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A prenuptial agreement is a contract between you and your spouse that states what would happen if the marriage ends. The prenup can be a sensitive or awkward issue to discuss with your soon-to-be spouse. It involves an open conversation on how each party feels how property or money accumulated during the marriage should be divided in the event the marriage is not successful. The manner in which the parties are able to successfully complete a prenuptial agreement is a prelude to how the parties will able to communicate over difficult issues that they may face later on in the marriage.
The issues that have to be addressed in a prenuptial agreement should be discussed with legal counsel. As a family law attorney, our role is to explain the consequences of the negotiated terms to our clients. If our client desires modification of the terms, we will either ask the client to discuss the terms with their fiancée or we will contact their fiancée’s lawyer directly.
Fairness
There is no one agreement that works for everyone. For example, one couple may agree that one party will be a homemaker raising the children. That party will be losing the opportunity for career advancement if that party chooses to go back to work at some time in the future. Another couple may agree that they both will stay employed, advance their career, and each be entitled to the money they have earned.
The terms of the agreement should reflect the circumstances that the parties envision that they will be in. Neither party should put the other party under duress to sign the agreement. There should be an adequate amount of time between signing the agreement and the marriage.
Additionally, it’s important there be full disclosure of the assets each party has prior to the marriage. How can one negotiate a fair deal when one does not know what the other party owns or the debts that they have? While the terms of the agreement are up to the couple, a lack of disclosure, coercion, or duress can be the basis upon which an agreement could be challenged.
Assets
If you don’t execute a prenuptial agreement to determine how your finances will be divided in court, then state laws will determine who owns the property that you acquire during your marriage. The following are some of the types of assets that should be discussed in a prenuptial agreement:
Real estate purchased during marriage
Each person's salary earned during marriage
Retirement benefits earned during marriage
Stock options and other employment benefits
Any increase in the value of a premarital business
Other investments made during marriage
Joint bank accounts
Separate Property
Most property acquired prior to marriage is separate property, and separate property is not subject to division in a divorce. An agreement will list the items which would be considered separate property. The following are the usual properties which the parties will consider separate:
All property now owned or acquired either directly or indirectly by the party up to the Marriage Date;
All property inherited by the party, whether before or after the Marriage Date;
All property listed on that party’s Schedules of Separate Property (Schedules A & B, attached), regardless of how title is held;
All income (whether earned or unearned and whether due to either parties, both parties’ or neither parties efforts) before or after the Marriage Date;
All profits, rents, proceeds, etc. derived from the party’s Separate Property before or after the Marriage Date;
All profits, income, rent, proceeds, etc. derived from either party’s future companies or properties that may be formed before or after the Marriage Date;
All increments and appreciation in value of the party’s Separate Property
All assets acquired with or exchanged for the party’s Separate Property
All the gifts given to the party by the other party;
All voluntary or involuntary contributions that either party has made or an employer has made on the party’s behalf before the Marriage Date to any pension or retirement benefit plan of any nature including, but not limited to, any IRA, KEOGH, pension, profit sharing, employee stock ownership, or other individual or employee benefit plan plus all appreciation thereon;
The additional properly deemed to be separate property under the terms of the Agreement; and
Property defined as separate property under the laws of the State of New York, to the extent that such definition shall not conflict with the provisions hereof.
Spousal Maintenance (Alimony)
The parties can waive their right to maintenance in the event of a divorce. In New York, there is a formula to determine maintenance and if there is no prenuptial agreement, then the parties will have to follow the formula set out by the laws of the state of New York.
Legal Representation
It is important that both parties have an attorney. Each agreement includes a clause which states: “The parties acknowledge that they are entering in this Agreement freely and voluntarily; that they have ascertained and weighed all of the facts and circumstances; that they freely sought legal advice and they have been duly apprised of their respective legal rights; that they clearly understand and agree to all the provisions herein; and that the parties believe that the terms are fair and reasonable to both. The parties further acknowledge that each has been represented by counsel.”
The reason we ask that both parties have legal representation is that we don’t want either party to be able to challenge the agreement on the basis that they did not understand the agreement. If one party chooses not to have an attorney, we will put in a clause that that party was advised to have an attorney but refused. We also include a clause that if one of the parties challenges the agreement, that party will have to pay the other’s legal fees.
Joint Property
We will also specify those items that will be considered joint property. For example, the parties may agree that if they purchase a home, it will be considered joint property.
Any provisions in the agreement regarding child custody or support are not enforceable in a divorce action.
The Cons of a Prenuptial Agreement
One of the reasons people are reluctant to bring up the topic of a prenup with their soon-to-be spouse is because of the potential for hurt feelings, including the feeling that the spouse requesting the prenup doesn’t trust the person they’re going to marry. Another reason may be because the couple doesn’t want to think about the possibility of the marriage ending. While these conversations are difficult, it will be much more difficult for both parties down the line if a divorce does happen, and the lack of a prenup causes drawn-out battles in court.
If couples decide to execute a prenuptial agreement, it’s important they hire an experienced family law attorney for the state in which they live. A prenup that is executed incorrectly could be tossed out of court during a divorce and could have disastrous consequences.
Factors that could invalidate a prenuptial agreement include:
The agreement is fraudulent. If one spouse intentionally undervalues their assets or fails to disclose them all, the prenup may be rendered invalid.
The agreement was signed under duress. If one party is forced to sign the agreement under duress or one party was mentally incapacitated during the signing, the document will be thrown out of court.
The agreement was improperly executed. The agreement must be signed and acknowledged in the form of a deed to be enforceable.
The agreement is unconscionable. If the terms of the agreement are unfair to one party or contains unreasonable provisions, the court can choose not to uphold it.
Want a Prenuptial Agreement? Hire a Qualified Team
For those who make significantly more than their soon-to-be spouse or for those who have the potential for a high net worth divorce later on down the line, a prenuptial agreement is required to protect their rights. When there exists a contract that clearly defines the financial relationship between you and your spouse, there is less chance for surprises and upsets.
If you’re thinking about getting a prenuptial agreement, our New York family law attorneys are here to help. We’ll work with you and your future partner to draft a prenup that is tailored to your unique relationship.
We can help you execute a prenuptial agreement that’s right for you. Contact Eiges & Orgel, PLLC at (347) 848-1850 for a consultation with our experienced family law attorneys today!