Increasingly more soon-to-be-married couples are exploring whether to draft and sign a prenuptial agreement. The stigma and misconceptions are increasingly being challenged by the reality that it’s not only wealthy couples who benefit from these contracts and damage your prospects for a long, happy marriage.
While statistically half of all marriages end in divorce, prenuptial agreements have the potential to save couples arguments, anguish and thousands of dollars. It often represents an agreement that is far closer to their wishes than what any family law judge could offer.
What’s more, a good prenuptial agreement can actually be a positive thing in a healthy marriage. Not only do these contracts protect each party from making financial decisions in the future out of feelings of anger or resentment, they also help engaged couples better understand the totality of their economic standing. Drafting prenuptial agreements compels conversations about tricky topics and gets couples on the same page with regard to money matters and life goals - things of key importance in a successful marriage.
We understand that division of assets isn’t a “sexy” conversation. In fact, many couples aren’t motivated to have it because many are entering their first marriage without substantial assets. Yet, it is something to carefully consider, especially if one of you is planning at one point to exit the workforce to raise children. Deciding ahead of time how to divide assets and future earnings can protect stay-at-home spouses against divorce laws that are typically more friendly to dual wage-earners who don’t need long-term alimony.
What Exactly is a Prenuptial Agreement?
A prenuptial agreement, also commonly referred to as a “prenup”, is a written contract between two people who are engaged, stating their rights and responsibilities with regard to premarital and marital assets and debts, and how these should be divided if the marriage ends in death or divorce.
It’s a wise investment because it not only forces couples to talk about their financial situation, it can help them sidestep a potentially costly and contentious divorce if things don’t work out. One study by researchers at Harvard found that while most people assessed the general public’s risk of divorce correctly (50 percent), they were overly optimistic about their own risk of divorce (10 percent).
Things that can be covered by a New Jersey prenuptial agreement include:
- Rights to separate and marital property.
- Right to buy, sell, transfer, spend or manage property/assets during the marriage.
- Entitlement to spousal support.
- Entitlement to death benefits from the spouse’s life insurance.
- Protection against a spouse’s debts.
- Property division in the event of death or divorce.
- Which state laws should govern the agreement.
There are, however, several things a prenuptial agreement cannot cover. Some of those include:
- Child custody/visitation matters.
- Child support.
- Day-to-day household matters.
- Anything prohibited by law.
Prenuptial agreements generally range anywhere from $1,500 to $10,000, but could be more or less depending on the complexity of the estates involved. Consider, however, that the average divorce lawyer in New Jersey may charge between $295 and $380 hourly, which could mean a bill well over $10,000 - for each of you - if you are trying to settle complex issues upon divorce. The more you have worked out ahead of time, the less you’ll have to pay someone else to help you sort out later. A well-drafted agreement can be well worth its weight in gold.
Who Should Have a Prenuptial Agreement
There is still the lingering notion that only uber-wealthy couples need a prenuptial agreement. Of course, high asset couples should have one, but they aren’t the only ones who could benefit from a New Jersey prenuptial agreement.
- Couples where one or both parties were previously married. A previous divorce can impact future rights or obligations pursuant to that judgment, so it’s important for the new couple setting out to be crystal clear on those terms.
- Parties with children. It may be important to protect the financial interests of kids from a previous relationship or marriage. Premarital agreements can ensure that certain assets remain intact and separate property that will provide for the children in the event of the parent’s death.
- Disparate wealth. If one party is wealthier than the other, a prenuptial agreement can help protect the interests of both parties.
- Disparate debt. Premarital debts are typically paid by the person who incurred them, but both parties can be liable for debts acquired during marriage - even if it was only one of you racking up the debt. Premarital agreements can help ensure whoever ran up the debt is responsible for paying it. It also protects joint assets from being used to cover the cost of those debts.
- Business owners. If you own a business prior to marriage, a prenuptial agreement is smart because a divorce can significantly damage your company. If you operate a firm with other people, their share of the business could actually be impacted by your divorce. Premarital agreements protect your firm, your partners and your employees.
- Privacy interests. Divorce records are typically public, and both parties are free to share their opinions on the marriage, its ending or the other person. A prenuptial agreement can require prior written consent of the other before one can disclose, publish or provide information/documentation to others about the union. Keeping such matters out of the public eye may be very important to one or both of you.
- There’s an inheritance to protect. Premarital agreements are smart if there is generational wealth to protect. Generally, inheritances are not considered marital property, but that could change if it is used for something like a joint title account or a piece of real estate that’s in both of your names. The best way to protect those funds is to put it in a separate account and only put it in the name of the person who has inherited it. Prenuptial agreements can help with further clarification of what is part of the inheritance and what isn’t.
- Plans for stay-at-home parenting. If one of you is planning to stay home with your children, a prenuptial agreement ensures the spouse that does so is going to be treated fairly in the event of a divorce.
If you have questions about drafting a New Jersey prenuptial agreement, we can help.
Contact our New Jersey prenuptial agreement attorneys today at (732) 810-0034 to schedule an appointment.