What are things that should be included in a prenuptial or postnuptial agreement?
The first thing that a prenuptial agreement (or “prenup”) should address is the protection of the pre-existing assets of the bride and groom. But there is so much more that can be and should be addressed in a prenuptial agreement which can protect against misunderstandings between the parties down the road as to who owns what asset. It can also make your case so much easier to resolve in the event of the failure of the marriage, especially if both parties have been concise and clear as to the intentions when they married.
New York State has a very broad rule governing marital assets called Equitable Distribution Law. Under this law it is all about fairness and voluntary financial disclosure. Further, if you intend to live in New York, and be governed by New York law be aware that the courts will routinely consider businesses and trusts as marital property. As such, if you are intending marriage, it is extremely important that your agreement address all of the assets that a New York court might consider in dissolving a marriage.
New York law will also designate certain property as being your own separate property. As such, it is very important to designate and define in your agreement what the parties will consider to be separate property and what the parties will consider to be marital property.
Prenuptial agreements were designed initially to protect property that was acquired prior to the marriage. More recently, however, prenuptial agreements are becoming more expansive and are also addressing how marital property will be treated during the marriage itself, but prior to a separation event.
Prenuptial agreements are made and intended to supersede the equitable distribution laws of New York. Equitable distribution of property is a right that each party has to have property acquired during the marriage distributed properly and justly in the unfortunate event of a dissolution of marriage.
As such, in entering into a prenuptial agreement and to ensure superseding the rules of equitable distribution, the language should provide an express waiver of these rights under equitable distribution. This waiver language is especially important given that a prenuptial agreement that provides for distribution of marital property should, if drafted properly state that it is the parties’ intent that there be a deviation from the rules of equitable distribution, such that the parties intend that there agreement should control distribution of property in the event of an ambiguity of interpretation.
Thus, it is important to have strong language and clear definitions in a prenuptial agreement because the legal construct of equitable distribution law gives the New York Supreme Court broad extreme discretionary power over the marital estate as to how property will be divided between the parties in the event of a divorce proceeding. If you want your prenuptial agreement to prevail against any challenges in a divorce proceeding, then it is important that the document be drafted properly, executed properly, and contain the proper definitions and waivers.
In my opinion, as a New York Divorce Lawyer, it is also very important for each of the parties to have independent counsel to read and go over the agreement with them, so that they are fully knowledgeable of what they are signing.
Additionally, one should also consider past and prospective gifts from your parents while drafting a prenuptial agreement. When parents are expected to provide significant financial contributions to a couple, if you wish to protect these gifts, these gifts should be described in your prenuptial agreement as a separate property gift to that respective child, however titled. If the gifts of third parties are not expressly treated in your prenuptial agreement and if the gift is commingled with other of your marital property it might be considered a gift to the relationship, and then the property loses its separate property characteristics, and a court could consider that gift as marital property when it comes to the division of the estate.
Another consideration of import which should be addressed in a prenup is the instance when the parents of a couple loan money to the marriage. It is important that in any prenuptial agreement you address what is intended by the loan proceeds money by parents or by third parties in the context of a marriage. Sometimes parents will loan money to their child, in an effort to assist them in covering their living expenses and expect that loan to be repaid. In essence, then, the loan was never intended as a gift to the marriage. This is particularly important to address in your prenup because if you do not address this issue your spouse could argue that the loan was a gift to the marriage and hence was marital property.
During the marriage, it is often the case that parties contribute to their respective 401(k) or pension plans. It is important that you prenuptial agreement addresses these retirement plans. If the parties had retirement plans prior to the marriage, and they wish to protect that portion of the retirement plans, which accrued value prior to the marriage, then that must be stated in the agreement. However, if contributions to those plans will continue throughout the marriage if the parties do not intend to share those contributions in the event of a divorce, this language can be included in a prenuptial agreement as well.
To conclude, the prenuptial agreement is a very formal agreement that should protect all of your property rights in the event of a divorce so long as it is properly executed, there are attorneys involved in the review process, the terms of the agreement are concise and capable of enforcement, the terms are fair and there has been an adequate exchange of financial disclosure.
There are also agreements called postnuptial agreements whcih I will deal with in a separate article. These agreements can be a bit more complicated because they can address several issues of import that cannot be addressed in Prenuptial agreement, such as child custody, support, and visitation.
Often times a postnuptial agreement can be considered as synonymous with or as a basis for a separation agreement and can be effective if executed properly to avoid a costly litigated divorce action.
Postnuptial agreements are entered into between parties who are not quite sure whether they are ready for a divorce or whether they are willing to give the marriage another shot. These agreements also provide an avenue of recourse to a prenuptial agreement if certain issues arise during the marriage which were not addressed in a prenuptial agreement, or if no prenuptial agreement ever existed at all.
I hope this information has been helpful to you. That should not be considered legal advice, and you should consult with a Lawyer before acting upon anything contained in this article.
By: Lisa Beth Older, Esq.
Your Manhattan divorce, prenuptial, and postnuptial lawyer