When most people think of divorces, only bad things come to mind. The reason is that divorces are often very complicated and messy matters. Even when a divorce starts out on amicable terms, it’s always possible for proceedings to take a negative turn. Because there are so many negative issues associated with divorces, more people are turning to financial advisors for alternative solutions.
The most common suggestion that trained financial advisors bring up with clients who make this request is a postnuptial agreement. Although far more people have heard of divorces than postnuptial agreements, this document is a legal contract. The simplest definition of a postnuptial agreement is a contract that a couple signs after getting married. The purpose of this contract is to provide clarity about the financial rights and obligations of both spouses in the event of a death or divorce.
The Difference Between Prenuptial and Postnuptial Agreements
The biggest difference between these two types of agreements is that a postnuptial agreement is made when both parties have legal rights. Since prenuptial agreements are signed prior to a couple having any legal financial obligations to each other, they generally can’t provide the same level of certainty about financial matters.
How a Postnuptial Agreement Can Function As a Divorce Alternative
Financial troubles, mental illness, addiction and infidelity are the most common causes of marital distress. When one or more of these issues comes up, it can shake the entire foundation of a marriage. In the event that any of these problems do arise within a marriage, a postnuptial agreement can provide a way for one spouse to seek specific protective measures.
Instead of defaulting to a divorce, a postnuptial agreement can enable a spouse to secure financial protection in the form of assets being distributed. By taking this route, a married couple can then focus on resolving the actual problems of the marriage.
More Details About Postnuptial Agreements
In addition to serving as a possible alternative to divorce, this type of agreement can also be used a financial planning tool when a married couple receives an inheritance or enters a family business. When used in this type of situation, a postnuptial agreement can provide clarity on an issue that will then give both spouses ample peace of mind about the matter.
When certified financial planners discuss this type of agreement with clients, it’s important for them to bring up the terms that need to be present in order for the agreement to be enforceable. Those terms include both spouses entering into the agreement voluntarily, as well as the agreement resulting from full financial disclosures by both spouses.