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The Pros and Cons of Prenuptial Agreements

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What is a Prenuptial Agreement?

A prenuptial agreement is a written contract between two people who are about to marry. It sets out the terms of possession of assets, management of future earnings, and control or division of property of each person if the marriage should be later dissolved. Prenuptial agreements are often used in the case of divorce, however, they are also helpful when one spouse dies. They can help resolve issues regarding property and distribution of marital assets. Although prenuptial agreements are becoming more common, many couples may be hesitant to create one. When deciding whether to use a prenuptial agreement, it is best to consider the pros and cons associated with them.

Advantages of prenuptial agreements

Protects pre-marital assets. Most prenuptial agreements protect all premarital assets. Assets that are jointly acquired during the marriage are typically shared equally.

Protects the financial stability of your children. Without a prenuptial agreement your spouse may receive assets you intended your children to have.

Reduces future conflict. Signing a prenuptial agreement eliminates the possibility of future conflict in the case of divorce, as it states how issues are to be handled. It can also help to reduce the amount of time that it takes to settle up the divorce.

Assigns debts. Prenuptial agreements can determine how liability for debt will be distributed between the parties to avoid both spouses sharing debt liability.

Makes divorce settlements easier. A prenuptial agreement can help avoid extended court proceedings, which result in the time of expensive divorce attorneys, since the expectations by both partners is clear.

Disadvantages of prenuptial agreements

Sense of distrust. Many feel that even bringing up the idea of a prenuptial agreement means there is a lack of trust. Some feel that a prenuptial agreement leaves the couple more open to the possibility of divorce.

May be unnecessary. State laws sometimes cover a lot of the issues that are addressed in a prenuptial agreement. Most states also don’t allow certain issues to be resolved through a prenuptial agreement. For example, child support matters have to be resolved through court mechanisms.

Can be a trap. Prenuptial agreements can be a trap for some people. In certain cases they can be as a tool to control the partner that is coming into the relationship with less assets.

Cannot include child support issues. A prenuptial agreement cannot include child support or child custody issues. The court has the final say in calculating child support. The court also determines child support based on several factors. A court would never uphold a provision o f a prenuptial agreement that dealt with child support.

Can create burdens. Sometimes circumstances change and people cannot predict what will occur in their lives and marriage. It can be difficult to predict how potential issues should be handled in the future, and what may seem like a compromise at first can seem more burdensome later on.

 

GETTING FAMILIAR WITH PRENUPS IN NJ

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What are Prenups in NJ?

A prenuptial agreement, also known as an antenuptial agreement or premarital agreement, is a written contract between two people planning to marry. It sets terms of possession of assets, management of future earnings, and control or division of property should a marriage end in divorce; however, it cannot adversely affect future child support.

Prenups in NJ go into effect immediately after a legal marriage takes place. It is possible to amend prenups in NJ after marriage; however, all of the changes to the initial agreement must be acknowledged and signed by both parties.

Although it is not required by NJ law, it is recommended that each party be represented by their own attorney to ensure their best interest.NJ prenups

Why is a Prenup Necessary?

Prenups in NJ are especially common when both or one party has substantial assets, high income, potential inheritances, children from a previous marriage, or a negative history regarding finances with a prior spouse.

Although prenups in NJ tend to have a negative connotation, they can actually serve to make a relationship stronger and open up a healthy financial dialogue. Many couples experience marital strife or divorce due to financial differences, but being open with one another from the engagement period may help avoid misunderstandings.

Prenups in NJ also help protect assets or property that has more than just monetary value. For example, an inherited family property may be of significant sentimental value to a person. Deciding what will happen with your spouse ahead of unforeseen circumstances will lead to a more fair settlement, as opposed to leaving such an important and sensitive matter for the courts to decide.

New Jersey Uniform Premarital Agreement Act

The Uniform Premarital Agreement Act was adopted by NJ in 1988 and outlines the requirements of prenups in NJ. In addition to definition and formalities it covers the contents and enforceability of a premarital agreement.

According to section 37:2-34, the contents of a prenup may include:

a. The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;

b. The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;

c. The disposition of property upon separation, marital dissolution, dissolution of a civil union, death, or the occurrence or nonoccurrence of any other event;

d. The modification or elimination of spousal or one partner in a civil union couple support;

e. The making of a will, trust, or other arrangement to carry out the provisions of the agreement;

f. The ownership rights in and disposition of the death benefit from a life insurance policy;

g. The choice of law governing the construction of the agreement; and

h. Any other matter, including their personal rights and obligations, not in violation of public policy.

The Uniform Premarital Agreement Act also states that if a party alleges that an agreement should not be enforced, the burden of proof falls on them to show that one or more of the following from section 37:2-38 is present:

a. The party executed the agreement involuntarily; or

b. The agreement was unconscionable at the time enforcement was sought; or

c. That party, before execution of the agreement:

(1) Was not provided full and fair disclosure of the earnings, property and financial obligations of the other party;

(2) Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided;

(3) Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party; or

(4) Did not consult with independent legal counsel and did not voluntarily and expressly waive, in writing, the opportunity to consult with independent legal counsel.

d. The issue of unconscionability of a premarital or pre-civil union agreement shall be determined by the court as a matter of law.

In 2012, Governor Chris Christie strengthened the enforceability of premarital agreements by signing a law that amended N.J.S.A § 37:2-38 and N.J.S.A § 37:2-32. This removed a provision stating that prenups in NJ could be invalid if unconscionable at the time of enforcement, and left unenforceability to those agreements which were unconscionable at the time they were executed.
nj prenups

Considering a Prenup

Forbes.com contributor Jeff Landers provides an interesting perspective on prenups. He describes them as being very similar to wills in that they are carefully thought out documents centered on open communication. The estate of a person who passes away without a will is divided according to the government, not friends or family; should a marriage end in divorce without a prenup, assests and property are divided by the courts, not by the thoughtful agreement of both parties. In this way, a prenup, like a will, can help provide fairer distribution.

Contemplating a prenup can be intimidating, and broaching the subject with a future spouse during a time full of joy, excitement, and wedding planning can be very difficult. It is important to keep in mind that drafting a prenuptial agreement does not have to be a negative experience and it can be beneficial to both partners in the long run. While no one hopes for marriage to end in divorce, it can be in the best interest of both spouses to have control of their financial futures should it occur.