1. What is a post-nuptial agreement?
A post-nuptial agreement is a contract between spouses. It is similar to a prenuptial agreement except it is signed during marriage. A post-nuptial agreement is entered into in contemplation of an ongoing, viable marriage. As with prenuptial agreements, one or both of the parties usually is seeking to protect assets or income in the event of divorce or death.
A married couple may seek to enter into a post-nuptial agreement after significant financial change or a period of marital conflict. The law regarding the validity and enforcement of post-nuptial agreements is not well developed in New Jersey. This is an emerging area of the law. The legal standard for the enforcement of post-nuptial agreements is very similar to the one used to assess whether a prenuptial agreement is valid. The key criteria for the validity of these agreements include: full disclosure of assets, absence of duress, and fairness.
When a man and woman are married (instead of just contemplating marriage), they may be held to a very high standard of fairness when dealing with each other on financial issues. This legal standard is even higher than would be the case if they were entering into a prenuptial agreement.
When entering into a post-nuptial, it would be a good idea for the parties to articulate in writing why they are entering into the agreement and to be sure that the agreement is fair for both parties. There are two basic rules that should be followed to safeguard your agreement: full and fair disclosure of all assets and separate and independent legal counsel.
2. Is there any difference between a prenuptial agreement and a post-nuptial agreement?
Yes. A prenuptial agreement is entered into before marriage, and a post-nuptial agreement is entered into after marriage. How the law views the parties is much different. Before marriage, the parties are entering into an agreement much like two business persons entering into a contract. After a marriage, they are in a fiduciary relationship with each other, and any transactions made between them are viewed with caution.
Many people don’t know that there is a significant difference between a prenuptial agreement and the post-nuptial agreement. Although some think both are equally valid and off the same amount of legal protection, this is not true. Most New Jersey family courts view a post-nuptial agreement with some degree of suspicion. In many cases, a wife is under a tremendous amount of pressure by her husband to sign a post-nuptial agreement. Meanwhile, the opportunity to argue the legal concepts of undue influence and duress are not as convincing in any litigation to void a prenuptial agreement. Certainly, a post-nuptial agreement is better than no agreement at all, but many clients are under the misconception that they are as “covered” with a post-nuptial as with a prenuptial agreement.
The harsh reality is that the family courts tend to assume that a prenuptial agreement is always valid. However, most family courts have the opposite reaction when they review a post-nuptial agreement. Most judges initially assume that a post-nuptial agreement is not valid. A post-nuptial agreement is hard to enforce simply because once married, a couple has a fiduciary duty to care for one another in all ways.
3. What are the typical reasons a post-nuptial agreement is made?
As with prenuptial agreements, post-nuptial agreements are made for a wide variety of reasons, and entail a variety of post-nuptial issues including divorce settlements, division of property, and property settlements. The typical reasons include:
4. Why should I have a post-nuptial agreement?
Prenuptial agreements between Hollywood’s rich and famous often makes headlines, but it has a less glamorous cousin, the post-nuptial agreement. And average Americans are increasingly turning to this post-wedding paperwork to salvage shaky marriages.
Like the prenuptial agreement, the primary purpose of a post-nuptial agreement is to stipulate ownership and the equitable distribution of financial assets in the event a married couple divorces.
A couple might obtain post-nuptial agreement for several reasons:
5. Why may a post-nuptial agreement be beneficial to your marriage?
Most people have heard about prenuptial agreements, but far fewer are familiar with post-nuptial agreements. Even if you have been married for many years, it’s never too late to enter into an agreement that promotes domestic harmony and protects your marriage. The bottom line is that the amount of mid marriage agreements has exploded in the past five years. There are many negative connotations attached to the word “post-nup,” as if it is admitting your relationship’s defeat. It is less intimidating to look at the process as a communication tool and as a “seat belt” for your relationship in the case of death or divorce.
Bringing up the subject of a post-nuptial agreement can be a great way to resolve underlying financial and communication issues that could be causing undue stress in your marriage. By opening up this line of discussion, you are well on your way to solving festering problems, which could strengthen your marriage.
Here are a few reasons why a post-nuptial agreement may be beneficial for your marriage:
6. How can the use of an effective post-nuptial agreement help you avoid a potentially messy divorce?
The use of an effective post-nuptial agreement can help you to avoid a potentially messy divorce. A post-nuptial agreement is essentially the same as a prenuptial agreement, but it is signed after a couple is married. Why should any person sign such an agreement after you are married? Well, here are several good reasons:
7. What are some important considerations of a post-nuptial agreement?
Even though post-nuptial agreements often serve the same purpose as prenuptial agreements, the family courts scrutinize post-nuptial agreements much more carefully than prenuptial agreements. The family courts hold post-nuptial agreements to a higher legal standard of fairness. The theory behind this is that the parties have less leverage when they negotiate a post-nuptial agreement as compared to a prenuptial agreement. Unlike prenuptial agreements, there is no uniform act that applies to post-nuptial agreements. The general rule in this quickly emerging area of law, however, is to apply the same rules for all marriage contracts. Both you and your spouse should be represented by separate and independent legal counseling addition, and you must provide full financial disclosure to each other.
8. I was recently married, and I will be purchasing a home in East Brunswick, NJ with my new wife. We both have similar incomes and we will be sharing the mortgage payments. She plans to pay $20,000 toward the purchase of the marital home. Meanwhile, I plan to pay $100,000 toward the purchase of the marital home. Am I entitled to receive my full share of the purchase monies if we should get a divorced, and if the house is then sold?
In this type of situation, you certainly should obtain a post-nuptial agreement. You should immediately consult with an experienced family law attorney. Don’t try to draft your own post-nuptial agreement. One mistake could invalidate the entire agreement. It would be very wise to enter into a post-nuptial agreement before you make this purchase. In this post-nuptial agreement you can specify that you will receive your entire $100,000 payment at any closing. The post-nuptial agreement can specify that the $100,000 is deemed to be a premarital asset, and it is not subject to New Jersey’s laws of equitable distribution. The post-nuptial agreement can even address how the $100,000 will be used if you should die. Perhaps you may have some other relatives that you need to support. The $100,000 can be earmarked to support other family members as well.
In summary, in this type of scenario it is essential to obtain a carefully crafted post-nuptial agreement. If no post-nuptial agreement is obtained, then at the closing you will be essentially making a gift of $40,000 to your new wife. If you get divorced in one year, she will still receive at least one of the equity from the sale of the home. Even if you “bust” your new wife cheating at the local hotel, and if you divorce her in less than one year of marriage, you will still have to give her one half of the equity from the sale of the home. New Jersey is a no-fault state, and it is irrelevant whether your ex-wife was the biggest “floozy” in the Garden State. Get the message! Post-nuptial agreements can be a lifesaver! Marriage is an important institution and I respect it. However, in this day and age, it is almost impossible to live a decent life without a sizable “nest egg.” The bottom line is this: don’t overlook your finances just because you are married.
9. Are post-nuptial agreements valid in New Jersey?
In New Jersey, post-nuptial agreements are considered the same as any other contract that parties may enter into and, therefore, are presumed to be valid and enforceable. This presumption can be only overcome only if clear and convincing evidence is presented by the spouse seeking to set aside the agreement, that the agreement was not entered into voluntarily, or that there was not a full and fair disclosure of assets and liabilities.
Like a prenuptial agreement, they will be evaluated under the same legal criteria applicable to contracts between individuals who stand in a confidential relationship to each other. They are also subject to the same rules of contract construction and will not be enforced if they are too vague. Consequently, the party against whom enforcement is sought must have entered into the agreement voluntarily, free of circumstances involving fraud, duress or undue influence, and the agreement must appear fair and reasonable in its face. There must be full and fair disclosure as well. Thus, it is the burden of the person seeking enforcement of the post-nuptial agreement to prove by clear and convincing evidence that the agreement was not fraudulent or coerced, or that it was no unfair or inequitable.
10. What is the main New Jersey case on the validity of post-nuptial agreements?
The major case on the enforcement of post-nuptial agreement is Pacelli v. Pacelli, 319 N.J. Super. 185 (App. Div. 1999). Here Mrs. Pacelli and Mr. Pacelli battled over the validity of their post-nuptial agreement. They had been married for 10 years in 1985, when, she says, he told her to choose between divorce and signing a post-nuptial agreement. Under the agreement, she was to be awarded $500,000 and half of a $1 million summer home if they divorced. But when Mr. Pacelli, a developer, filed for divorce in 1996, his wife argued that she was entitled to more of his fortune, which had increased from $5 million to $11 million, and she sued.
The trial court, after a hearing held that the agreement was enforceable. Thereafter, the wife Mrs. Pacelli appealed to the Appellate Division. The trial court held that the agreement was not the result of coercion or duress, and that it was fair as measured in 1985. Thereafter, Mrs. Pacelli appealed to the Appellate Division. The Appellate Division reversed and it held that the post-nuptial agreement was invalid. The Appellate Division held that the agreement was made under duress, and that it was not fair and equitable when made.
The Appellate Division also went to great lengths to highlight the stark differences between a prenuptial agreement and a post-nuptial agreement. The court held that the dynamics and pressures in negotiating a mid-marriage agreement are entirely different as compared to a prenuptial agreement. Moreover, the Appellate Division further held that the terms of the post-nuptial agreement did not provide Mrs. Pacelli with a fair share of the marital assets. The court noted that she would receive a far greater share of the marital assets if there was a full divorce trial.
11. Can a post-nuptial agreement be used as part of my estate plan?
A post-nuptial agreement also can be used to implement an estate plan. More specifically, post-nuptial agreements are often used to effectuate an estate plan when there is a second marriage. In New Jersey a spouse has a right to take an elective share against the will of their deceased spouse. In New Jersey the elective share is one third of the deceased spouse’s estate. An effective way to prevent a spouse forming taking against the will is to execute an agreement in which the partners voluntarily give up the right to a statutory share of each others estate, and agree on how much – or how little – of the others estate each will inherit. These agreements can be made before the marriage (prenuptial) or after it (post-nuptial). If a prenuptial or post-nuptial agreement is made then the surviving spouse will not automatically receive one third of the deceased spouse’s estate.