By Deirdre R. Wheatley-Liss, LL.M, CELA
In order to have your prenuptial (or midmarital) agreement address how you want your property to be distributed in the event of a divorce, you need to know upfront – before you create and sign the agreement – what all of your assets are. In this multi-part blog series, we share tips for you to think about if you are considering marriage later in life.
Tip #1: Before getting to a prenuptial agreement, identify what your assets are.
Put together a written inventory of all of the bank accounts, investment accounts, real estate, automobiles, collectibles – anything of value – that you own as a single person. Have that inventory available when you sit down with a lawyer to formulate a prenuptial agreement.
Tip #2: Keep inherited assets separate from marital assets.
Even after a prenuptial agreement is signed, it is important to make sure that you never mix assets you inherited or owned outright before your marriage with assets that you accrue after you marry.
If the assets mix, you could end up potentially losing in a divorce or at death some of your assets that you accumulated before the marriage because of the doctrine of commingling.
The Doctrine of Commingling
While you may have assets that were yours and yours alone before marriage (and therefore would not be distributable in a divorce), if you do any kind of commingling, those assets are going to be in play and potentially part of the pool of assets that get divided in the property settlement of a divorce, or pass directly to your spouse at death, even if your will says otherwise.
Example: You inherit a house from your mother. You get married and you put your spouse’s name on the title. When you add your spouse's name to the title, you commingle the asset, giving them half the equity – both the equity at the time you give it to them as well as any equity that accrues later.
If you don’t want that to happen, you need to keep any inherited assets separate, in your name only, always. Otherwise, you destroy their separateness by commingling them.
Tip #3: Don't add to an asset with your income after you get married.
Keep assets separate by putting them in different accounts.
You need to be sure never to add joint assets to an asset that is in your name.
Example: You have a bank account or an investment account in your name alone. You had it before you were married. It is a pre-marital asset that is exempt from distribution in a divorce. However, during the marriage, you put marital income in it – and that includes wages that you earned during the marriage or other income you have while married. When you put that marital income into that pre-marital bank account or investment account, you have commingled marital money with pre-marital money. In so doing, you have destroyed the separateness of that asset and potentially made it distributable in the divorce.
Tip #4: Consider your spouse's rights.
You are not required to make anybody the beneficiary of your estate. You can leave your assets to anybody that you want to, but you are not allowed to disinherit your spouse.
Right of Election and Your Spouse’s Elective Share
If you are married, you are not allowed to say “I am going to leave all my assets to my children” or “I am going to leave all my assets to somebody else and not leave anything to my spouse.” Why? Because your spouse has something called a “right of election.”
The right of election essentially says that, when you die, your spouse is entitled – no matter what your will says, no matter if you have a will or not – to approximately one-third of your assets. The amount of assets to which your spouse is entitled by law is called the spouse’s “elective share.”
Waiving the Elective Share
If a spouse is going to waive their elective share, they have to do it in the prenuptial agreement.
A prenuptial agreement is going to take precedence over any will document because wills can be changed – and your spouse may not even know that you've changed it. But the prenuptial cannot be changed without both parties signing the new agreement.
In order for the prenuptial agreement to take precedence, you have to say that it's going to take precedence over the will document and that New Jersey law is going to control (so someone can’t get around the agreement by moving to another state).
This post is for general informational purposes only. The specifics of your situation could affect the applicability of the information provided in this blog post. For a video presentation of this information, please visit Graying Marriage and Divorce, here. For more detailed information, please visit www.porzioplanning.com or contact us for a free 20 minute telephone consultation.
