Nothing can kill romance faster than the term prenup (short for prenuptial agreement, also referred to as an antenuptial agreement), however, with about one in three of all first marriages ending in divorce and 50 percent of second or third marriages hitting the skids, prenups have become increasingly more common and are widely believed to be a wise financial planning move.
Just like no one wants to talk about estate planning because it contemplates one’s death, the term prenup is considered a distasteful subject by many. But it doesn’t have to be if handled sensitively and with the skill and experience of Fredman Baken & Novenstern, LLP. Marriage is not just an emotional and physical union it’s also a financial enterprise – and a joint one at that. A prenup and the discussions that go with it can help ensure the financial well-being of the marriage and, most importantly, can avoid costly discussions later – both financial and emotional – if the marriage ends.
A prenuptial agreement is a contract between two people executed prior to marriage defining issues such as
- how assets will be distributed in the event of divorce or death
- what may or may not be excluded from consideration in the future
- how the parties will manage their economic life together during the marriage or even after
In New York and particularly in Westchester County and its environs, such agreements have long been considered a means for rich people to protect their wealth. In more modern times, these agreements have been legally recognized as another form of an “opting out” agreement, meaning the parties chart their own course, as opposed to leaving those decisions to a court.
As such, parties “write their own ticket” preferably far enough before the marriage so that the emotional issues involved with the upcoming wedding are not a pervading consideration for either party.
Further, you don’t have to be a rich to need a premarital agreement. In fact, a person who has managed to accumulate a small savings through hard work and smart financial management may be more protective of their little nest egg than someone who has millions. And, as always, a party who may have an inheritance expectancy may be feeling a little or a lot of pressure from family to clarify what the other party can expect to receive (or not) when family members leave a spouse an inheritance or trust funds during or after the marriage.
Even though NY marital law states that separate property which includes inherited or gifted funds shall remain separate, it is often helpful or desirable for that point to be made perfectly clear or modified as the parties may desire prior to embarking on their lives together – lest someone receive an unpleasant surprise later on. This can lead to all sorts of hard feelings at that later time, and which always ends up with a more difficult post-divorce relationship, not to mention the cost of litigating the fallout from such surprises or hard feelings.
Following are some of the reasons you might consider a prenuptial agreement before marrying:
- You have assets such as a home, stock or retirement funds
- Own all or part of a business
- You may be receiving an inheritance
- You have children and/or grandchildren from a previous marriage
- One of you is much wealthier than the other, and you want to make clear what each party’s expectations should be as to sharing in that wealth.
- One of you will be supporting the other through college or graduate school, or will be receiving a license or degree, which has value under NY law.
- You have loved ones who need to be taken care of, such as elderly parents
- You have or are pursuing a degree or license in a potentially lucrative profession such as law or medicine or a business career requiring or which will be enhanced by a graduate degree, such as an MBA.
- You anticipate a large increase in income
What is the best way to address these potentially touchy subjects? First, do it as early as possible. The mention of a prenup shouldn’t come as a surprise if the couple has been open with each other as the relationship became serious. Second, the discussion must be open and honest. Be candid about why you want the agreement, and what you wish to accomplish. Third, hire an experienced lawyer, such as the lawyers at FBK to acquaint and advise you as to the issues to be discussed, and urge your fiancé to do so as well. Both parties must be independently represented by counsel for the agreement to be considered valid. Many a prenup has been thrown out because an aggrieved spouse did not have legal representation.
The first step in the prenup process should be to sit down with your partner and have an open discussion about what you want the contract to say. It is beneficial to have each party draw up a list of assets and discuss it prior to retaining an attorney. The parties either meet with both lawyers, or one of the attorneys draws up a draft of an agreement with his/her clients’ best interests in mind. Some tips for producing a legally binding prenuptial agreement:
- Both parties must FULLY disclose their assets. If it turns out either person has hidden something, a judge can toss out the contract;
- the agreement should be signed well in advance of the wedding to avoid the appearance of coercion, another key reason why some agreements are rendered null and void;
- a valid prenup is “fair” and will not leave one of the parties destitute, no matter what state you reside in, although different states view these agreements with differing perspectives. Neither party can be taken advantage of;
- prenups can include responsibilities that don’t deal with money, but avoid making demands that might seem frivolous, such as requiring that your spouse not gain weight, or that he or she quit smoking and take out the garbage three times a week;
- follow proper legal procedures;
- use only matrimonial lawyers who are familiar with prenups and the laws of the state in which you will be living;
- Know that you cannot waive rights to child support payments;
- Understand that your spouse’s will cannot supersede the prenup if the will is stingier. But a will can be more generous than a prenup and leave the widow or widower more than what they agreed to before the marriage;
- make sure the agreement is in writing and the signing is properly witnessed. NY Law is very clear about this point. We recommend that the contract be signed in five duplicate originals with the groom- and bride-to-be each getting an original copy, and a third being kept with an independent lawyer, CPA or in a safety deposit box, and each party’s attorney receives a copy. Sometimes both parties remember signing an agreement, but no one can find a copy, and the law will not recognize an unsigned copy of a draft of an agreement.
Difficult as it may be to talk about money before marriage, doing so can save heartache and hassles in the long run. Having a prenup can minimize the financial and emotional toll of a divorce. Couples without one will have their assets distributed for them by the state if the marriage ends and they disagree about who should get what. In some cases, a party may proceed in a predatory fashion with respect to estates rights. A prenup can protect both parties from such behavior.