Couples in New York and around the country enter into prenuptial agreements because they allow them to decide for themselves how their property will be divided and how much alimony will be paid should they choose to divorce. However, these agreements are only enforceable if both parties negotiate in good faith and disclose all of their assets. This is not normally a problem, but it could be an issue for high-net-worth individuals who would prefer to keep aspects of their financial dealings confidential.
Using an irrevocable trust to protect assets
In these situations, a common strategy is to place the assets in question into an irrevocable trust. Assets placed into an irrevocable trust are no longer owned by the grantor, which means disclosing them during prenuptial agreement negotiations is not required. However, irrevocable trusts do have some disadvantages. The assets placed into them are controlled by the trustee and not the grantor, and making changes is difficult and usually requires a judge’s approval.
Decanting provides a way to modify the terms of an irrevocable trust without a court intervention. New York’s decanting statute allows the assets of an existing trust to be poured into a new trust. However, the law does not apply to all trusts, and some trust provisions cannot be changed.
Drafting prenuptial agreements
Many couples choose to draft prenuptial agreements because they wish to know where they stand would prefer to avoid long and public legal battles. Experienced family law attorneys could help couples work toward essentially fair agreements that provide both parties with peace of mind. They could also explain how trusts may be used to protect assets.