Congrats! You’re on your way to getting married!

After the initial excitement of the engagement, we suggest the couple discuss the need for a prenup as early as possible. While there is no timing requirement in New York, the more time a couple has for the process and negotiation, the better. It can be very stressful to work on the prenup too close in time to the wedding date. We often advise our clients on how best to bring up the topic with their partner if they are uncertain with how to initiate the discussion.  

It is important for both sides to have independent and separate representation in the prenuptial agreement process. Whenever possible, we provide referrals for opposing counsel, all of whom are attorneys we have worked with and know to be collaborative and committed to reaching an amicable outcome. Providing referrals is a common practice in New York, and it does not affect the enforceability of the agreement. It is also common practice for the party who wants or needs the prenup to pay for the other side’s attorney, which also does not affect the enforceability of the agreement and decreases the likelihood for resentment.  

Once both parties have retained attorneys, they meet one-on-one with their respective attorneys to discuss an overview of the law, what can and cannot be done in a prenup, and what each side’s concerns in the agreement will be. 

For both parties to have a full understanding of the issues at play, it is important for each side to have comprehensive financial disclosure of the other party’s assets, liabilities, income, and interests in irrevocable trusts. We typically disclose assets that are in the client’s own name; additionally, we disclose if the client is the beneficiary of an irrevocable trust and knows the terms and assets of that trust. We do not need to disclose prospective inheritances or what is held in a revocable trust created by a third party.  

After both parties have provided their financial disclosures, the attorneys will lead the clients in drafting the term sheet. This is typically a two- to five-page document that sets out the specific terms of the couple’s prenuptial agreement. We strive through the term sheet to proactively address both parties’ concerns. Negotiation studies have shown that when both parties are involved in creating the agreement, it is more likely to be accepted.  

This part of the process can be tailored to the couple’s unique wants and needs. Negotiations can occur between just the attorneys, can involve the couple in a four-way meeting with the clients and attorneys discussing the issues together, or sometimes the couple prefers to discuss the issues one-on-one.  

Upon completing negotiation and finalizing the term sheet, the attorneys will draft the full prenuptial agreement. These agreements are typically 20 to 30 pages long, and they mirror the terms of the term sheet and expand upon the details. While the full agreement might be edited to some degree, the drafting process is oftentimes less arduous because the substantive terms have already been determined by the term sheet.   

In New York, prenuptial agreements need to be signed and acknowledged in front of a notary. Typically, the parties and the attorneys meet in person to sign four originals of the agreement all together. Each party and attorney receives one original.  

Time to celebrate! Once the agreement is fully executed, we hope the couple can put it in a drawer and not have to worry about it again.  

Principally, prenups dictate distribution of property—specifically, how the couple will divide property in the event of divorce or death. To that end, the agreement must define “separate property”—property each party will be entitled to retain exclusively upon divorce—and “marital property”—property that will be divided between spouses upon divorce.

There are two overarching structures for prenups: title controls and “mirror the law.” A strict title controls prenup determines distribution of property based upon title alone—i.e., property must deliberately be placed in joint names to be considered marital, otherwise it is separate property. Title controls is often well-suited to couples with complex financial situations or those entering into second marriages, and can be tailored to include creative customized solutions designed to protect both parties upon divorce, such as a transfer of money from the more monied party to the less monied party.

A mirror the law prenup means the agreement follows existing state law on distribution of property upon a divorce. New York’s current statute enforces equitable—not necessarily equal—distribution of marital property. In other words, New York law views marriage as an economic partnership. The focus is on when and how the property was earned, rather than how property is titled, and everything earned during the marriage is deemed marital property. For many couples, a mirror the law prenup embodies the economic and life partnership they seek in marriage. As such, they are often preferred in situations where the purpose of the prenup is solely to protect a party’s family wealth, whether in expected inheritances, gifts, or in trust. Specifically, a mirror the law agreement provides an additional layer of protection to existing law by safeguarding against future changes to the law, loopholes, or a move to another state where the definition of separate property is more expansive, while also preserving the couple’s financial partnership.  

Within each of these structures, there are many variations and hybrids. For example, a couple may have a mirror the law prenup that still allows for the less-monied party to keep certain categories of assets (e.g., retirement) as separate property to allow them to build a nest egg. Or parties with a title controls prenup may treat the primary residence as marital property to be shared upon a divorce, even if it is titled in one party’s sole name.

Maintenance, also known as spousal support or alimony, is a monthly payment from one former or separated spouse to the other. Under the law, maintenance is determined based on a statutory calculation that accounts for any disparity in the parties’ annual incomes. The duration of maintenance is proportionate to the duration of the marriage. Maintenance and other forms of spousal support such as housing provisions (discussed below) are the only forms of support covered in a prenup—prenup provisions for any future children, such as child support and custody, would not be upheld in New York.

Typically, maintenance under a prenup is approached in three ways:

1) One or both parties agree to partially or entirely waive their right to seek maintenance from the other;

2) The parties agree that a formula or set monthly amount will govern maintenance; or

3) The parties agree to leave maintenance open to be determined at the time of a divorce.

In the latter two scenarios, prenups can also limit the income that will be considered in determining a maintenance award, for example stating that income from separate property, family gifts, and trust distributions (i.e., interest, and dividends) will not be considered in a maintenance determination. Prenups can also set an overall cap on the amount of income that can be considered for purposes of calculating maintenance or a net worth threshold at which a party is deemed ineligible to seek maintenance.

Several scenarios may arise when a couple establishes their primary residence together:

1) The primary residence is a rental property;

2) The primary residence is one spouse’s separate property—i.e., the home is owned by a trust for one party’s benefit, was inherited by or gifted to the spouse alone, or purchased in a party’s sole name solely with separate property; or

3) The primary residence is marital property—i.e., it is jointly titled and/or purchased, at least in part, with marital property.

Prenups can expansively or restrictively define a residence as “marital” depending on the circumstances. Parties might decide that any residence purchased during the marriage should be marital property, regardless of title or funds used for the purchase. Conversely, they might decide that a residence must be purchased in joint names or with joint property for it to be considered marital. Agreements can also provide the buyout and sale procedure for marital residences upon divorce, including provisions for rights of first refusal, valuation, listing, and occupancy pending sale.

Under New York law, all business interests formed or acquired by a spouse during the marriage are considered marital property. In addition, the appreciation on a separate property business interest is also likely considered marital property under the default law. That said, illiquid marital business interests are unique from other forms of marital property: they are rarely divided equally regardless of the length of the marriage. Rather, the non-titled spouse typically receives between 10-40% of the titled spouse’s illiquid business interest, in the form of a cash payment from the business owner to the non-titled spouse or in a greater share of other marital assets.

As with other substantive issues, business interests may be governed by either a mirror the law or title controls structure, or a hybrid of the two (e.g., parties might define certain kinds of business interests as separate property and others as marital). Additionally, prenups can be written with clear mandates as to how marital business interests will be valued and distributed between the parties upon divorce.

In New York, a widow or widower has various default rights upon the death of their spouse. The two most important of these are:

1) The right of election, which allows the surviving spouse to elect against their deceased spouse’s will if he or she received less than one third of the deceased spouse’s estate (which generally includes the deceased’s share of marital property as well as separate property in the deceased’s name); and

2) The right of intestacy, which allows the surviving spouse to inherit all or most of the deceased spouse’s property if he or she dies intestate (without a will).

Parties to a prenup can either waive, modify, or place conditions on these rights, or retain some or all of them (e.g., waive estate rights solely with respect to each other’s separate property).