A Primer on Prenup Agreements
Prenuptial agreements, also known as premarital agreements or antenuptial agreements and colloquially called prenups, are agreements between parties before they get married which establish certain conditions in the event of a divorce or dissolution of their marriage. Pre-marital agreements are authorized under the Uniform Premarital Agreement Act, L.1988 , c. 42, N.J.S.A., 28:2-31, et seq, and the New Jersey Common Law. A prenuptial agreement must be in writing and signed by both parties. The marriage is sufficient consideration (i.e. a good and valuable reason for entering into the agreement) for the contract. Most importantly, each party should have independent counsel before entering into the agreement.
All About Prenup Agreements in the Garden State
There are specific statutory provisions under New Jersey law that set out the requirements for a valid prenuptial agreement. Pursuant to the New Jersey Uniform Premarital Agreement Act N.J.A.C. 25:1-5.1 through 25:1-5.4, a premarital agreement is enforceable as long as it meets certain requirements mandated by the statute.
Under the New Jersey statute, and unlike the common law requirements of a contract, no consideration is required for a spousal agreement to be valid under New Jersey law. The critical test is that the agreement involve a waiver of certain rights that have financial consequences if there were to be a divorce. Under the statute however, contracts are not enforceable if:
- It was entered into under duress
- No full disclosure of assets and liabilities was made prior to the agreement
- The agreement was unconscionable when signed
- The agreement was not in writing and signed by both parties
- One spouse did not have an adequate opportunity to consult with counsel
If any one of the above factors exist, then the agreement may be deemed invalid. Unlike a contract, the mere failure to disclose an extensive or significant asset will not automatically render an agreement invalid, as long as full disclosure was made when the agreement was entered into.
An agreement is not valid if the court finds that there was an unconscionable provision made that would leave one spouse with "so little property" that he or she would be a public charge if the marriage were to end in a divorce. In addition, New Jersey case law has held that an agreement which provides for the forfeiture of a spouse’s child support rights may also be deemed unenforceable.
Additional statutory provisions require that any agreement entered into prior to marriage must disclose certain matters such as:
- The rights each spouse has to alimony if there were to be a divorce
- The rights each spouse has to equitable distribution of property acquired during the marriage
- The rights each spouse has to his or her non-marital or separately owned property
- The rights each spouse has to life or death insurance policies.
There is no waiting period for a premarital agreement to become effective as long as it is entered into prior to the date of marriage. Under the statute, it is presumed that the parties entered into the agreement voluntarily as long as a full disclosure of assets and liabilities was provided. The burden of proof to establish that there was fraud, overreaching, lack of voluntariness or some other basis for not enforcing the agreement is on the party not seeking to enforce the agreement. There are no "look back" periods and there need not be a specific waiver of any rights in particular.
Another unique aspect of the New Jersey statute is that if there is any dispute between the parties, the couple must first submit the dispute to mediation before commencing any other legal action. This was designed in part to limit the litigation costs involved and help promote the reconciliation of the parties prior to filing for divorce. There is no time table as to the mediation and the parties may commence court proceedings if they fail to settle the matter through mediation.
The Benefits of a Prenup
Although the concept of a prenup may seem unromantic, if you sift through its stigma, you will discover that entering into a valid agreement can bring you peace and security when you are both experiencing the honeymoon phase of your relationship. While you always hope for the best, the reality is that not all relationships stand the test of time. A prenup is an opportunity to discuss the matters and boundaries of your personal lives that no couple considers until issues arise. Although there is no right or wrong way to draft a prenup, below are some of the common advantages you may experience if you decide to draft one.
Protects Against Spousal Support or Alimony
If you enforce a valid prenup, you may receive payment per the terms of your contract, which could limit the amount or duration of the alimony. Without a signed contract, you will have to turn to the statutory laws within the state of New Jersey to determine the amount of support your spouse will owe to you.
Protects Future Inheritances
A prenup can also protect your future inheritances, which may include properties, businesses, investments, and accounts. However, your spouse cannot protect their future inheritances, because this type of protection is not enforceable in a contract per New Jersey law.
Decides Who Keeps What
While it may not seem like something you need to include in a prenup, a contract determines who will decide what happens to your property when you both pass away. A agreement can prevent a divorce by designating each party’s wishes as it pertains to their material belongings, and it prevents your assets from being tied up in a messy battle.
Protects Against Debt
If you decide to draft a prenup, you have the right to protect your individual assets from any debt that your spouse has acquired prior to the marriage.
Prevents a Messy Divorce and Helps You Establish Assets Ahead of Time
By planning ahead, you can make decisions jointly rather than fighting over who will take what. You can also decide how the divorce will be settled and who will pay costs to avoid a lengthy legal battle. A prenup can also help you establish premarital assets, such as withholding salaries, assets earned while married, and even other properties that are outside the scope of property division in New Jersey.
Busting Common Prenup Myths
Common Misconceptions Regarding Prenup Agreements in NJ
There are many misconceptions about what a prenup agreement can and cannot do and what the process for getting one through the court system will be. This article will address some of these issues to make the decision to get one easier. Many people think that prenup agreements are only for the rich. If you and your spouse, future spouse, or partner intend to marry, you may want to consider a prenup agreement, even if you consider yourself middle class.
Some parents think that having a prenup agreement in place prior to a child’s marriage is a way to protect the family money in the event of death or divorce. This is not necessarily true under NJ law. NJ does not recognize an inheritances conteined in a pre-marital asset as protected for children upon the death of a spouse. There are certain exceptions where assets passed from one spouse to another, such as pension payments, may be protected from division but other property is not.
It is important to note that a prenup agreement cannot prohibit your spouse from seeking alimony should your marriage terminate. Neither can a prenup agreement prevent the court from providing spousal support in the need exists. Alimony in NJ is based on numerous factors but the major ones are the length of the marriage and the income of the partners involved. A prenuptial agreement cannot interfere with the judiciary’s ability to provide spousal support.
Protecting prior premarital property from division in the event of divorce is one of the primary reasons people inquire about prenuptial agreements. When determining whether any asset is subject to asset division pursuant to divorce proceeding, NJ courts will look at both the title to an asset as well as the intention of the owner of said asset. You and your spouse can work together to come up with a prenuptial agreement that works in your best interests. Fundamental to this process is a full disclosure of all assets.
Putting a Prenup Agreement on Paper
When it comes to drafting a prenup agreement, the parties should first seek the advice of experienced counsel. This will ensure that both spouses understand the legal and practical implications of the agreement. Once the parties have a full understanding of its implications, they can then move forward in deciding which important issues are going to be addressed and how.
As with most contracts, a prenup must be in writing and signed by both parties. A prenup is not enforceable in New Jersey unless it’s in writing and signed by both parties. Generally, a prenup is not enforceable if you sign without reading it first. Again, when you don’t understand the contract, you would be "Amazon Prime-ing" with your spouse’s legal representation, which would be a disservice to you.
Even if a prenup is drafted by experienced counsel and both parties understand the fine print, it may still be invalid in the eyes of the court if it is one-sided. In other words, if the terms of the prenup are unconscionable or otherwise unfair, it may be thrown out. For instance, if a husband makes $1 million and wife makes $50,000, and the prenup states that in the event of divorce, she would only get $5,000, the agreement might be invalid. Or consider a spouse who agrees to give up everything during the marriage, but infidelity occurs. If the parties get divorced , the spouse who signed the prenup may not be entitled to any financial compensation.
A prenup can also be thrown out if both parties sign it and change their minds the next day. The agreement must be made with both parties’ full knowledge and understanding of the terms for the contract to hold up. If the parties don’t understand (or are lied to) about the contract terms, the prenup could be voided. To avoid such problems, it’s advised that your prenup be as simple and clear as possible. If you’re doing it yourself, draft the document in a way that doesn’t include false expectations. You don’t want the contract to require two cars and two homes because you hope to someday own a Porsche and a beach house. If you ever do have those items and get divorced, those assets may not be divided equally because you don’t currently have them or shared custody of them.
It is important to keep in mind that you cannot leave your future ex-spouse financially destitute in the event of divorce. A court has the right to decide what is fair for both parties. Therefore, a prenup shouldn’t be completely one-sided; the divorce court will most likely overturn it.
If you’re seeking to draw up a prenup agreement before tying the knot, it is recommended that you and your fiancé meet with an experienced New Jersey divorce attorney to discuss the process.
Limiting or Enforcing a Prenup
To have legal weight, prenup agreements must be executed voluntarily. Courts will generally not enforce a prenup against parties who did not have the opportunity to review it independently with their own counsel. This is among a number of reasons we routinely caution the extent to which one marriage partner can unilaterally dictate the terms to which both will be legally held upon separation or dissolution. The fact is that a marriage is about choice. Each partner must participate meaningfully in terms of full disclosure and negotiation of all relevant information including required drafting language. The actual signing of both the pre-maritally executed Agreement and the naming of a notary as an actuarial agent for certification purposes after the parties both physically sign in front of him or her, is of utmost importance. These steps preserve the integrity of the document. Failure to do so can render it unenforceable and allow one marriage partner to renege on the terms outlined in the document signed pre-marriage. So, if you intend to enter into a prenup in NJ take the measures necessary to ensure a strict adherence to the law so you won’t be disappointed if and when the time comes that you need to rely upon it. As with any other contract, prenup terms should also not be unconscionable. In other words, the conditions outlined must not be so one-sided that they abandon notions of fairness. If this happens, a prenup could stand to be set aside by a court after a full hearing on the issue. This can occur if, for example, the terms are on their face too harsh or if the document was signed due to duress. The latter is especially true if one marriage partner had very little prior preparation for the marriage and the document is inconsistent with his or her best interests.
Revoking or Amending a Prenup
In most circumstances, both parties to a marital agreement in New Jersey must voluntarily and mutually agree on its terms in order to revoke or modify the prenup agreement. This is usually done by a subsequent written agreement signed by both parties. The new agreement must be signed, witnessed, and notarized or acknowledged to be valid.
Some courts recognize and enforce oral modifications of a prenup agreement. This can occur when the much of the prenup agreement is performed throughout the marriage and the spouse seeking modification under the original prenup agreement waits too long to apply the prenup agreement , causing the court to rule that there was an oral modification of the prenup agreement. It is often beneficial to have subsequent amendments in writing to avoid this misunderstanding.
If the parties cannot mutually agree on the terms for revocation or modification, the court can order the original prenup agreement invalidated or modified, but this is very rare. Most commonly, the court will order that the parties abide by the original terms of the prenup agreement.
Common reasons why a court may order a marital agreement to be invalid:
Usually, a court will not order a marital agreement to be modified, even if the court finds that it is unfair, inequitable, or unjust. Rather, the court will simply enforce the original agreement and let the parties abide by the status quo.