How these types of trusts work is somewhat complicated, but the bottom line is that by creating the right type of trust, you can make the entire issue of separate vs. marital property irrelevant. That’s because, the trust, rather than you, would legally own your separate property, including your company.
A postnup is a contract established while you’re married.
If you’re already married and missed out on the opportunity to establish a prenup before your wedding, or your financial situation has dramatically changed , or you feel there’s reason to modify a prenup already in place, you may want to consider creating a postnup. Similar to a prenup, a postnup (short for “postnuptial agreement”) is a contract between husband and wife, but it is entered into and signed after the wedding.
There are many reasons why you may want to protect your assets with a postnup. Maybe you’re establishing a new business in your name or working to patent an invention? Perhaps you’re writing the next best-selling book or you agreed to quit your job to take care of the kids? If there’s any chance your financial situation may change (for better or worse), you may want to establish your property rights and the expectations surrounding any shift in finances.
Remember: When celebrities divorce, one of the biggest points of contention is typically intellectual property rights. These rights cover property such as patents, trademarks, copyrights and royalties and other contractual rights, and depending on the individual circumstances, they can be worth thousands, if not millions, of dollars.
What’s more, any intellectual property rights obtained during a marriage may be considered marital property –and that means they may be divided during divorce. Although the specific rules vary from state to state, the general rule of thumb governing intellectual and other property is this: Value that’s created during the marriage must be divided.
Despite all the potential benefits, postnups come with possible pitfalls, as well. For instance, anumber of states don’t recognize postnuptial agreements, and even in the states that do, they are frequently challenged and often invalidated. Still, if you’re a married woman involved in a business endeavor or career that makes you (or has the potential to make you) much wealthier than your husband, my advice is simple: I believe having a postnup in place is usually better than having nothing at all.
To be truly effective, any protective methods I discussed above should be in place long before divorce is a possibility. Obviously, something like a prenuptial agreement needs to be signed before you are married, but even techniques such as transfers to an irrevocable trust need to be done years in advance. Depending on your state’s fraudulent transfer laws, transactions can be voided up to seven years after the transfer!
So, please, be proactive. Learn to Think Financially, Not Emotionally® and establish a sound strategy, one that will provide you with financial security and peace-of-mind both during your marriage and afterward, if you divorce.