While marriage is most often thought of in romantic terms, the act of marriage is a legal one. As a result, there are several factors to consider, and for some people, entering into a marriage agreement is the best way to ensure an agreed-upon outcome in the case something changes within the marriage.
There are three types of marriage agreements:
● Prenuptial Agreements
● Mid-Marriage Agreements
● Settlement Agreements
The enforceability of each of these types varies, but one underlying theme in determining the validity of each is that there was full disclosure of the financial conditions which exist at the time the agreement is entered into and that the agreement is fair. It does little good to enter into any of these agreements if a party is not upfront about their assets and does not intend to come to a fair agreement.
Prenuptial agreements, commonly referred to as “prenups”, are not just for the rich. While prenuptial agreements are often used to protect the assets of a wealthy fiancé, couples of more modest means are increasingly turning to them for their own purposes. Many couples want to avoid potential arguments if they ever divorce, by specifying in advance how their property will be divided, and whether or not either spouse will receive alimony.
A prenuptial agreement is an agreement between two people made in contemplation of their marriage and in which they allocate their interests in property, child custody, support, and other interests that would require partition or division in the event of divorce or the death of one of the spouses.
In New Jersey, our courts have consistently found that prenuptial agreements are valid and enforceable and that such agreements should be welcomed and encouraged. The basic requirements are set forth in Uniform and Pre-Civil Union Agreement Act” also known as (UPAA) OR N.J.S.A. 37:2-31. The UPPA requires the following of all prenuptial agreements:
● Be in writing
● Have an annexed statement of assets of both parties
● Be signed by both parties
Prenuptial agreements are subject to the usual rules of contract formation, interpretation, and enforcement, albeit with a greater attention, at times, to the potential of undue influence or bargaining power by one of the two parties. A prenuptial agreement will generally not be binding on matters of child custody or child support, which must be determined based on findings of the best interest of the child at the time the question arises, although the prenuptial agreement is often followed in determining other matters regarding property or spousal support.
There are, of course, limits. New Jersey Courts utilize a three-prong test to determine if the agreement should be enforced. The Court looks to ensure:
(1) that there was “full disclosure by each party as to his or her financial
(2) that the party sought to be bound by the agreement understood and accepted the terms and conditions of the agreement; and
(3) that the agreement be fair and not unconscionable, that is, that the agreement will not “leave a spouse a public charge or close to it, or … provide a standard of living far below that which was enjoyed both before and during the marriage.
There is a strong public policy to enforce these agreements, assuming the above three conditions have been met. The public policy supporting enforcement of a prenuptial, as opposed to a postnuptial, agreement is that one party remains free to walk away before the marriage takes place.
Many couples who enter into a Prenuptial Agreement find themselves litigating far less in the event of separation or divorce in New Jersey. By predetermining the treatment of their assets before marriage, an attorney preparing a prenuptial agreement can help divorcing couples avoid lengthy legal battles.
This agreement is similar to a prenuptial agreement, except that it is done during a marriage rather than before. Before committing to one of these agreements, it is important that both parties have sufficient time and advice before drafting the agreement. If they don’t, the agreement is sure to be challenged if the parties divorce.
Couples enter into mid-marriage agreements for varying reasons, but the underlying goal is to make clear their intentions for how to handle finances after the marriage ends. Significant changes in the finances of the couple or increasing marital conflict are common reasons for creating a mid-marriage agreement.
Unlike Prenuptial Agreements, which Courts are inclined to enforce, Mid-Marriage Agreements are very vulnerable to challenges. The courts in New Jersey view these agreements with great skepticism as the belief is these agreements, as courts have stated, are inherently coercive.
The Court’s view is that one party, who greatly desires the marriage to survive, is simply not on equal footing with the other partner. In fact, the courts have commented that “that such circumstances are pregnant with the opportunity for one party to use the threat of dissolution “to bargain themselves into positions of advantage.” This desire of one partner to preserve the marriage can even negate the fact that they were represented by competent counsel.
While a properly drafted Mid-Marriage Agreement may prove useful, they clearly require full disclosure and the desire to agree to terms which are not unfair.
A property settlement agreement, also known as a marital settlement agreement, is the final agreement between two ex-spouses pertaining to all issues regarding their divorce. Not only does this contract determine the distribution of property and assets, but it includes rules about child custody, parenting time, child support, and alimony.
A good property settlement agreement should encompass everything and carefully detail the rights and responsibilities of each party and creating a comprehensive contract should be a couple’s main goal during divorce proceedings.
Unlike the scrutiny with which courts view the Mid-Marriage Agreement, property settlement agreements prepared in contemplation of divorce are enforceable as they assume the parties stand in adversarial positions and negotiate in their own self-interest.
It will only be set aside when it is the product of fraud or overreaching by a party with power to take advantage of a confidential relationship.” New Jersey has a “strong public policy favoring stability of arrangements’ in matrimonial matters.” Absent compelling reasons to depart from clear, unambiguous, and mutually understood terms of a marital settlement agreement, a court is generally bound to enforce them.
Utilizing marriage agreements is a positive mechanism to avoid a protracted, acrimonious divorce. A contested divorce is draining emotionally and financially.
To the extent you can control the terms of the dissolution of a marriage, it is in your interest to seek the sound, informed guidance of the family law and marriage agreement attorneys at Epstein Ostrove.