Protecting Individual Wealth in New York with Prenuptial Agreements

Prior to 1980, New York’s statutory regime for the distribution of property at divorce was a simple one.  The property in question was awarded to whichever spouse held title to it.  Given that women had recently begun entering the labor force as a result of the feminist movement, few women had accumulated much wealth before marriage or even after marriage.  Most husbands still held title to the property shared by the couple.  More often than not, the title system of property division at divorce left the wife in financially difficult circumstances.  A wife could be awarded alimony, but courts were reluctant to do so.  Thus divorced women easily slipped into poverty, at times becoming wards of the State.

Then in 1979 the United States Supreme Court in Orr v. Orr (440 U.S. 278 (1979)) declared that divorce laws that only provided alimony for wives and not husbands were unconstitutional because these laws violated the Equal Protection Clause of the Fourteenth Amendment.  The New York law was thus unconstitutional under Orr, and the State legislature was pressured to act to reform New York’s divorce law.

The enactment of Domestic Relations section 236 part B, known as the equitable distribution law, was the result of the redrafted law.  Equitable distribution means that a court can look at the totality of the marital assets acquired jointly or separately during the marriage and divide them fairly between the spouses.  In practice and under the law, this means that no two marriages are alike.  Under equitable distribution, the goal is fairness and judges have latitude and discretion to assess each spouse’s economic and non-economic contributions to the marriage.

In New York, marriage is viewed by the courts as an economic partnership and not solely as a sacred bond.  The judge determines the dollar value of a spouse’s non-economic activities, such as housework and child-rearing, and then adds that figure to the totality of the assets to be divided equitably.  Equitable distribution replaces alimony in New York.  Thus, a spouse’s post-marriage economic welfare often depends upon the size of the equitable distribution award.

Since the passage of New York’s equitable distribution law in 1980, an individual’s ability to earn a living and to create wealth prior to marriage has vastly increased.  Women and men are earning college and professional degrees in increasing numbers.  Career and professional women are also delaying marriage and child-bearing, factors that contribute to wealth-building.   Both men and women are saving for retirement in their own savings vehicles.

As a result, each person’s personal wealth acquired prior to a marriage may need to be protected in case of a termination event (divorce, separation, and death).  It is possible that one spouse entering a marriage may have substantially more assets than the other spouse and that one person’s ability to earn money may far outstrip the wage-earning capacity of his/her spouse after the marriage.  Should the couple divorce at a later time, absent a prenuptial agreement the court under equitable distribution will look to the couple’s standard of living during the marriage, among other things.

In order to be valid, each person engages separate legal representation so that the prenuptial agreement can be negotiated at arms length, as with any contract negotiation.  In addition, each party must fully disclose all assets and liabilities.   Like any other contract, it must be a signed writing that clearly states that the parties understand and intend to circumvent equitable distribution.

Therefore, a couple about to enter marriage and wishing to protect their separate future earnings and capital investments from equitable distribution in the event of a divorce or separation may want to budget for the legal fees associated with the drafting of a prenuptial agreement.

If you would like to discuss your own personal situation with me, or put together a prenuptial agreement that is tailored for your needs, you can get a free 30-minute consultation simply by filling out this contact form. I will get back to you promptly.

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