Prenup vs. Postnup - What's the difference?

As unromantic as it sounds, a strong marriage requires some practical discussions about finances. After all, you start creating a financial plan as soon as you’re engaged. Who’s going to pay for the wedding? What is the wedding budget? Money talk grows in importance throughout your marriage as you build assets together, make joint financial decisions, and transition into retirement planning.

One major financial decision that requires consideration from all couples is whether or not to sign a prenup or postnup agreement. You may not think you need one, but it’s an important step to financially protect both spouses in the event of a separation or divorce. 

Are you ready to gift your spouse and yourself a healthy financial marriage? Let’s dive in to understand the difference between a prenup vs. postnup agreement and how having one can offer you both some peace of mind.

Let’s Review The Basics of Nuptial Agreements

What is a Prenup versus a Postnup?

Prenups and Postnups are both legally binding agreements between a couple that establish the rights of both parties in the event of a divorce or death. Both types of agreements are an important financial planning tool for couples as they can be a fair way to outline each party’s responsibilities and property rights, and help avoid expensive court battles after a marriage is dissolved.

When is a Prenup created? 

A prenuptial agreement (or prenup) is signed by an unmarried couple before the wedding. 

A prenup is usually created when the couple is not anticipating divorce; instead, they’re looking forward to their big day. 

When is a Postnup created? 

A postnuptial agreement (or postnup) is signed by a married couple after their wedding. It’s most often used to document what would have been included in a prenuptial agreement if one was signed before marriage. 

A postnup is often created by couples who did not consider a prenup in time for their wedding, want to secure an inheritance for their children, or if the couple is concerned about the future of their marriage. In some cases, postnups are also created due to a change in financial circumstances for one or both of the partners. For example, one of the partners received a large inheritance or wants to take on a large personal debt. 

Many couples separate due to disagreements on how to manage finances and a postnup can help put some parameters in place to secure each party’s financial future, giving them the peace of mind they need to work on the relationship.  

What is included in a Prenup or Postnup agreement?

Prenups and Postnups often include:

• Division and ownership of assets (pre-marital or acquired post-marriage)
• Division and ownership of debts (pre-marital or acquired post-marriage)
• Details on spousal support
• Details on the inheritance of property
• Legal issues in the event of death

Prenups and Postnups should not include:

• Child custody arrangements, visitation rights, or support payments – If these provisions are included in a prenup or postnup, there’s a high likelihood of the agreement being challenged and disregarded in court. These decisions are made by the court at the time of the divorce to ensure that they are in the best interest of the children.
• Any provisions that are not related to your finances or property. These details are considered personal, non-legal matters between the couple and can invalidate your prenup or postnup.

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What’s The Financial Impact?

Pros

A prenup or postnup agreement can:

1. Achieve full financial transparency between couples by encouraging tough conversations on money, goals, and partnership.
2. Help avoid expensive court battles in the event of a divorce.
3. Protect each partner’s assets, both pre-marital and those acquired during the marriage under sole ownership.
4. Shield each partner from taking any obligation for debt that was not jointly acquired or agreed upon. 
5. Protect the inheritance rights of children from a previous relationship.
6. Compensate the partner who sacrifices a lucrative career for the marriage. 
7. Protect business or professional practice from being considered a community (joint) asset.
8. Limit the amount of spousal support and protect future financial growth for the high-income earner.

Cons

A prenup or postnup agreement can:

1. Be expensive when using legal support to reach an agreement and draft the paperwork. It is highly recommended that each partner have independent legal representation for the agreement to uphold in court.
2. If legal assistance is avoided, there’s a risk that courts may find the agreement unfair or invalid due to missing clauses.
3. If an agreement conflicts with the partner’s will, survivorship claims will become more complicated. 

On The Fence? Here’s Something To Consider

A nuptial agreement is still considered a taboo topic by many people. It’s important to note that the intention isn’t for the couple to cast any doubt on their marriage. We understand that bringing up the topic of a prenup or postnup is not easy. Below, we’ve outlined the big questions to help you work through them with your partner. 

Do you need a Prenup or Postnup? 

Here’s a list that may help – if you answer ‘yes’ to one or more questions below, you should consider having the conversation with your partner.

• Do you or your partner have:
  • Children from previous relationships? You may want to ensure that their financial interest or inheritance is clearly outlined in the agreement.
  • Parents or other loved ones who need support in securing their financial future?
  • Large personal investments or significantly higher assets than the other?
  • Large debt?
  • Different money personalities?
• Do either of you own or co-own a business?
• Are you expecting a large increase in income?
• Are you or your partner expecting a large inheritance or have already received it?
• Is this a second marriage for either you or your partner?
• Is there a significant age difference between you and your partner?
• Do you both seek peace of mind about future finances?

How do you reach an agreement with your partner?

1. Talk to your partner and give them time. Starting the conversation early will help ensure that you both have time to make a list of everything important to you, review and enter the agreement. The law requires that the agreement does not show any signs of coercion or undue influence. E.g., If a prenup is signed within 30 days of the wedding, then a court may question the agreement.
2. Be transparent about your financial situation and offer your partner a safe space to do the same. If there is any information held back, the agreement may be challenged in court as both parties did not have the same information when signing the agreement.
3. Focus on what you can agree to rather than areas of disagreement that may still need to be sorted out. This will help create an environment where you feel comfortable coming together.
4. Consider hiring a lawyer to help you finalize the agreement so there are no surprises in the future. It must be in writing for it to be legally binding.  Using legal expertise can help ensure that your agreement is fair, minimizing any risk that a court may question its validity.

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FAQs

Which is better – Prenup or Postnup?

Both agreements are comparable in protecting the financial interests and future of the couple.

Couples typically sign a prenup before their wedding. So, if any of the provisions in the agreement are unacceptable by either party, the couple has the option to work through these disagreements before the wedding day. If they cannot reach an agreement, they may even call off the wedding.

On the other hand, having a  conversation about creating a postnup can be more difficult if you have been married for a long time. It is important to account for spousal laws and ensure both partners have an equal voice. 

Can you have a Prenup and Postnup?

The short answer is yes. If you would like to change any provisions from the prenup or perhaps add new provisions for assets/debts acquired during the marriage, a postnup can be created.

What happens if you don’t have a prenup or postnup?

If you don’t have a signed agreement and are unable to reach a consensus at the time of divorce, the court will step in to make decisions on your behalf. This may include the division of property ownership, obligations for outstanding debt, and any other matters that require a division of responsibilities.  

No one goes into a marriage expecting things to not work out, but there’s always a chance of things not going as expected. Creating a prenup or postnup allows you to set your own terms so you don’t default to the terms of your state. In the event of unfortunate circumstances, it’s better to decide for yourselves than to have someone else decide for you.

Conclusion

Marriage is said to be a lifelong commitment – both emotional and financial. Couples always go in with the best intentions, but often things do not work out as expected. While you can’t foresee a divorce or the toll it may take on you emotionally, you can take steps to protect your financial future.

A nuptial agreement can be a tool to build mutual trust and save you plenty of headaches later on. Whether it is before your wedding or after, it’s a topic that can stir emotions and divide opinions. However, it’s important to think objectively and be prepared with an agreement that can protect you, your spouse, and your family.

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