Navigating Life Without a Prenup

Prenup Defined

A prenuptial agreement, or a premarital agreement, as it is defined under New Jersey law, "is an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage." N.J.S.A 25:1-5. In practice, however, the prenuptial agreement is often misstated as a contract that is effective prior to the marriage between the couple. This is not a true statement-in actuality, these agreements are ineffective until the vows are exchanged. After the marriage has occurred, then the prenuptial agreement becomes effective.
The prenuptial agreement sets the terms for the basis of division of assets, liabilities, alimony, and other matters that may occur during the marriage. One of the most common misconceptions in the field of family law is that these agreements are only for the wealthy to protect themselves from their impoverished future spouse. This is simply untrue , as the documents can cross all financial lines. For the more modestly situated couple, perhaps the prenuptial agreement is designed to give them ordering and peace of mind from arguing about finances during the marriage-and the best part, is that they can put the formalities of the marriage aside from the potential financial quarrels that may occur.
More times than not, these agreements state the parties should attempt to mediate any financial quarrels that may arise during the marriage, in lieu of costly litigation. In short, no one entering into a marriage with the intent to divorce at a later date believes that this marital premise will be the roadmap to happily ever after status. However, as we have seen most recently in the pop culture arena, some people just wish the marriage to end once it becomes untenable to them.
Regardless, whether you are a perfect candidate for a prenuptial agreement or not, it is always worth taking the time to consider it as an option.

Implications when Couples Don’t Enter into a Prenup

Legal Implications of Not Having a Prenuptial Agreement
In the absence of the protections afforded by a prenuptial agreement, the law of the land before the couple’s marriage sets out how the couple’s assets and their relationship will be governed as they enter marriage and which provisions may need to be brought before a court if disputes arise in the future. If the couple ends up divorcing or separating, the outcome of a court hearing to divide their assets may be heavily influenced by the applicable laws of those jurisdictions. These laws act as arbitrary rules, as opposed to customized solutions to fit the unique circumstances of the couple.
For the purposes of these rules, each province and territory has its own laws governing dividing property, but generally, the law defines two categories of property: "marital property" and "excluded property." Marital property includes assets acquired during the marriage and is subject to division on a divorce or separation. Excluded property largely consists of property owned by one spouse before the marriage or acquired during the marriage by inheritance, gift or an Agreed Statement. In the case of a divorce, each province and territory is assigned a different formula to determine the value of marital property and how it should be divided, depending on various factors, including whether parties have children. If there are children, the courts may exercise discretion to set aside property and allocate it for the benefit a child and determine the amount owed by one spouse to another (or to the state in some cases) based on factors such as the length of the parties’ marriage, their obligations to children and their respective means.
A court may also need to determine child and spousal support payments as part of property division. Under the federal Divorce Act, support orders are based on objective standards and the Spousal Support Advisory Guidelines. On the other hand, provinces and territories also have their own family laws that govern support obligations on marriages or common-law relationships. Such laws may be inconsistent with each other; for example, common-law partners in one province or territory may be subject to the laws of a different province or territory for various reasons, whether because of their choice of matrimonial home, the length of their relationship or their matrimonial home’s location. To the extent that parties to a marriage or common-law marriage are able to expect the outcome of a divorce or separation, certain jurisdictions may lend themselves more beneficially to those parties, depending on a few considerations.
In addition, without a prenuptial agreement outlining how assets will be dealt with on divorce, the parties may have fewer options related to structuring asset ownership going forward. Even though spouses in Alberta can enter into an Agreed Statement for various kinds and amounts of property, the choices spouses may decide on can be limited. For instance, exposing property owned as a joint tenancy in the name of both spouses to division on divorce or separation could result in adverse tax consequences or other unintended consequences.

Financial Effects of Marriage

Without a prenuptial agreement, there may be an imbalance in the financial dynamics of the marriage. The party with a larger income may become resentful if they are supporting their spouse because the debt is in their name. As a result, the end of the business relationship may become inevitable. Debt is also an important topic. Credit card bills can add up, and if each person has joint credit cards, the parties may be equally responsible for those debts regardless of who uses the card. Neither party is obligated by law to pay the separate debts of the other; however, if jointly held credit cards exist, one party could be liable for those debts. In some instances, prior to separation, spending habits may need to change, or debt may need to be consolidated or rolled into a single account.

Divorce Considerations without a Marriage Contract

When you don’t have a prenuptial agreement, the dissolution of your marriage and the equitable distribution of property follows a clearly defined process under New Jersey law. Given this methodical approach — and the likelihood that you can resolve most of the most important issues through amicable negotiation — you may be able to manage a straightforward divorce without too much difficulty.
Even with a divorce that is complicated by the absence of a prenup, it is possible to keep matters moving along by understanding the standard process, so you know what to expect.
Property division
The process of equitably dividing property (including assets and debts) begins with Step 1: Disclosing everything. Even for divorces in which spouses negotiate the terms outside of court, this step is vital. If there is no agreement, however, you cannot move forward without full disclosure.
Once disclosure is complete, the next step is determining the total marital value of the assets. It is logical to think that the TLS group of the assets in Step 1 might apply to the items in this step as well. The reality is that Step 2 focuses on everything that is not on the exclusion list. This means that even if family heirlooms, gifts and inheritance fall under the acceptable exclusions in Step 1 , they could end up in the collective pool at this stage.

Step 3 is where division really begins. In most cases, this is achieved by simply splitting everything down the middle. This process is known as equitable distribution. The goal is to split items in a way that is fair but could conceivably still be inequitable given the assets and income involved.

Alimony
With property division (hopefully) on its way toward resolution, you can begin moving on to the next critical step, alimony. Step 1 in the alimony process is "disclosure of income," so again, the process begins with a total overview of what you and your spouse bring to the table.
Once income is disclosed, the negotiation process begins. There are many factors that influence the amount of support that must be paid or received, which means that both parties don’t always negotiate in good faith. This is where the insight of an experienced New Jersey divorce attorney plays a crucial role in moving toward a collaborative solution.
Alimony is the last step of the process before the divorce enters official waiting period, after which either party (but usually the one being paid) can request a reduction or elimination in support payments. While many divorces don’t require an additional hearing on this matter, some do — particularly when income is challenged or hidden assets are suspected.

Prenuptial Agreement Alternatives

Existing alternatives to prenups are becoming more popular. More and more couples are entering into postnuptial agreements after they are married. A postnuptial agreement is basically the same as a prenuptial agreement, except that it is entered into after the marriage has commenced. The risks that whether it will be found enforceable under Pennsylvania law, however, are the same as with a prenuptial agreement. They include that the postnuptial agreement be entered into voluntarily and contain full and fair disclosure. As with a prenup, the postnuptial agreement can be as creative and as thorough as the couple wishes, covering any topic, including property division and spousal support.
As the use of postnuptial agreements is growing in popularity, so are the number of spouses embracing joint financial planning strategies. A growing number of sophisticated couples are meeting with stakeholders to discuss such financial issues as debt reduction, estate planning and pre-retirement analysis. When only one spouse has income or assets to protect, it is often more beneficial and cost-effective for the couple to undertake a joint financial planning strategy with the aid of an investment advisor or wealth manager than to enter into a prenuptial agreement. For the right couple, it can be a great alternative. There is also the potential for the couple to appreciate having worked together and the marriage to benefit from the collaborative effort.

Prenup-Free Marriage Advice

Although it is not as common as a prenup, it is not out of the question. If a couple does not have a prenuptial agreement, some practical advice can help the couple at the negotiation table after a marriage break down. The goals are the same whether with or without a prenuptial agreement: 1. To recognize the rights of each party – whether by contract or in accordance with the Family Law Act (which lists the various rights) taking into account the wishes of both parties in the negotiation process and not disregarding the rights of a contracting party. 2. To recognize the condition of the party – whether by contract or in accordance with an award by the Family Law Act which provides for maintaining a status quo during the marriage. The couple should talk about their financial expectations in a no-pressure situation before legally tying the knot. Financial priorities should be different for every couple , but having policy positions will help avoid ugly disagreements later. A few examples of financial priorities are: A financial strategy will help minimize or eliminate the hurtful consequences a divorce can bring. A crucial part of that strategy is an open and honest conversation about money, including issues such as: By being transparent and having a strong sense of financial priorities, couples can avoid a contentious litigation process when a marriage ends.