You've picked out the ring, popped the question, and your wedding plans are fully underway. You're ready to live in wedded matrimony. But have you considered how your finances — and debts — will get along? And how you will manage them if your marriage ends in divorce? It's not a romantic topic to bring up, but it could spare you both time and money — and afford you peace of mind — should unforeseen circumstances arise.
There are many reasons why, before marriage, some couples wish to form a premarital agreement, sometimes referred to as a prenuptial agreement or prenup. These written contracts are meant to cover issues that could come up in the marriage and, if necessary, set the terms of divorce should that situation arise.
A prenup usually lists all the property each person owns, as well as their debts, if any. It also specifies what each person's property rights will be if the couple divorces or one spouse dies.
Agreements or contracts made during the marriage rather than before are referred to as "postnuptial," "post-marital," or "marital" agreements.
A premarital agreement can help spouses resolve issues during their marriage and spare them the time, money, and stress that accompany lengthy divorce proceedings. In addition, premarital agreements may also be used as the basis for further divorce actions if necessary.
Benefits of a Prenuptial Agreement
Determining the treatment of assets before marriage through a prenuptial agreement can help resolve issues before they arise, resulting in far less timely and costly litigation if the couple separates or divorces. In the event of a divorce, having a valid prenup in place can allow you to:
- Avoid arguments over property distribution
- Protect you from your spouse's debts
- Make decisions on property division when you and your spouse are on good terms
- Protect your personal property
- Protect the inheritance of your children and other family members
- Protect your business from your spouse
- Protect your financial interests
- Give you control over your property and finances
- Establish in advance the amount and duration of spousal support or alimony or the waiver of support
- Predetermine rights to retirement accounts or the waiver of those rights
- Predetermine how the couple will share living expenses
- Avoid or limit the cost of litigation
Who Needs a Prenuptial Agreement
Contrary to common belief, premarital agreements are not just for the wealthy. While they are often used to protect the assets of a wealthy individual, couples with less wealth are increasingly entering into prenuptial agreements with their intended spouses for various reasons, such as if one partner:
- Owns a business
- Expects to receive a large inheritance
- Was married before
- Has children from a previous relationship
- Has significantly more assets than the other partner
- Earns significantly more income than their partner
- Is the beneficiary of a trust
- Is marrying someone with significant debt
- Is concerned about their privacy
What Happens if I Don't Have a Prenuptial Agreement?
Couples in New Jersey are not required to have a prenuptial agreement, and many do not. For those who do not, state laws will determine who owns the property you acquire as a couple in the event you get divorced.
Couples who divorce in New Jersey without a premarital agreement in place are entitled to “shared property ownership.” In other words, any property acquired during the marriage is divided equally in the event of a divorce. Likewise, any debts assumed by either party during the marriage are also divided equally at the time of divorce.
Premarital Agreements In New Jersey
In New Jersey, there are a number of aspects to a marriage than can be covered under a premarital agreement. A premarital agreement may address and provide guidelines for the following:
- Marital and separate property
- Property division
- Benefactor of a life insurance policy
- Establishments of any will or trust
- How the agreement will be carried out
- Any issues that are specific to the marriage and spouses
The overall goal of these items is to set parameters for the marriage and, if necessary, divorce. Premarital agreements may go as far as setting specific responsibilities for each spouse, provided that the actions do not violate any criminal or civil laws.
Premarital agreements may not cover issues that pertain to child support or custody. These issues are separate from marriage and are handled as a separate case.
Why Would Someone Refuse to Sign a Prenuptial Agreement?
Premarital agreements have historically gotten a bad rap. When couples vow to marry, they don't do so with divorce in mind.
Those who ask for a prenup may worry that they are giving the impression that they're not fully committed, or they believe their intended spouse is a gold digger.
On the flip side, if you have significantly fewer assets than your finance, you may be reluctant to sign a prenuptial agreement for fear you will lose the ability to gain some of your spouse's assets or wealth in the event you get divorced.
With divorce and remarriage becoming more prevalent, along with more equality among the sexes, attitudes about prenuptial agreements are changing. Furthermore, courts are increasingly more willing to uphold these agreements.
Today, every state permits prenuptial contracts, though those judged unfair or that fail to meet state requirements will be set aside and deemed invalid.
Validity Of Premarital Agreements
Premarital agreements may cover a wide variety of issues that come up in a marriage, or at times, during a divorce. But sometimes, one party will question the validity of the agreement.
The first requirement for a premarital agreement to have any bearing on a marriage is for the two people who signed the document to be married. If two people draft and sign a prenuptial agreement but never marry, the contract has no standing.
New Jersey has also adopted the Uniform Premarital Agreement Act (UPAA), which states that the contract must be in writing, signed by the spouses, and have a fair disclosure of both spouses' respective assets attached. Ideally, both spouses should also have their premarital agreement reviewed by an attorney before signing. Under the UPAA, if a spouse does not have an attorney, they must disclose that they willingly signed without legal counsel.
Can Premarital Agreements be Challenged?
Once the basic requirements have been met, if the premarital agreement is challenged in court, it must be on certain grounds, with the burden of proof resting on the challenger. These grounds include:
- Involuntarily signing the agreement
- Signing the agreement without a clear or voluntary waiver of legal counsel
- Signing the agreement but not properly disclosing the assets to either party
- Before signing the agreement, one spouse did not have adequate knowledge of the property or financial obligation of the other partner
- Before signing the agreement, one spouse did not consult with a lawyer and did not voluntarily waive the opportunity to have counsel.
The spouse challenging the premarital agreement must argue through evidence in court in order to revoke some or all of the terms of the agreement. This can be difficult, and it may be best to seek counsel from an attorney.
Alternatives to Premarital Agreements in New Jersey
If you are already married but don't have a prenuptial agreement, you can still draft a marital agreement, also called a postnuptial agreement. These contracts serve the same purpose as a prenuptial agreement.
Can I Have a Prenuptial Agreement if My Partner and I Aren't Married?
Unmarried couples cannot have a premarital agreement, per se. But couples in New Jersey who live together can have a “living together agreement” or “cohabitation agreement,” a legal document that helps protect their rights as a couple as well as safeguarding their individual assets.
Situations in which live-in couples may want to make a cohabitation agreement include:
- Co-owning a major asset, such as a home
- Making a joint agreement to make payments on a debt
- Making a major sacrifice that is financially detrimental to one of the spouses, such as giving up a job to relocate and move in with their partner
In New Jersey, cohabitation agreements are governed by and enforceable under general contract law.
New Jersey Family Lawyer
Premarital, mid-marriage, or cohabitation agreements in New Jersey are designed to resolve issues regarding property and asset division more efficiently than court proceedings or mediation following the filing of a divorce. They can significantly reduce the time, cost, and stress of litigation. Before entering into an agreement, you want to be sure your decisions are well-informed. An attorney knowledgeable in New Jersey family law can help.
If you or a loved one is engaged in matters of Family Law in New Jersey, contact attorney Joseph D. Lento and the Lento Law Firm Team today.