We all know the famous song by the infamous rapper. Zealously advocating for high-earning men to enter into prenuptial agreements, the song cautions that “it’s something that you need to have” or she’ll “leave with half.” Sexism aside, the clever beat and rhyming lyrics ring true to an extent. Prenuptial agreements, commonly referred to as “prenups,” protect assets that were acquired prior to the marriage and secure a specific financial outcome in case it “all falls down.” While prenups are not for everyone, specific situations may warrant such safeguards.
1. This isn’t your first marriage.
Sometimes the second or third time is the charm. Nonetheless, you will want to limit your exposure this time around, especially if significant assets are in play.
2. You must or would like to provide for your children from a previous relationship.
Providing for children is a significant concern for most people. It is important to have sufficient funds to support them, especially if you have been ordered by a court to do so. They also want to maintain separate assets in order to provide their children with an inheritance.
3. You want to protect your assets from the great beyond.
In New Jersey, as in most states, a widow/widower may “elect against the will,” which allows him or her to inherit assets despite not being named in his or her deceased spouse’s will. The intended asset allocation under a will can remain protected from the spousal right of election by a well-drafted prenup.
4. You want to protect your business interests.
In a New Jersey divorce proceeding, a business is considered an asset which may be subject to a claim of equitable distribution by the other spouse upon divorce. The determination of the value of the business alone may require costly analyses by forensic experts and can drastically prolong divorce proceedings.
5. You want to protect your “exempt” assets.
Various types of assets are typically deemed non-marital or “exempt” from equitable distribution: premarital property, gifts from a third party, or inheritances. Although premarital assets, or assets acquired prior to the marriage, are generally exempt from equitable distribution, there may be a claim toward any “active” appreciation of that asset’s value. Moreover, the comingling or transmutation of a non-marital asset can convert it to marital property. This is a complex, fact-sensitive analysis which largely depends upon the circumstances.
6. You don’t want to say “what’s mine is yours” to your soon-to-be spouse’s debt.
Division of debt upon divorce is often complicated. This is particularly true if one spouse enters the marriage with significantly more debt than the other and/or a poor credit rating. Whether it is credit card debt, student loans, or another type of liability, any pay off or interest accrual on a premarital debt during the marriage may become a source of contention during a divorce.
Importantly, while prenups are valuable financial tools, they cannot be utilized to pre-determine child support, child custody, or parenting time. There are also specific guidelines for the drafting and preparation of a prenup which are essential to a Court in determining its validity.
To determine if a prenup is right for you, you should consult with a trusted matrimonial attorney — not a rapper.
