POV: You’re a husband or a wife considering a postnup, and you are wondering what clauses are “essential” to a postnup. Look no further. This article discusses everything you need to know about the clauses that go into postnups and what you should consider when getting one. Remember, a postnup is a contract you get while married, but you’re not planning on divorce. It’s simply a contract you get with your partner to work out certain financial aspects of your life. From property division clauses to alimony provisions to transmutation agreements, we’ve got the scoop. Let’s dive in!
What is a postnup?
First and foremost, a postnup is a contract between two spouses who have already been married. The spouses are not planning on getting a divorce but simply want a way to outline certain financial aspects of their marriage. Whether it’s one singular issue or several issues, postnups can cover many different topics. It’s really specific to the couple, and there’s hardly a one-size-fits-all postnup. In order for your postnup to be enforced in a divorce, you must follow the laws laid out by your state. For example, some states require notarization for a postnup to be valid. Other states require legal representation for a postnup to be valid. It’s crucial to consult with an attorney to get it done right.
The anatomy of a postnuptial agreement
Before you can understand the clauses of a postnup, it’s important to understand how postnups are structured. For starters, postnups are not a one-size-fits-all, so each postnup is going to be different. For instance, many couples get postnups that strictly deal with one issue and one issue only. They may only want to transfer ownership of a newly founded business from marital/community property to separate property of one spouse, and that’s it. In some states, this is known as a transmutation agreement. Other postnups may cover several issues, similar to a prenup. It all depends on how long the couple was married, how many assets have been accumulated during the marriage, what the laws are in the state they live in, and what the couple wants to achieve. Generally speaking, most postnups state the circumstances in which the couple is entering into the agreement, the purpose of the agreement, the general contract, provisions, and the financial schedules of both spouses.
Every postnup is different
It’s crucial to point out that every postnup is different. There are no “essential clauses” for every single postnup because what is essential to one couple is not going to be essential to another. For example, an essential clause for John and Mary may be a clause specifying business investments, whereas that clause would make no sense for Megan and Kevin–they only want to address inheritances.
Unlike prenups, which act as a financial blueprint for a marriage before it begins, postnups address the realities of a marriage already in progress. Think of it this way: a prenup starts with a clean slate, while a postnup deals with a canvas that’s already been painted with shared experiences, accumulated assets, and maybe even a few financial complexities. Because of this, postnups often focus on specific issues or concerns rather than attempting to cover every aspect of the couple’s financial future.
Postnups require consideration
Now, let’s talk about something called ‘consideration,’ which is a fancy legal term for a simple idea: in any contract, both sides need to get something in return for signing. Sometimes, this can be something small (which lawyers call “nominal” consideration); for instance, if you buy a couch for $1, you get the couch, and the seller gets their dollar.
But with postnups, things get a bit more serious (at least for most states). Here, the ‘consideration’ generally needs to be something meaningful and fair to both spouses. For example, one spouse might agree to give up any claim to a future inheritance in exchange for $10,000. This ensures that the agreement isn’t one-sided and that both partners are getting something of value in the deal. That’s just one example, though, and consideration can be any exchange that makes sense for the couple’s situation.
Clauses that people may put into a postnup
With the understanding that each postnup is vastly different for each couple and consideration is required for most postnups, here are some clauses that couples may choose to include in their postnup. And, remember, what clause works for one couple may not work for another couple. It’s all dependent on your state law and your situation.
Transferring ownership of real estate
Let’s say John and Mary are married. John opened a bank account in his name and purchased real estate during the marriage. He wants to make sure that this real estate stays his separate property, and is not considered a marital asset. Without a postnup or other agreement, this real estate could be considered a joint asset, even though it is only in his name, bought with his bank account (depending on the state law). So, he opts for a postnup that addresses this matter.
Establishing a business as separate property
If a couple opens a business or one person opens a business during a marriage, they may want to ensure that the business is sorted out in a way that makes sense to them. For example, the business is only one person’s separate property. Or maybe it’s split in a proportional way. It all depends on the circumstances and goals of the couple.
Allocating debts
Whether it’s student loan debt, new credit card debt, or a business loan, you can create a postnup that deals with the debt of either spouse. If one spouse has gotten into trouble with some debt, the other spouse may want to get a postnup that says they are not responsible for this debt (because under default state law, they may be).
Inheritances
Some couples get married thinking, “What’s mine is yours, no matter what the future holds,” and that’s beautiful. Until one day, they realize that Great Aunt Joanne is leaving them a small fortune in the millions. This may change their tune a bit. Especially after the rose-colored glasses of marriage come off. Spouses may opt into a postnup that addresses and/or reaffirms that certain inheritances are separate property of one spouse.
Waiving elective share
Here’s a surprising fact: in many states, you can’t completely disinherit your spouse, even with a will! That’s because spouses sometimes have a legal right to an ‘elective share’ of their deceased partner’s estate, often one-half or one-third of the total assets. This can be a concern for those with children from a previous relationship who want to ensure their assets are passed on to them 100%.
This is where a postnup can provide peace of mind. By including a provision where both spouses waive their right to an elective share, you can ensure that your assets go 100% to your children or whoever else you want to receive your estate.
Spousal support
Spousal support (a.k.a. alimony) is payments made from one ex-spouse to the other if they get divorced. This one is tricky because there are some states, including California, in which you cannot include spousal support clauses in a postnup. However, if you are in a state where this is allowed, then you may be able to waive or alter spousal support in your postnup.
Essential clauses are what is essential for you
Remember, what makes an “essential” clause in a postnup is going to be vastly different from couple to couple. For example, some couples may only want to address the elective share waiver. Other couples may only want to address future inheritances. Whatever the case may be, check with your state laws and a local lawyer to ensure that what you want to achieve is doable and legal. And don’t forget to talk through this sensitive topic with your spouse openly and honestly to come to an agreement that benefits you both.
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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