Pre-Nup vs. Post-Nup – What are the Differences?
Even with the best intentions, sometimes a marriage doesn’t last. Both pre-nup and post-nup agreements will ensure your assets go to the people you want them to go to in the event of death or divorce. In the pre-nup vs. post-nup decision, there are a few factors that will determine which (if either) is right for you.
Both of these agreements allow you to predetermine the division of your assets and debts. The documents have similar names, but different attributes. The best agreement for you will depend on your situation.
Pre-nuptial agreements are the most common. They are the ones you hear about in the media and movies.
All 50 states recognize a pre-nuptial agreement.
As the name suggests, a couple has this document drawn up before they marry. It takes into account the couple’s individual assets and incomes. Normally a divorce attorney will draw up the agreement for one spouse, the other will review it and sign. Couples can go to one attorney, although keep in mind a lawyer can only represent one person.
The pre-nup then gives guidance on how to divide the assets in case of a divorce. It also accounts for any potential or future increases in one party’s assets or income.
They are particularly helpful for protecting retirement income. After you marry, in equal distribution states, your spouse owns half your retirement accounts. It doesn’t matter if you started your account before you married. You split your pension, IRA, and 401(k) 50/50 with your spouse in Nevada. Other states will divide retirement accounts based on whether they are an equal or equitable distribution state.
If you and your soon-to-be spouse have the time and temperament before the wedding, pre-nups are a good thing to take care of. Time is an essential factor here.
Time slips by and the intention to draw up a post-nup may be put off for years as distasteful or just inconvenient.
Judges scrutinize pre-nups, so you want to make sure your spouse-to-be has adequate time to seek counsel and make a decision. Pre-nups sprung right before the wedding can be invalidated if the judge finds one spouse felt undue pressure to sign.
Pre-nups are essential for people with children from previous marriages. In the event of the death of that parent, their children could be left with nothing if all the assets go to the spouse. Keep in mind that while pre-nups can pre-arrange the amount of alimony, it cannot calculate child support or determine child custody.
People with considerable assets entering the married state should also consider pre-nups. Whether it is a trust distribution, real estate, or a beloved pet, a pre-nup can protect your assets.
A post-nuptial agreement is an agreement dividing assets and or debts after the marriage has taken place.
The most common reason is to divide assets in the case of a divorce in a community property state.
Post-nups can also be used to protect a business owned by one spouse. Since nearly everything bought or earned after the marriage is community property, this can put many businesses in danger.
Post-nups can be more challenging to create. They must explicitly speak to assets or income acquired jointly by the parties after the marriage. In more straightforward legal jargon, community property. While you can do it on your own, many couples find that having a divorce attorney look over the agreement ends up saving them time down the road.
The conversation about a post-nup can occur for many reasons beyond asset protection.
Many couples will create a post-nup after one spouse has cheated. When the offending spouse wants to show repentance, and the injured spouse wants the situation never to happen again, a post-nup can put financial penalties in place. Whether the conditions to trigger the post-nup is a divorce in general, or another unfaithful relation is up to the couple.
Another common reason for a post-nup is when one spouse is likely to inherit significant assets. Nevada considers inheritance separate property. However, that separate property status can change under commingling rules. A post-nup would ensure that inheritance stays with the inheriting spouse.
Businesses are the final common reason worth noting. (Although there are a nearly incalculable number of reasons people seek a post-nup.) If someone dies or divorces and owns a business, the ownership of their company can be in jeopardy if there are no clear instructions. This can destroy the business if not resolved quickly.
If there is a divorce and no way for one spouse to buy out the other, they might have to sell the business to settle the matter. This would shatter one spouse’s source of income.
While pre-nup and post-nup agreements typically divide assets and income, they can also divide debt between two spouses. This ensures that one spouse is not left holding the bag for debts they didn’t create.
It’s always smart to speak with a divorce attorney if you aren’t sure whether or not you need one of these agreements. The divorce attorney can also offer advice on how to divide your assets and liabilities.