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Clarifying priorities with a postnuptial agreement

On Behalf of | Nov 4, 2021 | Uncategorized |

California has its share of high-profile divorce proceedings in the news, and one area that always gets a lot of attention is who gets what when the couple splits. Aside from the emotional issues that are a part of custody decisions, the more pragmatic financial implications of divorce can be a source of drama as well.

Although many people have heard of a prenuptial agreement as a means of keeping one newlywed’s property separate from the marriage, the postnuptial agreement has gained traction as the financial holdings of couples who are already married grow more complex. For couples in the Greater Los Angeles area, having a plan in place will help them to avoid future problems and clarify their financial goals.

Postnuptial agreements in California

 The Golden State follows community property laws in which couples must equally split all assets or debt that they acquired in marriage, unless there is a marital agreement in place to alter this provision. Under the California Family Code, a marital agreement such as a postnup addresses property rights, earnings during marriage, or assets and appreciation from a business that will change community property division in divorce.

The requirements for a postnuptial agreement are the mutual full disclosure of all financial information that the agreement covers. There can be no coercion in the signing of the agreement, and it must be in writing with signatures from both parties and notarized.

The unique value of a postnup

Unlike a prenup in which one or both spouses define current holdings that they wish to keep outside of the marriage, a postnup covers the complex priorities of spouses whose financial positions may change over time with property investments, changing careers, or other scenarios that involve anticipated wealth or risk.

Spouses may wish to protect their interests such as:

  • Appreciation or depreciation of the value of a business during marriage
  • Obligations of the nontitled spouse to debt incurred by the business
  • Marital assets that may or may not be part of a business
  • The choice of valuation to appraise a business or interest in a business in the event of a divorce
  • Protections to the nontitled spouse’s standard of living or property if their partner assumes risk by leaving their job or starting a new venture

The postnup has the unique ability to address current financial concerns in the marriage that will protect both parties from financial risk or loss in the event of divorce.