Negotiating a prenuptial agreement can be stressful for many couples. Ideally, the process shouldn’t be rushed for emotional as well as legal reasons. The parties should have separate attorneys to ensure they get independent advice. A lawyer can also help keep the negotiation focused. One way they can do that is by timing when financial information is shared with the other side.
Scope of a Prenuptial Agreement
Prenups can address a wide range of matters including marital and separate property, spousal support, asset distribution in the event of divorce or legal separation, and inheritance rights. The agreement can be as detailed as the parties want to protect their interests.
Reasons for Sharing Finances
The parties are required to provide financial information to each other. That includes their assets and liabilities. If it can be shown that a party withheld information, the prenup may be invalidated as to the property that wasn’t disclosed.
Apart from legality, honest communication about finances is also beneficial to the marriage. A prenup provides an opportunity for the couple to discuss their financial situation, expectations for the marriage and values about money. If they have disputes, they can address how to handle them before they are married.
Timing of Financial Disclosures
In the context of negotiating the prenup, a detailed list of each party’s assets and liabilities is often provided near the end of the process. This is because the main purpose of the prenup is to resolve what happens to the couple’s marital property in the event of divorce or legal separation. Marital property is property that is acquired after the parties’ wedding date and up to the date a divorce action is filed. The couple’s pre-existing assets and liabilities are separate property, which is not subject to division in divorce unless the party having assets wants them to be.
Generally, in New York, assets acquired before a couple’s wedding date, through inheritance during the marriage, or by provable gift made directly to a party during the marriage, are considered separate property. These types of assets are not subject to equitable distribution provided that during the marriage the separate property remains solely titled in the owner-spouse’s name, is not commingled with the other spouse’s funds, is not used by the married couple, and is not used to pay marital assets or expenses.
If the list of assets is shared early in the prenup discussions, there is a risk that the separate property becomes part of the negotiation. One party may want some of the separate property to become marital property prolonging and complicating the negotiation process.
To be clear, the list of assets must be disclosed before the agreement is signed. Typically, the respective lists will be attached to the final draft of the prenuptial agreement as exhibits to the document. Each side will have time to review the agreement and discuss it with their attorney.
Like any contract, prenups need to be carefully negotiated and vetted by a lawyer to ensure they address the needs and desires of each party. If you are considering a prenup, contact us to discuss how we can help you achieve a fair agreement.
