At Borakove Osman LLC in Madison, Wisconsin, we know that a well-crafted estate plan requires financial foresight that develops from extensive legal knowledge and experience. Our skilled attorneys have both. We know that prenuptial and postnuptial agreements can play an important role in creating a comprehensive estate plan since they provide clarity and protection for both parties in the event of a divorce or separation.
These agreements offer several advantages: they help delineate financial responsibilities, protect individual assets, and ensure fair distribution of property and obligations. If you are wondering how they work and which is right for you, this blog is for you.
What Is the Distinction Between Prenups and Postnups?
The only real difference between the two types of agreements is the time frame in which they are executed. While a prenuptial agreement is drafted and signed before the wedding day, a postnuptial agreement is activated at some point during the marriage.
There are several reasons for the variations in timing. While some couples are eager to get the task out of the way before they tie the knot, others may fear doing that may jinx the marriage and would rather address relevant financial matters once they are comfortably settled.
Advantages of a Prenup
Prenups serve a number of purposes by:
- Clarifying financial information about both parties
- Avoiding secrets about stashes or debts before tying the knot
- Setting a pattern of being completely honest about finances at the outset
- Considering the best options in case the marriage goes off track
Advantages of a Postnup
In some cases, the couple may have concluded that it is time to clarify their wishes and document them for the future. In other cases, they may not even consider a prenup or postnup until there is an event or development in the marriage. For example:
- The birth of a child may prompt concerns about inheritance
- One spouse may be about to inherit a sizable sum
- One spouse may have accumulated a large debt
- One spouse may have fallen victim to an expensive addiction
- The spouses may be having disputes about money that make them eager to separate portions of their finances
Under these circumstances, drafting a prenup or postnup may be the most practical action to take in order to allay fears and discourage disputes. In some cases, it may help to calm, or even save, the marriage.
Our effective, empathic attorneys are here to help you decide which kind of agreement is best for you by having an open discussion. We will clarify which type of document is best-suited for your estate plan and which provisions will be most advantageous in terms of your family situation.
Property Division
One of the primary benefits of both prenuptial and postnuptial agreements is that they provide a clear blueprint for how property should be divided if the marriage ends. In Wisconsin, property acquired during the marriage is generally considered marital property to be divided equitably in the event of a divorce. Nonetheless, there are notable exceptions. A prenup or postnup allows couples to define what constitutes marital and non-marital property in their specific situation.
A prenuptial agreement, established before marriage, can specify how each party’s property will be divided, protecting individual assets and potentially simplifying the divorce process. On the other hand, a postnuptial agreement, created after marriage, can be used to address changes or clarify property division as the relationship evolves and wealth (and perhaps debts) accrue.
Spousal Support Considerations
Spousal support, or alimony, is another critical aspect covered by both types of agreements. In Wisconsin, courts can award spousal support based on factors like the length of the marriage, financial needs, and earning capacities. A well-drafted prenuptial or postnuptial agreement can set forth terms for spousal support, making potential lengthy negotiations and potential litigation over alimony much less likely if the marriage ends prematurely.
Protection of Children from Previous Relationships
Both prenuptial and postnuptial agreements allow individuals with children from previous relationships to protect the rights of those children to get their full intended inheritance. These documents can ensure, for instance, that their inheritance goes to them even if their biological parent predeceases their stepparent and the stepparent remarries.
Payment of Debts
Addressing debt is another vital consideration in both prenuptial and postnuptial agreements. Wisconsin follows the principle of equitable distribution, which means debts incurred during the marriage are generally divided fairly between the spouses.
A prenuptial or postnuptial agreement, however, can specify how pre-existing and marital debts will be divided, paying particular attention to debts one spouse may have accrued alone, e.g. through gambling, compulsive shopping, or an addiction to drugs or alcohol. Having such an agreement in place can prevent future conflicts and ensure that each person’s financial obligations are clear.
Asset Protection
Both prenuptial and postnuptial agreements offer robust asset protection. By defining what constitutes separate and marital assets, these agreements help protect individual wealth from being divided in a divorce. This is especially important for individuals with significant personal or family assets, as it ensures that their property is managed according to their wishes and not subjected to standard marital property laws.
Business Ownership
For business owners, a prenuptial or postnuptial agreement can be indispensable. These agreements can outline the handling of farms and other business interests, and ensure that the business remains intact, regardless of changes in marital status. This may seem especially necessary if one spouse has developed the business completely on their own or inherited it as part of long-standing generational wealth.
The Takeaway
Our excellent Wisconsin attorneys are committed to helping you build a well-constructed, comprehensive estate plan to protect you and your family. We know how critical it is to put together a plan that addresses all eventualities, likely or farfetched, from education to retirement, from catastrophic storms to divorce. Contact the legal team at Borakove Osman today to see whether a prenup or postnup is right for you.