New to Marriage: the Postnup

Some Already Wed Couples Agree to Disagree

It may not be romantic, but a number of couples are using postnuptial agreements to avoid future fights over finances.

The postnup, which is neither as popular nor as tested in the courts as its big sister, the prenup, is an agreement signed during marriage. The voluntary contract could be used to decide such matters as the division of assets and income in a death or a divorce. But it also has limits: Postnups can't be used, for instance, to determine child custody and support issues, which need to be determined by a court.

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"Financial issues often cause people to get divorced, and one way to try to avoid that is by writing a postnup," says Gaetano Ferro, president of the American Academy of Matrimonial Lawyers, a trade association. He says the use of postnups is growing; in a recent poll of AAML members, 49% said they had seen an increase in postnups during the past five years.

While the actual postnup document could be drafted by one lawyer, both parties need legal representation during the process, which could cost anywhere from $5,000 to $25,000 depending on the complexity of the case, says Leon Finkel, a matrimonial lawyer in Chicago. To complete a postnup, people need to fully disclose their financial assets and liabilities including salary and other sources of income. Tax returns and financial statements are needed.

Most states recognize postnuptial agreements as long as everything has been fully disclosed, and the parties were represented by independent legal counsel, Mr. Finkel says. Still, prenuptial agreements have been around a lot longer and have legal precedent. "They've been tested, and there's more law that governs them," says Mr. Finkel.

When postnups come up in legal disputes, courts are asking "does it smell coercive or does it smell reasonable?" says Brian Bix, a law and philosophy professor at the University of Minnesota. "There isn't that much case law" with regards to postnups. His advice: Check with a lawyer in your state.

Raising the idea of a postnup isn't easy, says Mr. Finkel. He suggests to clients who want to bring it up with their spouse to say: "I want to put our financial cards on the table, and we want to plan in case something happens to us." Another possibility, he says, is to bring it up during a session with the marriage counselor, if you are seeing one. A growing number of financial advisers also are recommending it to clients, especially if they haven't planned for important life events.

Some people use a postnup because they think their marriage is on the rocks, but it isn't unusual to write one to update a prenup, legal experts say. Indeed, more couples are using both prenups and postnups, especially in a second marriage.

While a postnup "suggests a lack of trust in one another," says Debbie Cox, a wealth adviser with J.P. Morgan Private Bank in Dallas, "it's really about prudent management of assets."

Eric Cramer, a financial consultant in Alpharetta, Ga., for Charles Schwab Corp., says more women are using postnups when they step off the career track to raise children. They like the idea of knowing they will have some financial security if something happens to their marriage.

Laura Morgan, a family-law attorney in Charlottesville, Va., and the co-author of "Attacking and Defending Marital Agreements," says couples also use postnups "to do something nice." Someone might want to give a spouse a gift of stock, for instance. "It's a way of making a gift during marriage," she says.

Write to Jilian Mincer at jilian.mincer@dowjones.com