Many people contemplating marriage presume that the mere mention of a prenuptial agreement may torpedo their romance. Prenuptial agreements frequently are viewed as a way to “hedge one’s bets” or to avoid complete commitment to one’s partner. These marital contracts carry this stereotype even though most people insist on a formal written agreement when entering into a business partnership. Marriage could be considered a business partnership on steroids because it joins more than the financial aspects of people’s lives. A prenuptial or postnuptial agreement can provide a wide range of benefits for both parties but must be carefully considered and drafted.
Prenuptial agreements and postnuptial agreements (essentially prenuptial agreements entered into after marriage) permit spouses to plan for a wide range of issues in the event of divorce or the death of a spouse. A prenuptial agreement might be unnecessary for a first marriage where both spouses have middle-class wage jobs, comparable assets, and no significant prospects in terms of inheritance. However, there are many situations where a prenuptial agreement merits serious consideration, including the following:
- Business ownership by either marital partner
- Anticipation of significant inheritance by either spouse
- Either spouse with a loved one (e.g. elderly parent) needing financial support
- Entering marriage with an asset of significant value (home, retirement plan)
- Substantial disparity in net worth between the parties
- Prior marriages with children that will impact inheritance
- Either spouse is supporting the other in obtaining a higher education or professional career (i.e. physician, attorney)
- Significant wealth disparity between the parties entering marriage
A study by the National Center for Health Statistics (NCHS) predicted a third of new marriages would end in divorce within ten years and 43 percent will end in divorce within fifteen years.
The divorce rate for second and third marriages is considerably higher. A prenuptial agreement provides for predictable negotiated resolution to financial arrangements in the event of divorce or the death of a spouse. Parties reach more constructive arrangements on issues involving property and debt division, alimony, and other financial issues when discussed during amicable times.
Prenuptial agreement or postnuptial agreement can prevent unnecessary conflict and preserve the resources of the marital estate from being depleted by litigation costs incurred because of divorce or death of a spouse. A prenuptial agreement also can provide property and spousal maintenance arrangements that are acceptable enough to both parties that they could be agreed to before marriage.
If you have questions about a prenuptial agreement, we invite you to speak with one of our New Jersey estate planning attorneys. We are one of the most experienced and accomplished estate planning law firms in New Jersey with more than 30 years of experience. If you are considering esatate planning options in NJ or NY, we invite you to call us now at (201) 690-1642 to set up a consultation with a knowledgeable and experienced esate planning attorney in New Jersey or New York City.