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Thursday, June 20, 2024

What is a Postnuptial Agreement? Protecting Your Assets and Your Legacy in San Diego

While the idea of a "prenup" is well-known, postnuptial agreements are often overlooked. These agreements, signed after marriage, can be a vital part of your San Diego estate and asset protection plan. They provide clarity and protection, particularly as your life and circumstances change and new threats to your nest egg come to light.

What is a Postnuptial Agreement?

A postnuptial agreement is a legal contract between spouses outlining the division of assets, debts, and other financial matters during the marriage, in case of separation, or upon death. A postnuptial agreement can also change the nature of earned income from community property to separate property. This type of agreement is regularly used to clarify property ownership (including inheritances), ownership of income from separate property assets, protect business interests, address spousal support, and specify who is responsible for debts, both old and new.

Why Consider a Postnup

There are many scenarios where a postnuptial agreement might be beneficial. For example, if it's a second marriage and you want to protect assets for children from prior unions, or if one partner does a higher risk type of work or is starting a new business. They are also useful when financial circumstances significantly change with new wealth, debts, or inheritances. Furthermore, a postnup can safeguard business ownership and create peace of mind by providing clear expectations and reducing potential conflict.

Example: Imagine you started a business before your marriage. A postnup can ensure the business continues as your separate property, protecting it from potential division in case of a divorce or upon your death, even if your spouse has helped manage and grow that business.

Important Considerations

On the legal side, it's crucial that both spouses fully disclose their assets and debts to each other to ensure the postnuptial agreement is valid. Each spouse should also have independent legal representation for guidance and protection of their best interests. Along with disclosure and legal counsel, it's vital that the postnuptial agreement itself is fair to both parties. This helps ensure it will be upheld if challenged. It is also important that your attorney be aware of each of your exposures to creditors to avoid accidentally creating a fraudulent or voidable transfer.

On the personal side, you need to be warned that creating a postnuptial agreement can be stressful and bring many personal worries to the surface. Although it may be financially smart, a postnuptial that was done without the proper support or for the wrong reasons has moved many couples directly towards divorce. An experienced attorney who understands your reasons for seeking a postnuptial agreement and who coordinates its’ creation with each partner’s separate attorney, can be the best way to stay on track and avoid stirring up uncertainties.

A Brief Note on Prenups

While prenups are signed before marriage, postnups offer the advantage of addressing changes in life circumstances that occur after you've said, "I do."

Getting Help

If you're considering a postnuptial agreement, a San Diego estate planning attorney can guide you through the process and help you avoid improper transfers. Let's discuss whether this legal tool is right for protecting your assets and your legacy. Schedule an appointment by contacting our law firm at 619-281-1888 today. 

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