What is a Prenuptial Agreement?
Prenuptial agreements are contracts entered into by two parties intending to marry. These agreements may address what will happen in the event of a divorce. For couples who enter into prenuptial agreements, it is essential to have an understanding of their basic contents from a legal perspective.
Essentially, a prenuptial agreement is a contract. Two parties may determine for themselves what they believe is fair, and what is not, when it comes to their respective assets. As is the case with any kind of contract, it must be clear, fair and reasonable. In order for a judge to enforce its terms, the agreement must be examined to ensure that it is not overly oppressive , unfair or unreasonable regarding the party seeking to invalidate it. This will generally be determined in a court of law. That being said, if both parties agree to the terms set forth in the agreement, they may not need a judge to rule one way or the other. In other words, if the agreement is not heavily one-sided, the parties may decide to live up to the terms set forth in the agreement in the event of a divorce.
There are three ways in which a prenuptial agreement may be invalidated:
The laws that govern prenuptial agreements differ throughout the United States. In the State of New York, practitioners throughout the family law industry have a solid understanding of these laws. It is merely an overview of the law to provide a general understanding of the purpose of these contracts.
Requirements for a Prenuptial Agreement
A prenuptial agreement in New York must meet a few essential requirements in order to be deemed as a valid and enforceable contract. First, the agreement must be made in writing. An oral agreement is not recognized as valid in regards to prenuptial agreements in the same way that other contracts would be. This is to be distinguished from a post-nuptial agreement or separation agreement, which are examples of enforceable agreements that do allow for oral contracts.
Second, in order to be enforceable, the agreement must include the voluntary and informed consent of both parties. This means that no coercion or coercive tactics are utilized by one future spouse in order to get the other future spouse to sign the agreement. If fraud or shall subterfuge is used in getting the other party to sign, such as by providing information that is factually incorrect or misleading, or by not providing relevant information that would need to be disclosed (like income), then the agreement can be overturned.
The third requirement is that, prior to the date of the signing of the prenuptial agreement, the agreement must be signed by both contract parties in the presence of at least one witness. The witness must also sign and affirm that he or she witnessed each party sign the agreement. It is not required for the parties to each have their own witnesses.
In the event that a party to the agreement refuses to sign at the time of the signing, then the agreement being signed by the both of them must still be notarized, but only by the party who signs the agreement. It is important to have the agreement notarized in the event that the other party does not sign, or refuses to sign.
In some circumstances, a prenuptial financial agreement can still be valid even if it violates one or more of the above requirements. Such circumstances generally arise when a court finds it convenient for the spouses to have the agreement upheld, or it would impose an unnecessary burden on a spouse if the agreement wasn’t upheld given the surrounding facts and circumstances.
Key Terms to Consider Before Drafting
In many ways, the negotiation of a prenuptial agreement is like a business deal. It is important for both parties to be clear about what assets they have, and what they want to protect from the marital estate and the other spouse. Yet each party must also evaluate whether their requests are reasonable, and whether there are other less aggressive/sweeping approaches available to address their concerns.
There are two critical elements that couples need to consider when starting the process of drafting a prenuptial agreement:
What assets and income do you presently have? It is essential for both parties to fully disclose their assets, income, debts and liabilities before drafting a prenuptial agreement. Full financial disclosure is obviously a prerequisite for drafting a prenuptial agreement, but it is also a significant factor in assessing whether the terms of an agreement are reasonable. A settlement agreement that is based on financial information that is incomplete, dishonest or inaccurate, may cause the resulting agreement to be set aside. Therefore, until all assets and income are identified, a prenuptial agreement cannot be drafted.
Is the proposed agreement fair? Although negotiating a prenuptial agreement can often feel like bargaining over terms in a business transaction, you are not only dealing with legal rights and property in a prenuptial agreement. Rather, there are emotional issues that overlay financial issues. Simply because one spouse asks for something, does not always mean that it is fair. Will the other party be able to survive financially in the event of a divorce or death? What expenses will he or she have to incur if the agreement is enforced? Does the request place the other party in a precarious situation that could be avoided with some creative thinking? When negotiating the terms of a prenuptial agreement, it is important to be reasonable and empathetic to your partner’s needs.
Common Provisions and Clauses
When parties enter into a prenuptial agreement in New York, the law gives them a lot of leeway to negotiate for themselves. As such, there are no hard and fast rules for what must be included in a prenup, but the following are a few examples of the types of terms that are often included.
Property Division: Virtually any term can be included regarding the division of property upon divorce. State law gives people the ability to enter into contracts with each other, and that includes making agreements regarding what would happen to specific properties in the event of a divorce. Typically, these agreements would divide marital property in a way that the parties find acceptable. An example of this might be stating that if a couple purchased a house together during the marriage, the house would belong to whichever one is responsible for paying the mortgage. This type of term is particularly useful to avoid disputes over real estate that was owned before the marriage but which increased in value during the marriage.
Spousal Support: Like property division, spousal support can be addressed entirely within the terms of the agreement. Note, however, that the court has the ability to void any spousal support term in the agreement if it seems to a judge to be unfair under the circumstances. For example, if you are very rich and your spouse is not and you want to ensure they do not drag out a divorce to get more money from you, you might stipulate a payment structure in which you provide your spouse a set amount of money on a monthly basis for a certain number of months after the divorce. The court might determine that that would essentially force your spouse to stay married to you beyond the end of the marriage because it would hurt them financially to leave the relationship at any point prior to the end of a set time period.
Debt: Just like property and spousal support, the parties have the ability to create their own agreements in regard to the division of debt. You can stipulate that you would be responsible for all of your student loans, or that all credit card debt should be split equally among both parties. This will ensure that both you and your spouse are protected from having to pay the debts of the other party in divorce.
Challenges to Enforceability
All of these specified requirements are designed to protect against two major challenges to enforceability, lack of voluntariness in execution and unfairness of substantive terms. Even if none of these requirements are met, however, the agreement itself may nevertheless be enforceable, provided that the party seeking to enforce the prenup can defeat any claims by the other party of coercion or fraud. Having a valid waiver of the 7-day review period will go far to defeating a claim that that period was in fact not honored by the parties. Meeting or exceeding the minimum 7 day review period prevents a party from later asserting he or she had no time to review the document before signing it. If this occurs, then the party seeking to enforce will have to prove that the agreement was entered into by the other party volitionally, without coercion or undue influence, and after that party had a fair and reasonable opportunity to review it with independent counsel and to consider the terms of the agreement in the context of the full financial picture . Further, if there is a significant disparity in assets or about future support, there should be plain English written into the agreement explaining how those provisions were negotiated. Providing this "roadmap" in obvious and simple terms can be invaluable in aiding enforcement of a prenuptial where there is dispute. The Court is generally going to accept plain English explanations of the process leading up to the agreement, as its own analysis of the enforcement factors is necessarily devoid of hindsight, and an apparent attempt to enforce an unfair agreement just because it was voluntarily agreed to is anathema to the judicial function. Pay careful attention to the enforceability factors, so that the surviving spouse with the prenup can have the full, legally intended benefit of her or her bargain.
Amending and Modifying a Prenup
It is a common misconception that a prenuptial agreement is eternally binding, and that the terms must remain unchanged throughout the course of the marriage. In fact, prenuptial agreements are designed to evolve because many important variables in marriage can change over time. The birth of a child, a change in income or retirement considerations may prompt reconsideration of the terms of a prenup. A provision that may have been necessary when the agreement was signed could become obsolete or irrelevant years down the line.
Unlike many other states that require full financial disclosure and "consideration" for amendments, New York law does not have specific requirements for amending a prenuptial agreement. Instead, New York law provides that prenups can be amended by any method the parties agree to. Typically, amendments to prenups occur through a written document signed by both parties. Any amendments must be in compliance with the law codifying prenuptial agreements (New York General Obligations Law ("GOL") ยง5-311). Generally speaking, in order to amend a prenup, the parties must both agree to the changes, and both sign the amendment. The amended prenuptial agreement must then be notarized.
Where to Seek Legal Help
Given the legally binding nature of prenuptial agreements, obtaining legal assistance from a qualified New York attorney when drafting one is essential. An experienced attorney can help draft an agreement that meets the specific needs of both spouses and that complies with all relevant laws and guidelines.
There are several resources available to assist in finding an attorney who specializes in family law and prenuptial agreements. The New York State Bar Association (NYSBA) provides several resources for finding qualified attorneys, including a Lawyer Referral Service that can match individuals with attorneys who meet their specific legal needs. The service is free and confidential, and it allows individuals to receive a free 30-minute legal consultation with a lawyer.
Another option is to search the New York State Unified Court System’s Attorney/Client Fee Dispute Resolution Program, which is designed to help clients resolve fee disputes with their lawyers . This program can provide individuals with a sense of what the attorney’s fees may be and whether they are reasonable given the nature of the agreement.
Aside from using the NYSBA services or the Unified Court System’s link, individuals may also want to ask for recommendations from family members or friends who have recently used an attorney that they were satisfied with. This can also be a good opportunity to question the potential attorney about the availability of payment plans. Some may offer financing to help offset the cost of services.
Finally, be sure to inquire about the attorney’s experience with creating prenuptial agreements. Carefully look over these agreements and see whether any previous clients’ experiences are listed, as this can help you to make a well-informed decision.