Marriage is not just a personal commitment; it can also be a significant financial partnership. For many, entering into marriage brings questions about how best to manage assets, liabilities, income, and responsibilities. A prenuptial agreement (entered into before marriage) or a postnuptial agreement (entered into after marriage) are legal contracts that can provide clarity and peace of mind by outlining how financial matters will be handled in the event of a marriage termination event (i.e. divorce, separation, annulment, or death).
Why Consider a Prenuptial or Postnuptial Agreement?
1. Clarity regarding assets and liabilities
Well-crafted agreements clearly define which assets and debts are considered individual versus marital. This ensures that both parties understand ownership and responsibility from the outset.
2. Reduction of litigation costs
If a marriage ends, prenuptial and postnuptial agreements can serve as roadmaps to resolution. By reducing ambiguity and establishing what will happen in the event of a marriage termination event, couples may avoid lengthy court battles, saving costs, time, and emotional energy.
3. Managing changing wealth
Life events, such as starting a business, inheriting wealth, or acquiring new assets, often occur after marriage. A postnuptial agreement can address these changes, ensuring that your evolving financial picture is aligned with your and your partner’s long-term goals.
4. Minimizing statutory consequences
Without a prenuptial or postnuptial agreement, state laws determine how property is divided and how alimony is awarded upon divorce or legal separation. For example, under New Hampshire law, all property of both spouses may be considered marital property, regardless of how it is titled, and courts will presume, absent specific circumstances, that an equal distribution of property is appropriate (See N.H. Rev. Stat. Ann. §458-16-a (2023)).
Similarly, upon the death of one spouse, state statute provides that a surviving spouse may claim an elective share of an estate as opposed to collecting what was left to them in the deceased spouse’s estate planning (See N.H. Rev. Stat. Ann. §560:10 (1974)). Agreements allow couples to make their own decisions rather than relying on statutory defaults.
5. Safeguarding your business
Without clear documentation, business profits may be considered income for alimony purposes, and the business itself could be treated as marital property. Provisions within agreements can help preserve business continuity and ensure fairness.
Key Considerations When Creating an Agreement
1. Timing
Both parties should have sufficient time to review, negotiate, and consult with independent legal counsel. Rushing into a prenuptial or postnuptial agreement may impact its enforceability.
2. Alignment
Agreements should complement, not contradict, other legal and financial documents, such as estate plans or business agreements. Coordinating with professionals (attorneys, financial advisors, corporate counsel) helps ensure all documents work cohesively and efficiently.
3. Avoiding commingling
If an asset is designated as separate property in a prenuptial or postnuptial agreement, it is important to keep it separate. Mixing individual and marital assets can impact whether the asset is still considered an individual asset and, if not, how it may be divided upon the termination of the marriage.
Taking the Next Step
A thoughtfully designed prenuptial or postnuptial agreement can help couples prior to or during marriage proceed with confidence and comfortability based on a clear financial foundation. At Carlson Investments, we recommend working with your family law attorney, such as our colleague Dakema Welch at Orr & Reno, in conjunction with your financial advisor to ensure that your financial goals and legal protections align.
If you would like to discuss how this may fit into your broader financial strategy, reach out to a Carlson advisor.
Carlson Investments does not provide tax, legal, or accounting advice. This content has been written for informational purposes only. Always consult your individual tax, legal, or financial professionals for advice tailored to your situation.
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