One of the most commonly cited reasons for a postnup is to protect inherited assets. Let’s use a hypothetical example to demonstrate this conundrum. John and Lisa have been married for several years when suddenly, Lisa receives an unexpected inheritance from her Great Aunt Sue… in the millions. Given that this is John and Lisa’s second marriage, Lisa wants to ensure her newfound wealth is passed on to her children and not to a second spouse or future ex-spouse. Though she is very much in love with John and wants to stay married, she still wants to ensure this new fortune is 100% passed to her kids. Plus, she’s happy to spend some of it on John during the marriage. Heck, they don’t plan on getting a divorce, so John’s totally okay with it!
With the above example, you can see how protecting inherited assets with a postnup can be crucial for some people. Let’s dive into some more details about how this works.
What is a postnup, and how does it differ from a prenup?
You’ve probably heard of a “prenup” but may not have heard of a “postnup.” It’s simple–prenups are contracts you sign with your future spouse BEFORE the wedding day. Postnups are contracts you sign with your spouse at any point during the marriage, NOT imminent to a divorce. (If you’re about to get a divorce, you should get a separation agreement instead). Prenups and postnups cover virtually the same topics (though some states restrict what can go into a postnup). Postnups are also a relatively newer legal concept, so they can be considered “shakier,” legally speaking. Though postnups can be enforced if you follow state laws and have a reasonable situation (meaning no funny business, fraud, unfairness, etc.).
Can you protect inheritances with a postnup?
Of course you can! Whether you’ve already received the inheritance or you are expecting the inheritance in the near future, a postnup can protect that asset and ensure it is separate property (i.e., not divisible in a divorce).
You can also use a postnup to protect this inherited asset upon your death if you don’t want any of it going to your spouse. You can do this by making sure you both waive your right to an elective share. An elective share is a legal right for a spouse to take a portion of your estate when you die. However, you can waive that right in a postnup in order for all of your assets to go to someone else besides your spouse (like your kids).
How do you protect your inherited assets with a postnup?
First things first, you’ll want to hire an attorney to ensure that your postnup is as enforceable as possible. While many states do not require legal representation for a postnup, it is risky to DIY it. Second, you will want to ensure that your attorney is familiar with postnups, as they are a relatively newer and niche legal concept, so the attorney you hire should have specialized knowledge in the area.
Third, you will want to consult with your attorney on how to best protect your inherited assets. This will likely be one of two ways: (1) By ensuring the inherited assets are categorized as “separate property,” meaning they cannot be split up in a divorce; and (2) Making sure to waive elective share rights so when you die, your spouse can’t take a portion of your estate, which may include the inherited assets.
Other strategies to protect inherited assets
Outside of getting a postnup, there are other things you can do to protect your newly inherited assets. Here are some other things to consider:
Keep the assets completely separate and don’t commingle them
Even with a prenup and/or postnup, if you commingle your assets, you’re setting yourself up for failure. You’re effectively going against what your prenup/postnup says by mixing the assets with your partner’s assets. It can send a mixed message, and it can also be extremely difficult to untangle. So, bottom line–keep your inherited assets in a separate title, separate account, with no mixing of assets with community/marital property or your partner’s separate property.
Set up an estate plan
Depending on your financial situation and your goals, you may want to consider setting up an estate plan, such as a will and/or trust for your new inheritance property. With a trust and/or will, you can make sure your assets are distributed properly when you die, including that inherited asset.
Amend your prenup
So, you had the foresight to get a prenup, but surprise! Great Aunt Mildred leaves you a fortune you never knew about. No worries, you can absolutely update your prenup to include this newfound wealth (in almost every state). Prenups tend to hold up better in court than postnups, and while some places might treat a revised prenup like a postnup, it’s still worth chatting with your lawyer to make sure everything’s rock solid.
The bottom line on protecting inherited assets with a postnup
The short answer is YES. Postnups can help protect your inherited assets, whether you have received them already or expect to in the future. You can protect this inherited property by hiring a lawyer to draft up a postnup and protect you in the event of divorce and/or death. And don’t forget to follow other protective measures such as avoiding commingling, setting up an estate plan, and/or amending an existing prenup if necessary. Congrats on your new inheritance and happy planning!
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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