- January 31, 2021
File Under: Pre-Nuptial Agreements
The number of couples signing prenuptial agreements has grown considerably from the 5% of the population that signed them at the start of the 21st century. There is a distinction between having a prenuptial agreement and having an effective one. Here are some of the things that the prenuptial agreement should cover in order to provide both parties with the maximum amount of protection and certainty.
More People Are Signing Prenuptial Agreements
In the past, many people hesitated to sign a prenuptial agreement because there were negative connotations associated with it. Some couples felt that it was unseemly or bad luck to protect themselves from the possibility of a divorce. However, too many people these days have seen and heard horror stories of bitter divorces where money was a contentious issue in the legal proceedings. As a result, they are opting for executing prenuptial agreements.
For many people, the question is not whether they need a prenuptial agreement, but what they need to include in it. This document is a binding contract. Anything that is not included in the prenuptial agreement at the time that it is signed will not be a part of what is enforced in the event of a divorce.
The agreement will be strictly construed and will not be expanded when the time comes to apply its terms. Therefore, people getting set to sign a prenuptial agreement will need to work with their divorce lawyer to ensure that the agreement covers all the necessary issues. With that in mind, here are some areas which should be covered by a prenuptial agreement.
Protection From the Other Spouse’s Debt
One of the most important things that a prenuptial agreement needs to cover is protection from the other spouse’s debt. These days, both people may enter a marriage with a high debt load, both from credit cards and student loan debt. The prenuptial could reaffirm that the separate debts are in fact separate and that the responsibility of the debt remains with the person who incurred it. Prenuptial agreements can protect you if you are marrying someone who has significant debts.
The Prenuptial Agreement Can Help Set Alimony
Both spouses might have an interest in resolving the alimony question before they are married. This issue looms very large and can cause uncertainty for both the spouse paying the alimony and the one receiving it. The two parties may want an agreement down on paper so they both can have some security. If one spouse is coming into the marriage with significant assets, the other spouse may want some assurance that they will receive alimony if the marriage fails. After all, someone would not want to grow accustomed to a certain standard of living during the marriage and then end up having to dramatically change their lifestyle after a divorce.
The spouse with assets would also want some assurances about alimony. They would not want to feel like they are writing a blank check for alimony if there is a divorce. That spouse needs some predictability about what they would be facing. In any event, having some provision that covers alimony would be helpful to both sides.
How Disagreements Will Be Settled
The last thing that you want is to have a lengthy and costly divorce trial, having to repeatedly go into court with your family lawyer. One thing to consider for your prenuptial agreement is a dispute resolution clause. This will obligate the spouses to go to mediation in the event of a divorce or do something else other than going to a divorce trial. The prenuptial agreement could also require that the couple goes to arbitration. In any event, this could lend some predictability in the event of a divorce. Both parties could waive their right to appear in court in front of a judge.
Distinctions Between Marital and Separate Property
This is one of the key elements of a prenuptial agreement. When people think of a prenup, this is what they usually think about as the crux of the agreement. People want the assurance that the separate property that they had before the marriage will remain theirs in the event of a divorce. This is especially important when one of both spouses has significant assets of their own. For instance, if one is a business owner, having a prenuptial agreement is a must. Of course, a spouse can always try to prove that they owned the asset before the marriage and kept it separately, but they are taking a risk without a prenuptial agreement.
Other Financial Arrangements
A family law attorney will advise you how wide-ranging prenuptial agreements are. Not only can it affect the financial conditions of a divorce, but it can also govern the couple’s relationship during the marriage. For instance, the prenuptial agreement can specify which spouse is responsible for what in their financial life. For example, one spouse may pay the mortgage while the other takes care of household expenses. This can be a way to help the couple avoid fights about money during the marriage. The prenuptial agreement can even lay out a manner in which the couple resolves disputes about money.
Children From Previous Marriages
One common reason for prenuptial agreements is that one or both spouses have children from a prior relationship. People want their children to be able to inherit some of their money if something happens to them. However, that must be balanced with the needs of the spouse. This is often handled in a prenuptial agreement that lays out detailed terms regarding what happens to property in the event of a death. This helps resolve a frequent dispute that blended families often have. Accordingly, both the children and the spouse can be taken care of in the future.
Valuation of Assets
Many bitter divorces involve fights about the valuation of assets both before and during the marriage. One way to use a prenuptial agreement is to value these assets ahead of time in the agreement itself. This is especially helpful when one spouse owns an illiquid asset such as a business. The other spouse may be legally entitled to be compensated for the growth in value of the business over the course of the marriage. However, the value of the business at the start of the marriage is not always specified. Having a business valuation expert put a number on it before the marriage starts is one way to make a divorce less contentious.
Before drafting a prenuptial agreement, you should consult with a divorce attorney for help. The family lawyer could advise you what can go into the document along with what you should consider before signing. Once you sign the prenuptial agreement, it would be incredibly difficult, if not impossible, to go back and make changes, so you have one chance to get it right.
Equally important is the question of what not to include in the prenuptial agreement. Certain provisions, such as child support and custody, are not allowed to be in prenuptial agreements and if they are in the agreement, a court will not enforce those terms. These would be struck down and not enforced by the court.
A divorce lawyer can represent you at the time that you negotiate and sign a prenuptial agreement. Having a family law attorney on your side is vital as it increases the chances that the agreement is enforceable. Contact the New Jersey divorce attorneys at Lawrence Law today at (908) 645-1000 to set up a consultation. We have offices in Watchung and Red Bank.