Postnuptial Agreements… Not Just a “Divorce” Tool

Ohio became one of the last states in the country to permit postnuptial agreements between spouses. When Senate Bill 210 goes into effect this March, married couples will be able to alter and/or define rights between them that weren’t otherwise done before the marriage.

The prevailing mindset is that prenups or (now) postnups are for those who contemplate divorce. Certainly this can be true, but it doesn’t necessarily have to be. These agreements are useful in the estate planning context for those willing to consider what happens to their assets after they pass away – in the event their surviving spouse remarries, or for those blended families coming together presently. Presumably, you’d like to find a way to be thoughtful and provide clarity for your family, whether today or down the line.

Postnups provide some really valuable estate planning opportunities that aren’t tied to divorce. Let’s discuss a few.

Postnups can be used to change the nature of ownership of property.  

Assets may be characterized as joint property, community property, or separate property.  How a particular piece of property is characterized has implications in trust planning as well as probate after someone passes away. The character of ownership at death ultimately controls an asset’s distribution. It would be beneficial to avoid any “default” settings tied to how a particular asset was owned, while avoiding confusion and reducing the risk of fights among heirs.

Postnups can help with asset protection and estate tax planning. 

There are some sophisticated tools out there for married couples that become more powerful if we can define rights in property before the property gets funded into a Spousal Lifetime Access Trust or an Ohio Legacy Trust (a domestic asset protection trust). Who owns an asset when it gets funded into a trust has divorce implications, for sure, but it also has tax implications.

Postnups can limit rights your surviving spouse might have in your estate. 

Especially in blended family situations, a postnup can be helpful to ensure you’ve properly protected your children’s inheritance.  Surviving spouses have rights in probate court, regardless of what your Last Will and Testament might say. Further, folks should consider what it might look like for a surviving spouse to get remarried, whether you’re entering into a blended family situation, or planning for the possibility of one after you pass away. With remarriage and property ownership, it’s not always an issue of trusting your spouse. For most of our clients, that’s not the problem. The problem is the accidents that happen with the “default setting” mentioned above, and it’s possible not everyone wants to play nice after you’re gone. For example, you pass away, and your surviving spouse gets remarried and fails to do any prenuptial planning or meaningful estate planning after you’re gone. This new spouse may have a stake unless you’ve guarded against it. 

Postnups can protect your children’s inheritance. 

Many of our clients are concerned about what happens to a child’s inheritance should the child get divorced. In combination with effective trust planning, you can require your child to execute a postnup with the child’s spouse in order to access an inheritance. This allows for legacy planning, because your assets will, at your direction, stay on your side of the family.

Postnups can actually strengthen a marriage. 

Though sometimes uncomfortable, it is vital that couples sit down and discuss finances. A conversation about a postnup requires disclosure and good communication, two important things in a relationship. Sometimes one spouse feels lost, as the other spouse “handles the finances.” A postnup can level the playing field. In addition, if money is a hot-button issue in a relationship (as it certainly can be), tensions around the issue may be eased if the couple can put an enforceable agreement in writing.

It’s good that Ohio finally got on board with postnup planning. Families in Ohio will benefit from the clarity they provide, not only in divorce, but also in estate planning.

If you’re in a blended family, or you’re otherwise thinking about how your estate may play out in the remarriage context, postnups should be something on your radar. If you’d like to have a conversation with one of our expert attorneys about how a postnup may fit in your estate plan, just send us a note. Let’s Talk!  

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