On the subject of prenuptial agreements, the first question to ask your attorney is, “Do I need one?” Under current law in my state (which is New York), in most cases an honest answer might be “Probably not.” However, for various reasons, it is not the answer you are likely to hear. To be precise, there are a variety of special factors that can dictate that you should have one, even if you don’t absolutely need it.
When considering research, I often recall the advice of a now-deceased former colleague (a pioneer in our field on behalf of women’s rights in divorce). When approached by a high-powered potential client, a successful businesswoman who wanted to know if she “needed a pre-nup,” my colleague paid little attention to the client’s candid explanation of the financial complexities and personal emotional factors of her situation. Instead, he narrowed the investigation down to a single question: “Who has more money, him or you?”
When told that the future husband was undoubtedly the wealthiest part, my colleague said, as if reciting one of the Ten Commandments: “Well then you certainly don’t need it. And don’t you dare say a word about your fiancé. Don’t even mention the word pre-nup! “
Some other factors to consider that militate in favor of a garment are the following:
(1) You want or need to provide for people other than your spouse in your estate plan. This could include parents, siblings, children from a previous marriage, even charity. If you don’t provide it, under New York law, your spouse will have the right to choose to take up to one-third of your estate, regardless of what your will says (a right known as “spousal right of choice”). And, if you died without a will (the legal term is “intestate”), your spouse may be entitled to an even larger share.
(2) You own an asset together with other people that you do not want or cannot share with your future spouse in the event of a divorce. Under New York’s system for dividing marital property in divorce (known as equitable distribution), whether or not title to the premarital property is held with a third party, your spouse may have the right to share in your appreciation. (or even the total value, when the property has been “mixed” with the marital property is considered indistinguishable).
(3) You trust that your future spouse will not marry you for your money, but you still find it necessary to put that trust to the test. Most prenuptial agreements state that all joint title assets will be shared equally in the event of divorce; Therefore, after your spouse gains your trust, you can, if you wish, choose to take a more sharing and sharing approach. A less common provision sometimes proposed by the less wealthy party is a “sunset provision”, which means that after a certain number of years of marriage, the entire pledge becomes null and void. I have never been comfortable with this concept, which strikes me as a built-in incentive for a party to initiate divorce proceedings before the “expiration” date.
(4) For other reasons, you want or need to establish a mechanism to share future living expenses with your future spouse. An example might be when one spouse can more easily afford to make an initial investment in an asset such as a home or business, and the other has more monthly cash flow available. On the other hand, the true usefulness of this type of provision is questionable; It is hard to imagine one spouse taking legal action to enforce this type of provision against the other without triggering a divorce litigation.
(5) You plan to undertake a significant joint investment, in the very near future, for example a marital residence, and you want to address, in advance, your respective rights to share any increase, how you will assign the responsibility to maintain it, etc. . If you want to arrange that, in the event of a divorce, the estate will be divided proportionally (based on your respective contributions), rather than 50/50, now is the time to do so. In addition, presetting a mechanism for sharing common expenses during your marriage could serve to reduce tensions or allow one or both of you to commit more sincerely to the purchase.
(6) You are in your own business and you or your business partners do not want your future spouse to take a share in it. Under New York divorce law, your prenuptial business, or at least your marital appreciation, can be marital property subject to valuation and distribution. No judge will force you to sell your business, especially if it is your main source of income, and certainly will not require you to accept your ex-spouse as a business partner, but rather cash awards, determined by an appraisal of your business that is done routinely. . This can be particularly problematic when your business cannot be sold or is not easy to sell, such as with a minority interest in a nearby corporation, a limited partnership interest, or an interest in a professional practice.
(7) More specifically, you have, or plan to have, your own professional practice and do not want your spouse to be interested in it. While many companies can be evaluated with reference to the sales of comparable companies, professional practices normally cannot and, consequently, are valued in accordance with established accounting conventions. This can result in appraised values of up to seven figures, where the gains are substantial. Additionally, since there is typically no asset to sell to generate the court-awarded payment, the payer typically ends up paying the award with the proceeds that have been valued.
(8) You are pursuing or could follow a course of study, taking an exam, etc., which will lead to a degree, certification, license or similar, and you do not want to risk having to pay your future spouse. for a part of its intangible value. If such intangible assets were acquired in whole or in part during the marriage, the resulting improvement in earnings will generally be valued over the actuary’s working life of the holder. Again, when it comes to substantial income, the value can easily go up to seven figures. And, a professional practice, degree, certification, license, or something similar certainly cannot be sold to generate the funds necessary to pay for such an award.
(9) You are involved in a business or occupation where opening your books, or disclosing your finances, in a divorce is far from an attractive prospect. There is financial liberalism in New York divorce proceedings, which means that anything within reason that affects income or assets is fair game. Enough talk.
(10) And last but not least, what may be the biggest motivating factor for some, the desire not to have to pay divorce attorney fees that could be large enough to eat up a substantial portion of your hard-earned assets. Divorce litigation can be extremely expensive. If that’s not cause for sufficient concern, consider that you may have to pay not only your own fees, but your spouse’s legal fees as well, if he or she is the financially dependent party. Establishing your financial rights in advance, pursuant to a prenuptial agreement, is one way to avoid costly litigation over financial matters, but keep in mind that child-related issues cannot be legally resolved prior to the wedding.
I’m sure any of my colleagues could point to ten or more important reasons that I have missed. However, if none of the 10 reasons above apply to you, and you are not substantially wealthier than your future spouse, you may be one of those lucky few people who can avoid the usually painful (always unromantic) process of negotiating. a prenuptial agreement on the eve of your wedding.