A Prenuptial Agreement is, as the name implies, an agreement that is entered into in contemplation of marriage.
There are many reasons why a couple may wish to have a prenuptial. This may be a second marriage where one party has children from a prior marriage and wishes to preserve assets for them. One of the parties may anticipate receiving a substantial inheritance or an interest in a family business, which they wish to preserve without pressure from the future spouse to make the property joint. One may simply be concerned about becoming involved in costly litigation in the event of a divorce.
What does Prenuptial Agreement usually consists of?
- A typical agreement provides that the property that each party holds at the time of marriage, including specifically the increase in its value or its exchange for other property will continue to be separate property.
- It frequently also provides that all property acquired by either spouse during the marriage, shall be separate rather than marital property. Thus, the party may deal with the after acquired property in any manner that he/she wishes without the other spouse, upon the divorce, having any claim thereto.
- The agreement also frequently provides that if the parties purchase or acquire any property held in joint names that it constitutes marital property and will be divided in a specified fashion between the parties at the time of divorce.
- There is frequently a waiver of maintenance by one party in the event of a divorce.
- The courts have ruled that an ERISA qualified pension, can only be waived by a spouse and that any attempt at waiver prior to marriage is ineffective. Thus, the agreement must contain a provision that after the marriage that there be proper waiver of spousal pension rights.
- Last, but not least, there is usually a waiver by each party as to the rights in the estate of the other.
The New York courts have indicated that the parties to a prenuptial are in “a relationship of trust and confidence” at the time as they enter into the agreement. Thus, most current agreements do not provide for a total waiver by one spouse to all the assets of the other. It is not unusual to see prenuptial agreements providing for increasing levels of distribution of property based upon the length of the marriage. It may range from 0% within the first five years, to 50% after 25 years of marriage. The same concept applies to payment of maintenance. Agreements often also provide for increasing amounts of life insurance as the marriage progresses.
Prenuptial Agreement Requisites
There are certain requisites that should be complied with in order to have an effective agreement.
First, both parties should be represented be separate counsel. Although it may not be absolutely fatal for one party not to be represented, it will be much more difficult to defend against a claim of fraud, deception, undue influence and overreaching if the party was unrepresented.
Second, the agreement must be in writing and must bear a proper acknowledgement of each party’s signature taken before a notary public. The statute requires that the notarization use the same language as is necessary when a deed is recorded.
Third, the agreement should not be signed under the pressure of an immediately impending marriage. Courts have set aside agreements on the basis of duress that were signed to close in time to the wedding ceremony. While there is no hard and fast rule, it is best to execute the agreement at least 30 days before marriage.
Fourth, there must be full financial disclosure of the income and assets of each party. Without such disclosure there can easily be a claim that the other party had no knowledge of what they were waiving. It is good practice for each party to complete the same financial form that is required in a divorce action. In addition, there should be an exchange of tax returns, as well as, any other important documents that will clarify the parties financial circumstances.