Marriage is an economic partnership. Most people would not go into a new business partnership without clearly outlining the financial terms to protect themselves if the partnership does not work out.
Although prenuptial agreements sometimes have a stigma of being associated with celebrities or a wealthy individual and far less wealthy spouse, many other couples can benefit from a prenuptial agreement, including young professionals as well as couples entering into a second marriage who want to avoid the uncertainty and cost of another divorce.
Why should you get a prenuptial agreement in New York?
A prenuptial agreement is a legal agreement that couples enter before getting married and the contract becomes effective once the couple is officially married.
The prenup dictates the definition of marital and separate property, and often addresses issues regarding spousal maintenance and other issues in the event of divorce. Regardless of your net worth, a prenuptial contract provides the following benefits:
- Discloses, identifies and provides a value of premarital separate property
- Establishes or expands on the definition of separate vs. marital property
- Protects the appreciation in value in separate property, including businesses and real estate
- Protects your estate when appropriate to ensure that you can leave your assets to your intended beneficiaries such as children from a prior marriage
- Provides for a waiver or determines how spousal maintenance will be calculated
Many people are reluctant to propose a prenuptial agreement because they think it means they have doubts about the marriage. In actuality, a prenup requires the parties to discuss their finances before they are married, which can help strengthen the marriage by encouraging honest, open discussions about potential financial matters and provides clarity for how the parties will shape their economic partnership.
Who should get a prenup in New York?
Although prenuptial agreements are often associated with a wealthy individual and a less wealthy spouse, other categories of individuals who can benefit from prenups include:
People Who Want to Protect Their Assets
One of the most complicated issues in many divorces involves the identification and valuation of separate property, particularly premarital property. Property acquired before the marriage is separate property. Many young professionals as well as individuals who are well established in their careers enter into a marriage with significant assets that they acquired prior to the marriage, including retirement accounts, savings, investment accounts, a home or apartment, investment property, or other assets like stock units.
The party claiming that an asset is separate property or that they are entitled to a separate property credit is responsible for proving their claim with documentary evidence. Without a prenuptial agreement, significant legal fees can be incurred in trying to prove a separate property claim. Often it becomes one of the primary sources of contention to establish what happened to a retirement account or savings account that existed 10 or 20 years before the divorce. A prenuptial agreement can help protect your assets by identifying and valuing separate property as well as expanding on the definition of separate property and clarifying how separate property credits will work in your economic partnership.
If you own your own business, a divorce will be more complicated especially without a prenuptial agreement. In a divorce, even if you owned the business before you were married, your spouse may be entitled to a percentage of the appreciation in the value of that business during the marriage. Business owners can negotiate a prenuptial agreement that protects their business and the appreciation in value from a potential divorce and forensic accounting of their revenue and expenses.
Individuals Who Expect Eventual Inheritances
Inheritance is separate property by law, but many times becomes an area of confusion and conflict if it is received during the marriage. Without a prenup, your spouse could end up getting part of your inheritance when you divorce. A prenuptial agreement is often used as part of a larger estate plan for the entire family. If your family owns a family operated business or anticipates inherited real estate or investments, or if your family intends to make annual or other gifts as an advance on inheritance, a prenuptial agreement can provide protections depending on how that inheritance is used during the marriage.
People with Children from Previous Relationships
If you have children from previous relationships or marriages, you may want to make sure your property goes to the children. Without a fully acknowledged signed waiver, your spouse has an automatic right of election to ⅓ of your net estate. A prenuptial agreement can and often does include such a waiver or a partial waiver, particularly in second marriages where you may already have a last will & testament that leaves your property to your children from a prior relationship.
Prenuptial Agreements are Prepared While you’re Not Emotional
Negotiating a divorce agreement after a marriage has broken down often involves strong emotions including anger and resentment. Negotiating a prenuptial agreement in the time leading up to the wedding may be intimidating initially, but the parties are almost certainly less emotional and more pragmatic. A prenuptial agreement can be prepared by your respective attorneys while you are not emotional in order to provide better clarity about the financial terms of your marriage to avoid ambiguity and strife in the event things fall apart. A prenup is simply a financial planning document that anyone with any assets should consider before getting married.
Limitations of Prenuptial Agreements
While prenups can address a wide range of issues regarding property and money, they generally cannot address the issues of child support and child custody, particularly for children who are not yet born.
The party proposing a prenup also has to be realistic about what is fair for the other party to accept. A complete waiver of all assets and all income ever received during the marriage may seem like a good way to protect yourself, but what if your future spouse gives up their career to raise your children or becomes dependent because of a disability? A prenuptial agreement can provide protections, but one of the limitations on what can be included is what the other party will accept when there are uncertainties in life and how the prenup may impact them based on future developments.
Assistance and Advice About your Prenup
At Aiello & DiFalco, we negotiate many prenuptial agreements each year. We have drafted and negotiated custom-tailored, comprehensive, solid and enforceable prenuptial agreements for young professionals, business owners, wealthy individuals and second marriages as well as others. If you want to discuss your options, kindly contact us and speak to one of our attorneys about how we can help with your prenup.