According to matrimonial lawyers, postnups are on the rise. And it’s no wonder! They can protect assets, family wealth, pets, debt, inheritances, and so much more. One very common trigger for getting a postnup is an incoming inheritance for one of the spouses. For example, their parent(s) are executing their Last Will and Testament documents. The parents may realize that if they pass down their money to their child, it could potentially go to their child’s spouse, too. Enter: the postnup. The parents (and child) may want to ensure this incoming inheritance is protected as separate property in any scenario–divorce or death. Let’s dive into all of the ways postnups can help protect family wealth.
Addressing inheritances as separate property
Many states do not automatically categorize inheritances as separate property. This means that some states may say if you receive an inheritance during the marriage, it is to be considered marital property and is divisible upon divorce. In plain English? Your Mom’s inheritance to you could be split up with your spouse.
With a postnup, you can address how you want any inheritances to be treated. For example, you can state that any inheritance that either spouse receives should be considered the separate property of each respective spouse. Each spouse has full control over the inheritance, and any appreciation of that inheritance is also separate property. In addition, if one spouse uses their inheritance to buy something else, that new thing is also separate property. (Remember, if something is separate property, it’s not up for grabs in a divorce).
Waiving spousal elective share
Another way to ensure family wealth stays in the family is with an elective share waiver. Some states give spouses an “elective share” of their deceased spouse’s estate, which can mean that the spouse may take a portion of their spouse’s estate EVEN IF THEY WERE WRITTEN OUT OF THE WILL. Yes, we put that in all caps because it’s that important. Even if you write your spouse out of the will, some states say that the surviving spouse can still take a portion of the state (a fourth, third, or half usually). For example, Illinois says a spouse may take one-third of their deceased spouse’s estate, even if they were written out of the will. (755 ILCS 5/2-8). So, if you put a waiver of elective share in your postnup, your spouse cannot invoke their elective share right.
How does this help keep wealth in the family? Well, the ex-spouse will not be able to take any money, family wealth, or inheritances from their deceased spouse, and the money can go to other beneficiaries in the family, such as children, nieces and nephews, etc.
Address how shared property will be treated upon death
You and your spouse are likely to accumulate (or have already accumulated) a fair amount of marital property. So, what happens to that joint property when someone dies? Does it automatically transfer to the surviving spouse? Well, you can decide that with a prenup!
For example, imagine you and your spouse own your marital home together 50-50. What do you want to happen to your share of the marital property when you die? Should it automatically go to your spouse, or should that 50% of the marital home go through your estate? A prenup can outline some of these terms, with the help of estate planning documents, too.
Keeping all assets separate in case of divorce
Besides keeping inheritances separate and talking about death in the postnup, just simply keeping all other assets separate is also another straightforward way to keep wealth in the family. For example, if you own a home or 401k, a family business, or Mona Lisa painting, you can use a postnup to ensure those assets are kept separate in the event of a divorce. This keeps wealth in the family and away from a potential future ex-spouse.
Common concerns about postnups
Now that you see the various ways postnups can help protect your family wealth, let’s go over some of the misconceptions floating around out there about postnups and why they’re not necessarily true.
Isn’t a postnup unromantic?
We won’t fluff it up. Postnups don’t stand a chance against a moonlit dinner on the beach with some delicious wine. However, there is an argument to be made that postnups are romantic in their own logical and reasonable way. Just like travel insurance on your honeymoon isn’t “romantic,” it’s still smart and logical. It’s also a financial tool you use to protect yourself and your partner. Same goes for a postnup–protecting each other in any scenario, even if you aren’t together anymore!
Aren’t postnups unenforceable?
In a small handful of states, postnups are not enforceable, such as in Nebraska (Devney v. Devney, 886 N.W.2d 61 (2016)). However, most states do say postnups are enforceable, as long as you follow the rules laid out by the state. Most states have a higher level of scrutiny applied to the evaluation of a postnup, which can make it slightly harder to enforce than a prenup, but don’t be fooled, lots and lots of postnups get upheld all over the country at any given time.
Doesn’t getting a postnup mean we don’t trust each other?
Nope! Not in our opinion, at least. Sure, there may be some instances where that is the case for some couples, but it’s not the default. Here’s why: You already technically have a “postnup,” and it’s the divorce laws of your state. In addition, postnups must be entered into with a level of trust, good faith, and fairness between the spouses, otherwise it could be thrown out by a judge. Yes, many states evaluate a postnup under the standard that people are entering these agreements under the utmost good faith as spouses, so if there were any bad faith acts, it’ll get tossed.
Aren’t postnups only for the wealthy?
Nope! Getting a postnup protects assets you have now or in the future. Whether you have $20,000 or $2,000,000, you wouldn’t want to lose any amount of your property to a potential ex-spouse, so it really shouldn’t matter how much money you have, only if you have something to protect. And if you have nothing to protect now, what about the future? What if you climb the corporate ladder, get an inheritance, start a business, or become a stay-at-home parent and need financial support? Postnups can protect the future, too.
A quick note on prenups vs. postnups
Postnups and prenups are often confused and not well understood by people who aren’t lawyers. Let’s clear it up for you really quickly: postnups are signed during the marriage (after the wedding day), and prenups are signed before the marriage (before walking down the aisle). Prenups tend to be more enforceable than postnups, so if you have the option to get a prenup or postnup, most lawyers would recommend you get a prenup (and potentially a postnup, too). However, if you’re already married, then you cannot get a prenup. The good news is that prenups and postnups typically can cover the same topics–property division, alimony, inheritances, real estate, businesses, etc. However, there may be some state restrictions. California law doesn’t allow spousal support in postnups, but does in prenups, for example (Cal. Fam. Code § 1620).
The bottom line on protecting family wealth with a postnup
There are four main ways to protect family wealth with a postnup: (1) Protect any future inheritances; (2) Waive spousal elective share; (3) Determine how marital/joint property will be split upon death; and (4) Keeping assets separate upon divorce. Doing these things in a postnup is a good start to ensuring your family wealth is protected by using a postnup. Don’t forget to speak to a lawyer about other potential ways to protect family wealth, such as trusts, wills, or other legal documents.
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
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