Many people feel anxious and stressed when they are about to get married. Some ask themselves, “Is this the right thing to do? Will the marriage work? Am I making a mistake?” Some of the anxiety, stress and fear can be eliminated by a prenuptial agreement.
A prenuptial agreement is a contract entered into prior to marriage that defines how assets will be distributed in the event of a divorce. The key advantage to a prenuptial agreement is that it can create its own definition of marital property. New York Law defines marital property as all property acquired by either spouse during the course of a marriage. Of primary importance is the fact that it does not matter how the marital property is acquired or by whom.
Since the division of assets is not based upon who “acquires” them during the marriage, it is particularly important for those who own an interest in a business to have a plan prior to the marriage. A business can be included as marital property in the event of a divorce, even if one spouse played no role in the day-to-day operations of the company. A prenuptial agreement can protect those business interests by allowing the spouse most involved in the running of the business to maintain ownership should the marriage ultimately break up.
Prenuptial Agreement Basics
In the past, prenuptial agreements were thought of as being only for the very wealthy, those with substantial assets going into a marriage; however, legal and financial experts agree prenuptial agreements are smart financial planning for almost every couple.
In addition to a division of marital assets, prenuptial agreements can also provide in advance for a plan regarding spousal maintenance (also called spousal support or alimony). Providing for spousal support in a prenuptial agreement allows a spouse the freedom to leave the workforce to care for the home or any children by knowing he or she will still have the necessary support to care for himself or herself even if the marriage ends. The payor spouse will know what his or her obligation for maintenance is in advance. This is typically done by formula so that length of the marriage is a consideration.
The idea of a prenuptial agreement can seem pessimistic to some people. However, many people believe that they don’t need automobile insurance because they are very careful drivers. Everyone who gets married also thinks they were very careful in choosing a spouse, but in both instances, driving and picking a spouse, accidents happen.
A prenuptial agreement can benefit both parties involved by clearly defining how property will be split up based upon what the couple believes is fair and reasonable, instead of according to state law. A prenuptial agreement allows couples to take the situation into their own hands and alleviate some of the marital property issues that can come up. It is also drafted at a time when both parties can be very fair with each other. Again, while no one expects to get divorced, a prenuptial agreement can be a valuable precautionary tool and shows responsibility and practicality when entering a marriage. It is an insurance policy without yearly premiums.
Prenuptial agreements can also potentially save thousands of dollars in legal fees, as many divorces are so contentious that the parties lose sight of the economic issues and incur far greater fees than they would otherwise incur with a prenuptial agreement.
While prenuptial agreements are valuable, they must be done correctly and according to state law in order to ensure their validity. Each spouse should consult an experienced family law attorney individually to fully understand the potential options and rights a prenuptial agreement can provide.