Most of you have heard stories about prenuptial agreements, especially when it comes to high profile celebrities. If I recall an article I read recently, Russell Crowe entered into such an agreement with his long time model girlfriend before they tied the knot early this past April.

What many of you may not realize is that you can manage your affairs and do estate planning after marriage with a postnuptial agreement. While these are far less common and have received almost no publicity at all, a postnuptial agreement can be a beneficial estate planning tool.

A postnuptial agreement is just what it sounds like. It is an agreement which you enter into with your spouse after you are married and is used when you intend to stay together, rather than separate or divorce. This is the primary difference between a postnuptial agreement and a separation or settlement agreement. The latter is used to define your respective rights when your marriage is about to come apart. The postnuptial agreement helps organize your affairs during your marriage.

There are many reasons for entering into a postnuptial agreement. One might be to correct errors or omissions in an existing prenuptial agreement. If this is a second marriage for each of you and you have children from your prior marriages, you may want to ensure that your separate property passes to your individual children only. If the property was not fully and properly identified in your prenuptial agreement, you can use the postnuptial agreement to clarify who is to receive what.

What if you are trying to put a damaged marriage back together? If the relationship has been strained by financial or property issues, you might want to get them out of the way first by addressing them in a postnuptial agreement. This way, you can focus on fixing what is broken emotionally without having dollars and cents cloud the issues.

I represented a client many years ago who had been separated from his wife for almost 20 years. They didn’t want to divorce because of tax and employment benefits they received from staying together. They didn’t want a separation agreement because they weren’t planning on getting a divorce. What they wanted was something in writing that allowed them to remain married, handle their individual finances without interference from the other, and avoid any problems with their children at the death of either one.

As you can see, postnuptial agreements are not for everyone and since they are creatures of state law, they may not be as effective in one state as they are in another.

Just as with a separation agreement a postnuptial agreement will be enforced if it meets the following requirements:

• It is free of fraud

• Both parties entered into it voluntarily

• It is free of duress, coercion, or undue influence

• There has been adequate disclosure of all pertinent facts and finances

• It is fair and equitable to both parties

• Neither side has been guilty of overreaching

If a postnuptial agreement is challenged in court, each of these factors will be carefully scrutinized to ensure that the parties dealt fairly with one other. Both parties should have been represented by an attorney. If one of you hired the attorney to draft the agreement and the other never consulted with or received the advice of counsel prior to signing it, the agreement immediately becomes suspect and it is unlikely to withstand judicial scrutiny.

If one of you is giving up rights to which you are entitled by statute, such as inheritance rights, homestead rights or support rights, they need to be fully explained to you by your attorney -- and the reasons you are waiving these rights should be spelled out in the document itself.

Another situation in which a postnuptial agreement might prove beneficial is if you own a family business which has been passed down from generation to generation. Both you and your husband work in the business so he might have a claim against it at your death. If you want the business to pass to your children, rather than to your husband, you can specify this in a postnuptial agreement which provides him with other property in exchange for his release of any claim he might have to the business.

Or we might look at a similar situation, but in a different context. Let’s say your parents had a very successful business which they left in equal shares to you and your two brothers. Your brothers actively work in the business and it is their sole source of income. You, on the other hand, have a well-paying job of your own and your only involvement in the business is when you receive a dividend check from it’s earnings. Your brothers worry that if you predecease them, your spouse might step in and try to interfere with the running of the business or even force its sale. While they like your spouse well enough, they don’t want to risk their livelihoods on the fortunes of fate.

To put your brothers’ concerns to rest, you might enter into a postnuptial agreement with your spouse in which your spouse waives any right to your interest in the family business at your death or divorce. Since this is your separate property, you need not offer your spouse anything in return for the waiver of this interest, but there is nothing to prevent you from offering something in exchange, especially if you feel it might be necessary to maintain harmony in the family.

Postnuptial agreements aren’t for everyone and they have limited utility in most marriages. For some, however, they may prove beneficial as a financial management, estate planning, and even a family counseling tool.

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