Understanding Postnuptial Agreements

Most people have heard of prenuptial agreements, but relatively few are familiar with postnuptial agreements, also called “postnups.” That’s not a surprise. Prenups are much more common than postnups, perhaps ten times as common. What’s the difference between the two, and why would somebody enter into a postnuptial agreement?

The biggest difference between a prenup and a postnup is when the agreement is executed—before or after the marriage. In both cases, the agreement is one in which parties make complete disclosures of their financial situations and agree on what will happen to their assets in the event of a divorce or the death of a party. In some cases, the parties agree about how they will handle finances during the marriage, as well.

While either a prenup or a postnup may address issues other than the usual financial topics, couples cannot make agreements about the custody or support of future children in a prenuptial or postnuptial agreement.

Why Make a Postnuptial Agreement Instead of a Prenuptial Agreement?

There are a number of reasons a couple might make a postnuptial agreement rather than a prenuptial agreement. One of the most common is that they simply did not get around to making an agreement before the marriage.

The engaged couple may have been focused on wedding planning and looking forward to their lives together, and taking the time out to consult attorneys may not have been on the agenda. They might have been concerned that creating an agreement planning for a potential divorce would cast a shadow over their marriage. After the excitement of the wedding, many couples realize that they need to get on the same page, financially speaking, and decide to do an agreement then.

Another common reason to make a postnup is some change that has happened in the marriage. For example, one spouse may acquire an asset, such as a business interest, during the marriage, and the couple may want to agree that that asset will not be subject to division in a divorce.

The change that sparks interest in getting a postnup need not be a financial one. One spouse might have an affair, and the other might request a postnup with financial terms that are favorable to them as an incentive to remain and work on the marriage rather than immediately leave the unfaithful spouse. Another possible scenario involves one spouse accepting a career opportunity that places a burden on the other. In exchange for accepting this unanticipated burden, the other spouse might ask for a postnup, or renegotiation of a prenup.

Pay attention to those words, “in exchange for.” Like any contract, a postnuptial agreement requires that each party receive some benefit (“consideration”) for the agreement to be enforceable. With a prenup, the benefit for each party is the other party entering into the marriage. With a postnup, the parties have already gotten married. There must be some other consideration for entering into the agreement, or a court might not find the postnup enforceable.

How Do You Make an Enforceable Postnup in South Carolina?

The first step to making an enforceable postnup is gathering all the information you want in the agreement. This should include:

• A detailed list of all property, both personal and real, that you and your spouse brought into the marriage;
• A detailed list of all property, both personal and real, that you and your spouse have acquired since your marriage;
• A detailed list of all assets acquired during the marriage using an asset that belonged solely to one spouse before the marriage. For instance, if one spouse had an investment property before the marriage, sold it, and reinvested the proceeds in a different investment property;
• A detailed list of items and assets that either spouse has received as a gift to them as an individual during the marriage;
• A detailed list of any debts either spouse has incurred before or after the marriage.

Bear in mind that while property includes things like bank accounts, real estate, investment portfolios, cars, artwork, and other tangible things, it can include intangible assets as well. Things like business interests, stock options, patents, and other intellectual property can be addressed in a postnup as well. A South Carolina prenup requires a sworn financial affidavit that will be attached to the final agreement.

Once you have your list of assets and debts, you and your spouse will want to sit down and agree on how you intend to divide or dispose of them. You may be able to do this on your own, at the kitchen table. You may have areas of disagreement that a family mediator can help you work through. When it comes time to commit the agreement to paper, you will both want to have your own attorneys.

The idea that each spouse should have their own attorney may seem oppositional, as if you are already drifting toward divorce. In reality, it is for your protection. For one attorney to represent both spouses in a postnup is a conflict of interest. If you and your spouse each have an independent attorney, your agreement is less vulnerable to a later claim that one spouse didn’t understand what they were getting into, or that they were tricked or forced into signing the postnup.

The voluntary nature of the agreement is essential. In order to be enforceable, the postnuptial agreement must not be “unconscionable,” or shockingly unjust. The agreement also cannot be procured by fraud, mistake, or duress.

Don’t think that just because you failed to create a prenup before your wedding that you can’t reach an agreement with your spouse now. There is, of course, expense involved in creating a postnup. But if it helps prevent financial fights during your marriage, or expensive conflict in the event of a divorce, the investment in a postnuptial agreement is well worth it.

If you have questions about South Carolina postnuptial agreements, we invite you to contact Brinkley Law Firm to schedule a consultation.