1. What is a prenuptial agreement?
A prenuptial agreement is also known as premarital agreement or an ante-nuptial agreement. This type of agreement may be used by a couple to determine, prior to marriage, what each party’s rights and obligations will be in the event of divorce. Premarital agreements are governed by the Uniform Premarital Agreement Act, N.J.S.A. 37:2-31 et. seq. The agreement must be in writing and it must have a statement of assets attached to it. It becomes effective upon the marriage of the parties. Premarital agreements are entered into by prospective husbands and wives before they get married. If a premarital agreement is properly drafted, then they can save the parties significant emotional and financial expense if they get divorced.
2. What marital terms can be negotiated in a premarital agreement?
The parties to a premarital agreement may negotiate about the following areas:
a. The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;
b. The rights to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
c. The disposition of property upon separation, marital dissolution, death, or the occurrence or non-occurrence of any other event;
d. The modification or elimination of spousal support;
e. The making of a will, trust, or other arrangement to carry out the provisions of the agreement;
f. The ownership rights in and disposition of the death benefit from a life insurance policy;
g. The choice of law governing the construction of the agreement; and
h. Any other matter, including their personal rights and obligations, not in violation of public policy.
However, a premarital agreement cannot predetermine issues relating to children including child support, custody or parenting time.
3. What martial terms can’t be included in a premarital agreement?
A premarital agreement cannot limit any child support or any other types of financial support for a child. This includes costs to maintain health insurance or life insurance. Moreover, a premarital agreement can’t stipulate which party should have custody of any child born of the marriage.
Child support provisions are governed by different rules that take into account a child’s needs and best interests and the state’s concern as to the welfare of children. Waivers of child support are invalid. Agreements as to child custody and visitation will not be upheld because as the welfare of the child born after marriage will override.
4. What is the standard of law that a court uses to ascertain if a premarital agreement is legally binding?
As to enforcement of premarital agreements, there is a three-pronged test that must be addressed by a court if the agreement is challenged:
a. Was the agreement entered into voluntarily;
b. Did the parties have the opportunity to have the agreement reviewed by counsel of his/her own choosing; and
c. Was there full disclosure as all assets, liabilities and income?
If these three prongs can be proven, then the burden to set aside the agreement shifts to the other side (with a higher burden of proof) and the primary focus will be on whether the agreement was “unconscionable” at time of enforcement, which shall be determined by the court as a matter of law.
5. What are the reasons why a prenuptial agreement may be declared invalid?
a. Unconscionability. A premarital agreement must be fair and reasonable. A premarital agreement can’t cause financial hardship to the other party. Unconscionable contracts are often found to be invalid in the courts. The concept of unconscionability is often used the family court arena as well.
b. Both Parties Don’t Have Independent Counsel. Each party must have their own lawyer. Many people mistakenly believe that they can have one lawyer represent both of them. Lawyers are expensive, and no one can blame the public for wanting to save on legal costs. However, each party must have their own legal counsel. A lawyer must make it clear to the unrepresented party that he or she does not represent him/her, and further advise them to obtain their own lawyer. All steps should be taken to insure that any premarital agreement is “air tight” and can’t be challenged one day if the marriage turns out to be a disaster.
c. The Premarital Agreement Has Incomplete Information. There must be full disclosure when negotiating a premarital agreement. Quite often a person will try to hide some assets when he or she negotiates a premarital agreement. This can be a tragic mistake. If a person does not make full disclosure during the negotiation of a premarital agreement, then this can eventually be strong grounds to void it.
d. The Premarital Agreement Has False Information. A premarital agreement can’t be based on false and misleading financial information. A person must make full disclosure during the negotiations of a premarital agreement. There are many risks to getting married. However, if a person wants to increase the odds that a premarital agreement can withstand any legal challenges, then he or she must insure that they were completely honest in their dealings.
e. Invalid Provisions. A premarital agreement can’t limit child support or any other child support related areas. If a premarital agreement contains clauses that try to limit child support or child support related areas, then that specific clause will be invalidated. If a divorced spouse has signed a very oppressive premarital agreement, then he or she will try to use this illegal clause to invalidate the entire agreement. However, in most cases, the court will only strike the illegal clause, and enforce the remainder of the premarital agreement, provided that it is fair and equitable.
f. There Must Be Reasonable Time For Consideration. The prospective spouse who is entering into a premarital agreement must have a reasonable amount of time to adequately review it. It would not be wise to give a prenup to your prospective bride or husband the day before the wedding. These agreements must be thoroughly reviewed and considered.
g. There Must Not Be Undue Pressure. Premarital agreements are often challenged once the parties get divorced. One of the most popular challenges to a premarital agreement is that a person will allege that they were pressured by their spouse, the lawyer, or the in-laws to sign the prenup. I would suggest that the execution of a prenup should be videotaped. If there is a significant amount of “money on the line” then a videotape can really save the agreement. Obviously, these formalities may take out some of the romance out of the wedding. However, let’s face it, life is not romantic. It is always my credo to be overly cautious in life. The divorce courts are packed! A premarital agreement may enable many people to sleep a little better at night.
h. No Written Agreement. All premarital agreements must be in writing. An oral premarital agreement is not enforceable. Don’t be cheap, hire a lawyer, and put your agreement in writing. Don’t be misled to believe that all lawyers are expensive. Don’t hire the first lawyer who tells you he charges $200 per hour. If you have a “war chest” of assets, then it may be wise to hire a top echelon family lawyer in your county. However, most cases are no so complicated, and many lawyers will charge you a much more reasonable fee.
6. What are the essential requirements that must be satisfied in order for a premarital agreement to be upheld?
a. There must be full and fair disclosure of the earnings, property and financial obligations of the parties. A complete and comprehensive financial statement must be annexed to the agreement that sets forth the part’s earnings, property and financial obligations. A CIS should also be attached to the agreement.
b. Both parties should be represented by attorneys. In all probability, a premarital agreement will not be enforceable if the other party did not consult with an attorney, or did not waive the right to do so in writing.
c. The agreement must not be unconscionable. A premarital agreement is defined as an agreement that would leave a spouse as a public charge or close to it. N.J.S.A. 37:2-32 defines a premarital agreement as unconscionable if certain circumstance should arise. These situations are as follows:
1. When a spouse is rendered without a means of reasonable support.
2. When a spouse becomes a public charge.
3. When a spouse is provided a standard of living far below that was enjoyed before the marriage.
7.Â I signed a prenup agreement, and I am now getting a divorce 12 years later. I now have MS and I don’t believe that the prenup is fair and reasonable. Can I make an application to void the prenup based on my change of circumstances?
Yes, in the recent case of Rogers v. Gordon, __ N.J. Super. __, Docket No. A-1531-07T2 (App. Div. 2008), the court held that a prenup can be changed if there is a change of circumstances since the execution of the agreement. In this case, the legal issue was whether a prenuptial agreement entered prior to the adoption of the Uniform Pre-Marital Agreement Act may be modified upon a showing of changed circumstances? The Appellate Division held that the trial court may amend the agreement if it was executed prior to the Uniform Pre-Marital Agreement Act, so long as the defendant experienced a substantial change in circumstances from the marital standard of living, or if he would be at a subsistence standard of living.
The court cited Marschall v. Marschall, 195 N.J.Super. 16 (Ch. Div. 1984), and noted that there is a three prong test for determining enforceability: (1) there was full financial disclosure; (2) that the party sought to be bound knew and understood the terms and conditions; and (3) that the agreement be fair and not unconscionable, i.e. that it not leave a spouse a public charge or close to it, or with a lifestyle far below what was enjoyed before or during the marriage. The court also cited Dâ€™Onofrio v. Dâ€™Onofrio, 200 N.J. Super. 361 (App. Div. 1985), noting that upon establishing a change of circumstances under Lepis a spouse may apply to the court for a modification of the agreement.
In summary, there is no type of prenup that always air tight and iron clad. If there is a substantial “change of circumstances” then most courts will reevaluate a prenup to determine if the agreement is reasonable. The most common change of circumstances is a health condition, a loss of a job, or a failed business. The family courts try to fair, and if a spouse’s fortune has deteriorated since the execution of the prenup, then most judges will reevaluate the agreement and assess whether justice can still be achieved if it is enforced. The Rogers court also held that a premarital agreement that is determined to be unconscionable as to its provision regarding support, still can be enforced as to its other provisions including property distribution. The court held that there is nothing in New Jersey case law that supports setting aside an entire agreement merely because part of it is ruled unenforceable due to being unconscionable as to support.
8. Are prenuptial agreements set in stone and/or can they be challenged in court?
Prenups give you substantial legal protection but they are not set in stone. A litigant can still always challenge their validity in court. Moreover, a litigant can also allege that there has been a change of circumstances since the execution of the prenup that makes it unenforceable. An illustrative case is Rogers v. Noguera -1531-07T2. Here, the parties entered into a prenuptial agreement (agreement) prior to their 1981 marriage. In 1998, the Legislature adopted he Uniform Pre-Marital Agreement Act (the Act), N.J.S.A. 37:2-31 to -41. The agreement was governed by pre-Act case. Those pre-Act cases held that prenuptial agreements are valid and enforceable under certain conditions, but are subject to modification at the time of enforcement if the spouse sought to be bound by the agreement will suffer a substantial diminution in his standard of living after the divorce. Here, after a very lengthy evidentiary hearing, the family court still declared that the entire prenup was unenforceable. Thus, the family court determined that the defendant was entitled to seek equitable distribution and alimony. The case was appealed, and the Appellate Division modified the family court’s decision. The Appellate Division ruled that the defedant could seek alimony if she can demonstrates a substantially changed circumstances under Lepis v. Lepis, 83 N.J. 139 (1980). The court did enforce the remainder of the prenuptial agreement.
The Rogers case is a very important one. This case illustrates that prenups only give you some legal protection and they can be modified. Moreover, a family court could always find that there are “a change of circumstances” that dictate that it should not be strictly enforced. The main goal of the family courts is to avoid spounal impoverishment. Thus, it must be emphasized that family courts are courts of equity and they “want to do the right thing.”
9. Are prenuptial agreements guaranteed?
No, the only guarantees in life are death and taxes, and if you are living in New Jersey lots of traffic. There are no legal guarantees that a prenuptial agreement will be legally enforceable. However, they do give you a significant amount of legal protection. Prenups are challenged all of the time in court. If a prenup is challenged then it will be evaluated under the circumstances that existed at the time the agreement is executed.
10. When should a prenuptial agreementÂ be signed?
It is very important that a prunuptial agreement be signed at least a month before the wedding day. One of the key legal concepts that is used to void a prenuptial agreement is that is was signed under duress. If a prenup is signed at the last minute then the dependent spouse can claim that the agreement was signed under duress. The more time that the dependent spouse has to review the prenup and the financial disclosures, then the stronger chance that the agreement will be legally enforced. Nonetheless, if you have to sign a prenup right before the wedding then it can still be enforceable. In the case of Himestra v. Himestra, 2010 WL 1433889, the husband sought to enforce a prenup. However, the wife claimed that she had executed the agreement only three days before the marriage, and that she signed it under duress. Nonetheless, the court ultimately held that agreement was enforceable and the Appellate Division affirmed. Similarly, in the case of Estate of Towbin, 2009 1817411, the Appellate Division affirmed the enforceability of a prenup that was signed on the parties’ wedding day. The court noted that both parties were represented by legal counsel and exchanged financial discovery.
Nonetheless, it is very important that any prenup be reviewed and executed at least one month before the marriage ceremony. If a prenup is signed at the last minute, then the dependent spouse can have a very good duress defense if she wants to try to void the prenup.
11. What is the most important aspect of preparing a prenuptial agreement?
The most important aspect of preparing a prenuptial agreement is that there must be full disclosure to the prospective spouse. If a person does not make full disclosure then there is a very strong chance that the prenup could be declared void. A very important case is DeLorean v. DeLorean, 211 N.J. Super. 432 (App. Div. 1986). Here, the court ruled that under New Jersey common law financial disclosure required detailed and not general disclosures. If you hold back and don’t reveal all of your assets to your new spouse, then this legal mistake could come back and haunt you.
12. Can I limit my child support payments in a prenuptial agreement?
A prenuptial agreement may not be used to limit your child support payments. Nice idea, but “no can do.” A prenuptial agreement should not have any types of provisions that limit the amount of a child support award or of day care expenses. If the parties do eventually get divorced, then they will have to exchange income information and then the court will have to determine child support.
13. The prenuptial agreement is now fully prepared and me and my future wife want to sign it after the wedding ceremony. Is this advisable?
Absolutely, no way. If the prenuptial agreement is executed after the wedding day, then it could be reviewed by a court as a post-nuptial agreement. Post-nuptial agreements or mid-marriage agreements are much easier to have declared void or unenforceable. In the case of Pattison v. Pattison, 2007 WL 1008642 (App. Div. Apr. 5, 2007), the court ruled that an agreement that was finalized after the marriage could be analyzed as a prenuptial agreement. However, it is much more likely that most courts would view this type ofÂ agreement as a mid-marriage agreement. See, Pacelli v. Pacelli, 319 N.J. Super. 185 (App. Div. 1999).