In the throes of love, when a couple is planning their wedding, the last thing they want to think about is divorce. But the sobering reality is in many parts of the United States, the divorce rate is over 50 percent. Although it may seem a bit unromantic to talk about how to handle finances in the event of a divorce, a prenuptial agreement is an important tool to protect both spouses and their finances later in life.
This discussion explains how a prenuptial agreement works, when it makes sense, and how to get one in New Jersey.
What is a Prenuptial Agreement?
A prenuptial agreement is written contract for an engaged couple that describes their rights and responsibilities regarding premarital and marital assets and debts, and how they will be addressed in the event of divorce or death.
A prenuptial agreement is a private agreement based on transparency and fairness. In other words, each party must be totally honest when disclosing their assets and debts. And the terms must be fair based each partner’s lifestyle, earning potential, and other factors. Issues relating to future children are not covered in a prenuptial agreement. Those are handled in family court.
Because there are so many variables involved, prenuptial agreements will look different from couple to couple.
Are Prenuptial Agreements Only for the Wealthy?
It is a common misconception that prenuptial agreements are only for the super-rich. They can be beneficial for couples of all financial means for a few reasons:
- They clarify both spouses’ financial rights and responsibilities.
- They help protect spouses from each other’s debts.
- The help prevent disputes in the event of divorce that cause couples stress, time, and money.
- They allow partners to pass separate property down to children from previous relationships.
Prenuptial Agreements among Millennials are on the Rise
The American Academy of Matrimonial Lawyers (AAML) recently conducted a poll among attorneys and found more than half said they saw an increase in the number of millennials seeking prenuptial agreements. Why are so many millennials opting for a prenuptial agreement before marriage? Here are a few reasons.
Student debt. More than any generation before, many millennials are saddled with significant student loan debt. That should give pause to anyone getting married to someone with substantial debts. A prenuptial agreement is a way to protect a spouse from responsibility for that debt should the marriage end in divorce.
Non-physical property. A growing trend among engaged millennials is the inclusion of non-physical property in prenuptial agreements. Couples see the value in ideas or intellectual property and want to protect them in the event of divorce.
Realistic vision of marriage. Finally, millennials seem to be more realistic about the possibility of divorce. They are going into marriage without proverbial rose-colored glasses and taking practical steps to protect their financial future, whatever comes to pass.
Reasons to Consider a Prenuptial Agreement
Prenuptial agreements make sense for millennials who may be starting out with substantial student loans or have non-traditional assets they want to protect. But prenuptial agreements offer many benefits to couples of every age and every generation.
Here are a few common circumstances when it makes sense to get a prenuptial agreement:
Imbalance of wealth. Prenuptial agreements are common when there is a significant disparity of wealth between two partners. Oftentimes, it will be the wealthier spouse who requests a prenuptial agreement to protect certain assets and ensure their future spouse is not marrying for money.
Debt. Generally, a person who acquires debt before getting married is responsible for paying it off, whereas debt acquired during the union is both parties’ responsibility. A prenuptial agreement that states premarital debt cannot be paid from joint funds offers another layer of protection for the spouse who did not bring those debts to the marriage.
Prior marriage. Someone who has been married and divorced before may be hesitant about getting married again, especially if their divorce was particularly bitter. A prenuptial agreement offers reassurance and peace of mind they will be protected regardless of the outcome of their next marriage.
Children from previous marriage. A prenuptial agreement helps parents protect the interests of children from a previous relationship. It can allow them to keep certain assets separate from the marital portfolio, and even create a living will or trust to provide for the children in the event of their passing.
Business interests. If one or both spouses enter the marriage as business owners, they will surely want to protect those ventures regardless of what happens at home. A prenuptial agreement gives a business owner the discretion to determine how it will be managed now and in the future.
Inheritance. Generally, inheritances are considered non-marital assets, unless the recipient takes steps to make them marital, such as depositing funds in a joint account. A prenuptial agreement eliminates any confusion and ensures that an inheritance remains the recipient’s non-marital property.
Stay-at-home parents. Some spouses make the choice to be a stay-at-home parent. Without a prenuptial agreement, they can be penalized for the years they do not work or earning income. Couples can use a prenuptial agreement to protect the stay-at-home parent and provide a steady income stream or property to ensure they have a comfortable lifestyle should they divorce in the future.
Privacy. Privacy is another big incentive to get a prenuptial agreement before getting married. This is especially true for professional athletes, wealthy entrepreneurs, and other high-profile people. Both parties can include a provision in the prenuptial agreement that neither party can disclose or publish information or documentation concerning the marriage and divorce without the other’s written consent. They can also agree to handle disputes through arbitration, out of the public eye.
How Should I Bring Up the Topic of a Prenuptial Agreement with My Partner?
It is natural to be a little nervous about bringing up the idea of a prenuptial agreement with a partner. But open and honest communication, even about unpleasant topics, is the key to a successful marriage.
When raising the idea, it is helpful to reassure one’s partner that a prenuptial agreement is only a precaution, not a prediction of failure. Let them know they are loved, trusted, and valued.
Avoid forcing the issue or getting defensive if a partner seems unreceptive. The issue may not get resolved in one conversation. Sometimes it is good for couples to take a step back when things get heated and revisit the subject later after everyone has had time to think.
A Prenuptial Agreement Opens the Door for Important Conversations about Money
The prenuptial agreement conversation can be invaluable for an engaged couple because it opens the door to discuss expectations and ideas about finances that may have otherwise gone unaddressed for years. These early discussions about money often uncover red flags or conflicting views about spending and saving that should be addressed before the wedding.
It is important for couples to accept they may not always see eye-to-eye on these issues. But if they can listen respectfully to their partner and arrive at a place of empathy and agreement about how to navigate differences, they have already mastered essential skills for the years ahead.
How to Get a Prenuptial Agreement in New Jersey
After discussing a prenuptial agreement with one’s partner, the next step is to meet with a trusted divorce lawyer. Each partner should hire their own lawyer because sharing one is a conflict of interest.
Some people try to save time or money by using a self-prenuptial agreement they find online. But there are no guarantees a free prenuptial agreement will address the entire financial picture, meet all the legal requirements in New Jersey, or even hold up in court.
The client’s job is to disclose all their assets and debts including income, inheritances, business interests, and student loans. The lawyers for each partner will take it from there and walk the couple through the rest of the prenuptial agreement process.
What Happens if I Do Not Have a Prenuptial Agreement?
Should a couple break up without a prenuptial agreement, the laws in their state will determine what happens to property acquired during the marriage. Generally, most states give both spouses a claim to marital property and hold them liable for debts incurred during the marriage. Those terms may not necessarily seem fair or just to one or both parties, for whatever reason.
To come up with an arrangement that makes more sense for both spouses, consider getting a prenuptial agreement before taking that walk down the aisle.
New Jersey Divorce Lawyers at Lyons & Associates, P.C. Protect Their Clients’ Interests with Fair and Binding Prenuptial Agreements
The New Jersey divorce lawyers at Lyons & Associates, P.C. encourage their clients to think of prenuptial agreements not as a sign of future failure, but more as a form of protection for their financial future. Once it is complete, couples have peace of mind that whatever happens in future, they are protected. To learn more about the prenuptial agreement process, call us at 908-575-9777 or contact us online to schedule a free consultation. Located in Somerville and Morristown, New Jersey, we proudly serve clients in Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, and Morris Plains.