Prenuptial Agreements — What Are They and Do I Need One?

Prenuptial agreements are versatile tools that can provide reassurance and guidance for the couples who take advantage of them. That said, there remain many misconceptions about what a prenup can and cannot do — so I thought I would take some time to demystify the process in this post.

What Is a Prenuptial Agreement?
A prenuptial agreement is a contract between two parties contemplating marriage that is entered into prior to the marriage. This contractual agreement provides how property will be divided in the event of a divorce or upon the death of one of the spouses. It may also address the issue of spousal support in the event of a divorce (also known as maintenance under New York law), in addition to other issues such as how pre-marital debt will be handled, support for children from a prior marriage, among other issues.

Why Do I Need a Prenup?
Some reasons why a couple may want to consider a prenup include:

• To clearly define separate property (property that does not get shared upon divorce) and marital property (property that does get shared upon divorce) according to the parties’ own terms. 
• In the case of a second or third marriage, the parties may want to protect their children from a prior marriage by preserving inheritances that they would otherwise be entitled to, had the second or third marriage not occurred. 
• To address any appreciation of separate property. 
• To address the use of separate property to purchase marital property or the commingling of separate property with marital property. 
• To exempt certain assets accumulated during the marriage that would otherwise be defined as “marital property” under New York law, such as retirement assets. 
• To address inheritances and/or gifts received from third parties during the marriage, and how the commingling of such assets with marital property will be dealt with upon divorce or death.

What Happens If I Don’t Have a Prenup?

For parties who do not sign a prenup prior to getting married, the law of their state will dictate how property is divided and/or distributed.
In the case of a divorce in New York, the N. Y. Domestic Relations Law (DRL) provides how property gets divided between spouses and will also determine whether maintenance (alimony) will be paid by one spouse to the other. In the case of death, the Estates, Powers and Trusts Law of the State of New York will determine how an estate will be distributed, taking into consideration whether the deceased spouse had a will or died intestate (without a will).

Divorce in New York

The Law of Equitable Distribution in New York provides how property is divided and defines separate property (property not to be divided between spouses) and marital property (property to be divided between spouses). Determining whether the property is separate or marital is not always clear cut, and there are numerous factors and nuances that come into play that may determine whether the property is considered separate or marital property under New York law.
New York also has a Maintenance Guidelines Law that provides mathematical formulas to calculate maintenance/alimony payments. The Guidelines consider the parties incomes, length of the marriage and other circumstances and factors to determine the amount of maintenance to be paid by one spouse to the other, in addition to the duration of maintenance.

Death in New York

In the case of the death of one of the spouses, the Estates, Powers and Trusts Law of the State of New York provides for a spousal right of election. The spousal right of election contains provisions protecting spouses who may be disinherited in a will; and also contains provisions for the spouse of a person who dies intestate.

How Do I Get a Prenup Drafted?

First and foremost, you should always begin by seeking the advice of counsel.
The most common way to begin the process is for one of the parties to retain an attorney to draft the prenuptial agreement. The soon-to-be spouse of that party will then retain a separate attorney to review the agreement on his or her behalf.

Another way to get a prenuptial agreement drafted is for both parties to retain a neutral third party, such as a mediator attorney, who will meet with the parties to discuss their intentions and then draft the agreement for the parties. The parties will then each hire separate counsel to have the agreement reviewed on their own behalf. This is a more collaborative way of going about the process.

Either way, whether you decide to enter into a prenuptial agreement or not, it’s a good idea to have these conversations with your soon-to-be spouse prior to getting married to assure that you are both on the same page and that the expectations are clear.