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For richer or poorer ... or according to the postnuptial agreement

A prenuptial agreement between Hollywood's rich and famous often makes headlines, but it has a less glamorous cousin, the postnup. And average Americans are increasingly turning to this post-wedding paperwork to salvage shaky marriages.

What is a postnup? As its name implies, it's any written agreement entered into between spouses after they say "I do." Like the prenup, the primary purpose of a postnuptial agreement is to stipulate ownership and division of financial assets in the event a couple divorces.

A couple might seek a postnup for several reasons:

  • They didn't define their financial relationship in a prenup.

  • They want to amend their prenup.

  • One party's financial circumstances have changed, perhaps through inheritance, promotion, stock options or sale of a business.

  • Financial insecurity is undermining the marriage.

  • They want to provide for dependents from prior marriages.

  • They want to specify the division of their assets rather than leave it up to the divorce laws of their state.
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"Anytime you enter into a postnup, you are altering somewhat the result you would get if a judge were deciding your case," says Sharyn Sooho of Law Offices of Sharon T. Sooho in Newton, Mass. "You're crafting your own solution to the problem as you define it. You can divide assets differently; you don't have to do a 50-50 split in community property states, for instance."

Evolving marital law
Sooho notes that marital contracts are a relatively recent legal development of the past 50 years or so. Prior to that, spouses either were prohibited from entering into contracts with each other or, for fear that one spouse would coerce the other into the action, could only do so through trustees.

As a result, postnups are not universally recognized in every state. Where they are accepted, the document isn't considered valid unless it is "fair and just." Even then, courts may exclude some provisions, most commonly those involving child support.

"In Massachusetts, postnuptial agreements are the last area where the court and the legislature have not yet determined whether they are going to be upheld," she says. "It's not that we suggest that couples not enter into them; it's just that we don't know what the courts would do should one party choose not to honor their commitment."

Rule of thumb: Check your state's laws, then bolster your postnup by hiring separate attorneys to review and sign it with you and your spouse.

Boosted by boomers
Interest in all nuptial agreements continues to grow with the maturing of the baby boom generation. More and more of these individuals, especially those entering into second and third marriages, are seeking to separate love from money.

"While some people will try to discuss their rights prior to marriage and enter into a prenuptial agreement, others won't talk about it in detail upfront and would discuss it later," says James Reape, a lawyer in Valencia, Calif. "It's not the second marriage per se that is creating these contracts, it's that people may now enter marriages with separate estates or some accumulated wealth."

Which is where the postnup runs into its image problem. Financial trouble is the top reason couples divorce today. When times get tough, marriages get strained. One or both spouses may outright refuse to discuss their money fears.

Even broaching the delicate issue of a postnup could not only exacerbate the problem, it could become the problem, according to Philadelphia attorney Michael Dolich.

"You've got to think about this before you do it. If you're expecting the worst, usually you're going to get what you're expecting," he says. "Once you're fully protected, once the passion dies down, it makes it easier to walk away from your commitment. Do you want that? Do you want to be forced to work these things out or do you want it easy to get out of?"

It's not that Dolich disapproves of postnups; he finds them very effective at making sure that a different set of rules would apply to your case should your marriage end up in divorce court. The problem is that too often the postnup is the first step down the slippery slope to Splitsville.

"It's like creating a conflict that's not even there yet," he says.

Preventative renegotiating
Reape says there are very valid reasons for couples to divide their own assets before circumstances demand it. "Just laying it out sometimes relieves the stress that might otherwise lead to a decision to dissolve the marriage," he says.

Take, for example, two doctors who marry. One is an orthopedic surgeon in private practice, the other an anesthesiologist who contracts with various hospitals. They each make $250,000 a year. Should they divorce, the orthopedic surgeon's interest in his practice is worth $1 million while the anesthesiologist only has a job.

"The one person's practice is divisible and the other person only has a job. So there are instances where it is just unfair without having some kind of marital agreement," Reape says.

Another common scenario is where a couple wishes to clarify each spouse's role and responsibilities in a family business should the marriage hit the skids.

Do postnups save marriages?

"It's hard to say," Reape admits. "It's a tool in the arsenal that probably is not used as frequently as it need be, and sometimes by the time they're in talking to attorneys, it's often too late."

Love above money
Ruth Hayden, financial educator and author of "For Richer Not Poorer: The Money Book for Couples," says postnups need a makeover from an adversarial legal document to an agreement between spouses that puts love above money.

"There really are two kinds of agreements out there. One is the old adversarial agreement that I've got to protect me from you because I don't know if this is going to work and I don't want to lose any of my money if it doesn't. Some of the lawyers are still stuck on that garbage," says Hayden.

"What I'm talking about is, we want to make sure that if something happens to our marriage, we're both going to be OK. I don't want you worried about something and you don't want me worried about something."

Hayden says money issues often go back well before the wedding. Putting them out on the table is the first step toward resolving them.

"The challenge is that a lot of couples don't want to have a prenup or postnup because they think it means they don't trust each other. That is as ludicrous as saying if you make a will you're planning to die," she says.

"I think it helps relationships because when they have a fight, it's not going to be exacerbated by this phantom issue that, 'Jeez, if I get divorced now, I'm going to be screwed.' That's not there anymore because they both know what would happen, just like with the will, so let it be and now make your life work."

Jay MacDonald is a contributing editor based in Mississippi.

-- Updated: Feb. 4, 2005

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See Also
Financial survival guide to divorce
Second marriage? See a financial planner first

Quiz: love and money

Financial advice glossary
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