To follow this blog enter your Email address here

Monday, December 22, 2008

Tough Economic Times Create Need for Prenuptial Agreements

Seeking advice about whether one should have a prenuptial agreement in tough economic times is especially important. In the current economic downturn there is an increase in the number of foreclosures, bankruptcies, defaults on credit cards and other loans. More people are at risk for losing a job now than have been for nearly a generation. These are all criteria that may make it a very good idea to have a prenuptial agreement.

I must state that I don’t recommend that everyone get a prenuptial agreement. Most people who want one are trying to protect property that is already separate under New York State law. Most people want to make sure that their family property or inheritances stay “in the family.” So long as these assets are not commingled, they maintain their separate characteristic throughout the marriage.

Another important point is that a prenuptial agreement is not limited to people who are not yet married. The very same type of agreement can be created after partners are married. Such an agreement is called a postnuptial.

If a partner has debt or is likely to incur debt, that debt may become a marital liability and a source of conflict in the marriage. A prenuptial agreement along with care in keeping credit cards and loans separate will help ensure that one party is not saddled with unwanted debt.

The most common reasons for which I advise my clients to enter into a prenuptial are as follows.

One partner owns real estate, a business or a share in a business. Without a prenuptial agreement, when the marriage ends, the business needs to be evaluated, and any part of its increase in value during the marriage may be marital property. This is disruptive to the business, and the other shareholders or members of the business. This principle may hold true for investments and improvements to real estate. The increase in value to separately owned real property that is attributable to something other than just the market going up may be marital.

It’s a second marriage and one of the partners has children or other financial obligations from the prior divorce. A proper will is also recommended for this type of client.

If one of the potential spouses is significantly more wealthy than the other.

One of the spouses to be is a spendthrift. If your partner has debt or is likely to incur debt, that debt may become a marital liability. A prenuptial along with care in keeping credit cards and loans separate will help ensure that one party is not saddled with unwanted debt.

There are interpersonal reasons for having a prenuptial agreement. One partner may wish to make sure that the other is not just marrying for the money.

In the end, a prenuptial agreement is always subject to attack in Court. It is important that both partners have independent lawyers to advise them of their rights before the agreement is signed. Finally, the agreement must have some level of fairness. If the agreement is so one-sided that a Court will deem it “unconscionable,” then the agreement will be unenforceable. All prenuptial agreements should be drafted by experienced matrimonial lawyers, to ensure that the agreement will mean exactly what the partners want it to mean.

I would like to credit the astute observation of Jeena Belil, Esq. in connection with the December 19, 2008 blog that inspired today’s article.

No comments:

Post a Comment