Prenup vs Postnup Agreements: What's the Difference?
Prenuptial agreements are legal documents that address what will happen to marital assets if a married couple, who already has financial assets, divorces or one of them dies. They commonly detail how financial assets, including retirement benefits, will be distributed. A prenuptial agreement can be amended during the marriage or dissolved with divorce. A prenuptial agreement sets out the division of financial assets and payment of alimony from before the marriage. Most courts view a prenup as legally binding.
Benefits of a Prenuptial Agreement
While these agreements may seem like a type of insurance against the risk of divorce, there are also benefits for couples who decide to remain married. Some of those advantages include:
Saving Money and Time
A prenup often eliminates the need to use lawyers and courts to divide assets after a divorce. This is because it specifies that everything will be divided in a specific way ahead of time, which can save couples money and time.
A prenuptial agreement can protect the assets of one partner from being seized by the other in the event of a divorce. This is especially important for couples who bring a great deal of wealth into the marriage.
Creating Peace of Mind
A prenuptial agreement can give both partners a sense of security, knowing that their finances are taken care of in the event of a divorce.
Drawbacks of a Prenup Agreement
While there are some clear benefits to having a prenuptial agreement, there are also a few potential drawbacks to be aware of. Those drawbacks include:
Lack of Flexibility
A prenup is binding, so it can’t be changed during the marriage or dissolved with divorce if one partner wants to change the agreement. This means that things may become more difficult for both partners when issues regarding financial matters arise, even if they are minor.
Many people feel a great deal of emotional stress when preparing for a prenuptial agreement. This is because it can be seen as a sign that the couple is not confident in their ability to stay married.
A postnuptial agreement also addresses divorce and death, but it’s signed after a couple is married. Postnuptial agreements are legal documents that address what will happen to marital assets if a married couple divorces or one of them dies. Like prenuptial agreements, they commonly detail how financial assets, including retirement benefits, will be distributed. They may also prescribe levels of spousal support and alimony. Sometimes they stipulate that heirlooms and other sentimental items will remain with one family or the other in the event of divorce or death of one partner.
How Do You Know If You Need a Postnup Agreement?
Most couples don’t need a postnuptial agreement unless they experience a significant change in their financial status or relationship. For example, if one partner loses their job or there’s a large increase in the amount of debt that one partner is responsible for, a postnup may be necessary to clarify how those new financial circumstances will impact the marriage. If a couple begins to experience serious problems in their relationship, a postnup can be used to lay out specific rules for how the marriage will operate from that point forward. This can help to avoid conflict and provide some peace of mind.
Key Differences Between Prenuptial and Postnuptial Agreements
Prenups and postnups share some similarities, but they also have key differences. These include:
- A prenuptial agreement is put in place before marriage; a postnuptial agreement is signed after it. A prenup may be seen as more formal and binding than a postnup.
- While both agreements can provide financial security in the event of a divorce, prenuptial agreements are more commonly used to protect assets. Postnups can also be used to protect assets, but they’re often more about clarifying financial arrangements during a marriage.
- Prenups are typically created when one or both spouses have significant assets; postnups are more likely to be seen in marriages where one or both partners are less financially secure.
- Prenups usually prevent assets from being divided evenly upon divorce; postnups don’t make this an explicit rule, but it can be implied by the agreement.
- Both agreements help couples plan for future events, but prenuptial agreements tend to be more focused on tying up loose ends by clarifying rules and expectations for what happens in the event of a divorce or death.
- Prenups and postnups can both protect children by specifying how they will be cared for financially in the event of a divorce, but they may also specify which parent will have custody of the children.
- Prenups can be canceled or amended during the marriage, but postnups cannot; this is a key difference between the two agreements.
- Postnuptials are less common than prenuptials, so they may be less familiar to couples preparing for divorce. This can lead to more conflict and confusion if the couple decides to divorce and tries to rely on the postnup agreement.
The Bottom Line
When deciding whether or not to sign a prenuptial or postnuptial agreement, it’s important to consider your unique situation. If you have significant assets that you want to protect in the event of a divorce, a prenuptial agreement might be your best option. However, if you have a stable relationship and aren’t concerned about protecting assets, a postnup may be the better choice because it can help clarify financial arrangements during the marriage. Many couples decide that they want to sign a prenuptial or postnuptial agreement before they get married. When they sign the agreement, it’s important for them to understand that just because they want to protect themselves financially doesn’t mean that their marriage is bound for divorce. The likelihood of divorce occurring has nothing to do with whether or not a couple decides to sign an agreement, and couples should feel confident knowing that they can rely on either agreement if they ever need to.
Prenup vs Postnup Agreements FAQs
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.