Prenuptial agreements are formal, legal agreements between two individuals before they marry. The intent of the document is to specify how assets and liabilities are to be divided in the event the couple separates or divorces. A well-written prenuptial agreement saves money, time and frustration for all involved as much of the emotional aspect of dividing assets is eliminated since the allocation is predetermined.
Additionally, by not needing court intervention in the division of assets, the length of time required for divorce proceedings can be significantly decreased.
Terms of a Prenuptial Agreement in NJ
The structure of each prenuptial agreement in NJ will be dependent on the specifics of that couple. Some prenuptial agreements will be simple, short documents, while others will be lengthy and more complicated. Issues that may be addressed in a prenuptial agreement include:
- How all property, and the associated debt when applicable, will be divided. This includes property owned prior to the marriage and property acquired during the course of the marriage.
- How property is to be managed and who has the right to sell, transfer ownership or control property acquired both prior to and during the marriage.
- Determination of the rights to property in the event of death, divorce or separation.
- Statement of agreement to spousal support or to waiving the right to spousal support.
- Agreement upon how life insurance proceeds will be distributed.
- Indication of the jurisdiction over the prenuptial agreement.
Issues Excluded by a Prenuptial Agreement in NJ
While New Jersey prenuptial agreements can predetermine alimony and division of assets and debt, they cannot predefine issues related to children. This includes predefining custody arrangements and child support payments. Those issues must be determined by New Jersey family court in a manner that is conducted in the best interest of the children.
Requirements of a Prenuptial Agreement in NJ
In New Jersey, prenuptial agreements are governed by the Uniform Premarital Agreement Act (UPAA) which became law in 1988. According to the UPAA, the following requirements must be met in order for a prenuptial agreement to be valid:
- The agreement must be in writing.
- Both spouses must sign the agreement.
- A statement of assets must be attached to the prenuptial agreement that fully discloses the financial information of both parties.
Once executed, prenuptial agreements may only be adjusted with the written consent of both spouses. It is strongly recommended that spouses be represented by legal counsel, although that is not required. In the event that one or both parties elect to not have legal representation, they must formally document their willingness to waive the option of legal representation.
Documenting Assets and Liabilities
One of the most fundamental aspects of prenuptial agreements is a declaration of financial standing, including all assets and liabilities. The statement of assets must clearly include:
- All sources of income and amounts.
- All property, the value of that property and associated debt, if applicable.
- All assets, including retirement accounts, stocks and bonds.
- All vehicles and personal property, including jewelry, art and antiques.
- Contents of safety deposit boxes.
- Statement of debt, including credit cards, personal loans, mortgages, tax liens and student loans.
Failure to adequately disclose financial information can result in a prenuptial agreement in NJ being found invalid, thereby requiring settlement of all assets brought into and acquired during the marriage through the court.
Challenging a Prenuptial Agreement in NJ
When a prenuptial agreement exists, the burden of proof falls on the challenging spouse to demonstrate why the agreement should not be seen as valid. This demonstration must have evidence of the following:
- That the spouse did not enter into the agreement on their own will.
- The agreement was unreasonable, legally termed unconscionable, when it was executed. This includes instances where a spouse would have no income and need to rely upon the state or have a significantly decreased lifestyle due to the nature of the prenuptial agreement.
- The financial statement in the prenuptial agreement was not accurate and therefore did not allow the other spouse to make a fully informed decision prior to entering into the agreement.
- An absence of counsel and no documentation of an agreement to waive the right to counsel.
A forensic accountant is a key person to have on your team when challenging a prenuptial agreement in NJ. Forensic accountants can find hidden assets, verify income and perform business valuations in order to document undisclosed or undervalued assets.
Preparing for a Prenuptial Agreement
The best way to prepare for a valid prenuptial agreement is to have a full understanding of your, and your future spouse’s, assets and liabilities. Working with financial experts, such as a CPA firm, can help you make sure that the disclosed financial information is accurate and complete. Failing to adequately and fully disclose both assets and liabilities can be costly in the long run.
