What Is a Postnuptial Agreement?
A postnuptial agreement, sometimes styled post-nuptial agreement, is a written contract executed post-marriage that outlines the division of assets and financial arrangements should the marriage hit hard times in the future, resulting in the need for separation or divorce, perhaps for death or some other termination of the marital contract. The parties may also choose to stipulate how child custody and support will be allocated, but in New Jersey this is not determinative of child custody once the terms of a postnuptial agreement are triggered. In fact, child custody terms in both a prenuptial and postnuptial agreement are exercise books for the court in New Jersey, especially since the court cannot abdicate its responsibility in determining the best interests of a child. That said , this arrangement does provide for some certainty for future finances and is therefore not inherently against public policy.
Similar to a prenuptial agreement, postnuptial agreements are legal contracts, also known as "marital contracts." They are recognized under New Jersey law N.J.S.A. 37:2-31. They are governed by the principles of contract law, with the same requirements for entering into these agreements, such as offer, acceptance and consideration. Hence, while marital contracts may appear routine, they may also appear enforceable regardless of the foregoing circumstances. There is an agreement offered for both parties to read and understand. A legal process is set in motion that each party should understand well before entering into it. It is therefore advisable that you speak to a lawyer before proceeding with a postnuptial arrangement.
Legal Guidelines for Postnuptial Agreements in NJ
In New Jersey, in order for a postnuptial agreement to be considered valid, it must comply with the Uniform Premarital Agreement Act, N.J.S.A 37:32-21 et seq. Postnuptial agreements are essentially the same as prenuptial agreements but are executed after the date of marriage.
In order for a postnuptial agreement to be enforceable, the agreement must be voluntarily entered into by both parties to the agreement. The parties must possess the mental capacity to consent to the agreement. There must be full and fair disclosure, on the part of each party, of his or her assets, liabilities, and income. The spouses must also be advised of their right to representation by independent counsel. Courts will consider the amount of time between the presentation of the agreement and the execution of the agreement.
The courts will not examine the fairness of the agreement nor will the courts apply a case by case analysis. Instead, they will look to see if the proper legal procedures were followed, which includes whether both parties were represented by counsel. If counsel was not obtained prior to the execution of the agreement, the courts will determine whether the agreement was "unconscionable". A requirement of unconscionability has been written into the statute. A postnuptial agreement that would otherwise be enforceable may not be enforced if the court finds that the agreement is "unconscionable". An agreement is "unconscionable" if either of the following applies:
a. A party was not provided a fair and reasonable disclosure of the property or financial obligations of the other party.
b. A party did not voluntarily and expressly waive in writing any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided.
A postnuptial agreement that prohibits a party from testifying in any divorce proceeding is not enforceable.
Common Reasons NJ Couples Choose Postnuptial Agreements
One of the most common reasons couples enter postsnuptial agreements is to address changes in the financial situation of either partner after marriage. This is frequently seen with the acquisition or sale of property. These situations can also arise following changes in business status, such as the acquisition of a substantial stake in a closely-held business by one person.
For couples who do not obtain premarital agreements, entering into a postnuptial agreement can be a particularly appealing and appropriate means of resolving traditional spousal support (alimony) issues between themselves without litigation. Where prior to marriage, the parties had significant assets and wealth, a postnuptial agreement can provide much needed security where there has been a significant change over time. For example, perhaps a businessman earned a significant salary prior to the marriage, but now earns substantially more or has sold his corporation and now has a significant trust fund. The wife may not want to have to rely on alimony throughout her life if the couple separates or divorces. Instead, the husband may be willing to forego alimony in favor of a cash buyout or some other property settlement. This is something that can be agreed to between the parties.
Inheritance and estate issues are common scenarios for postnuptial agreements. New Jersey does not have any forced heirship provisions, meaning that spouses do not automatically inherit property from each other. However, children of marriages often have an expectation of it. The postnuptial agreement may not only confirm the waiver of estate rights for each of the children of the marriage but may make explicit those property settlements that were made in lieu of any interest that the parties might otherwise have had by reason of their marriage.
Of course, the most common reason for postnuptial agreements lies with the provision of a sufficient level of security for the economic future of the parties. Parties who marry at an older age to gain reparations from prior relationships/marriages can benefit from safeguards usually reserved for those who receive their property prior to the marriage itself.
Advantages of Entering into a Postnuptial Agreement
Like prenuptial agreements, postnuptial agreements can offer individual parties a wealth of benefits, but even more so than their prenuptial counterparts. Given the legal complexities of prenuptial agreements, a postnuptial agreement doesn’t need to be signed prior to marriage, which may help alleviate some of the pressure couples feel in the lead up to their wedding. It also extends a window of negotiation after the couple has gotten married—an opportunity that some newlyweds prefer to having an uncomfortable conversation with their fiance because of the worry that such a conversation will negatively impact the relationship. Because postnuptial agreements don’t require the next step of marriage before they’re drafted, they also allow couples to work through their issues at a more reasonable pace without the symbolic implications of a tainted, broken-off engagement.
An even more significant advantage of having a postnuptial agreement is that it constitutes a legal contract that mandates a reduction in the probability of a contested divorce and, by extension, the costs associated with divorce-related litigation. It doesn’t have to be contentious between the two parties because the agreement is a collaborative document; both parties are able to negotiate the terms of the agreement together, and doing so allows the couple to clarify and prioritize their values with foresight, hopefully helping them to avoid some of the complications that get in the way of amicable divorces and lead to marital discord in the first place.
Limitations and Potential Difficulties
Postnuptial agreements are not immune to challenges, and address a number of issues. The first limitation is that these agreements are only effective in states that recognize them, which New Jersey does. New York does as well. However, some states do not recognize postnuptial agreements, although if a postnuptial agreement is valid in one state, it may be enforceable elsewhere. Additionally, there may be questions regarding enforceability. While the majority of states will enforce postnuptial agreements that have consideration and do not include any alimony for an unfair and unbalanced distribution. Exceptions exist for marital contracts that attempt to change custody or have terms similar to custody, such as visitation, child rearing or parenting plans, it is easier to challenge a postnuptial agreement in the context of these issues. Furthermore, while the efficacy of enforceable postnuptial agreements is well settled, courts still have the ability to modify such agreements for a number of reasons, including but not limited to cases of abuse, bankruptcy, parenting and child care issues and where the agreement itself may violate public policy. For instance, there have been exceptions allowing modifications of postnuptial agreements where the conditions of the separation were met. Generally, even if courts do modify postnuptial agreements, there must be a significant difference in the financial positions of the spouses in order for a court to consider the modification of a postnuptial agreement to be significant enough to warrant modification. Certain conditions or provisions in the agreement can make them void. For instance, postnuptial agreements cannot: Additionally, questions of jurisdiction arise in cases of cross-border agreements, meaning that a husband and wife enter into a postnuptial agreement while living in a different state or country . A postnuptial agreement could be void altogether, because the postnuptial agreement was entered in a different jurisdiction than the state in which either divorce could take place. The most practical consideration for the enforceability of a postnuptial agreement in New Jersey is whether or not it is fair and equitable. With divorce settlements, New Jersey courts require a "totality of the circumstances" test to determine the fair and equitable nature of a divorce settlement. Since the same considerations are in place for postnuptial agreements, a court will require a hearing to determine why the postnuptial agreement should be overturned. Courts look to see if there is a change in circumstances that warrants a modification, and look at the changes to each party’s standard of living and finances. Relatedly, "future contingencies and speculation are not appropriate subjects of negotiation," such as alimony, future pensions, college expenses and other similar items. In addition, because separate property generally is not subject to equitable distribution, performance of a postnuptial agreement may waive the right to seek equitable distribution of separate property – i.e., property acquired during marriage, whether through inheritance, gift, or pre-marital holdings. This also applies to medical insurance benefits. Separate property that was received is usually still separate property. For example, a husband may receive a stock option plan during the marriage through his employer, but if the postnuptial agreement waives the right to medical benefits and equitable distribution of any property, then usually this is a waiver.
How to Prepare a Postnuptial Agreement in New Jersey
Before drafting a postnuptial agreement in New Jersey, it is advised that each spouse obtains independent legal counsel. The guidance of an attorney is essential in understanding the scope and implications of the agreement. This will help ensure that each party is fully aware of their rights and obligations before entering into the agreement.
Once each party has obtained an attorney and has discussed their needs regarding the agreement, the next step is to obtain a complete financial disclosure from the other spouse. This information is very important because after reviewing the information and going over each provision, each spouse will become aligned and develop a "take it or leave it" attitude about the provisions of the agreement.
Careful drafting of the agreement is crucial; it is important to ensure that the agreement does not violate any laws or public policy in New Jersey. A document that is in written form and signed by both spouses becomes effective as long as it is not amended or terminated.
The ideal situation in negotiating and drafting a postnuptial agreement is for the attorneys to meet and discuss the agreement with their clients separately, without the presence of the opposing spouse. This almost perfectly balanced approach allows for the opportunity to accurately advise the clients and inform both parties equally on the purpose and intent of the agreement.
Postnuptial Agreements FAQs in NJ
FAFAQS for Postnuptial Agreements in NJ
How much do postnuptial agreements cost in NJ?
The fee for a postnuptial agreement is similar to the fee for a prenuptial agreement. The price will vary based on the complexity of the matter, how many assets are involved, the size of a party’s estate, and so forth. A reasonable fee for a simple postnuptial agreement will likely be between $2,000 and $5,000 per party.
Are postnuptial agreements enforceable in New Jersey?
Yes, under New Jersey law. Under both New Jersey statutes and case law, postnuptial agreements – also referred to as a "mid-marriage" agreement – are valid as long as they are entered into knowingly and voluntarily.
Do I need a lawyer to draft a postnuptial agreement?
Under the laws in New Jersey, the parties to the postnuptial agreement should each have independent counsel for their needs . A judge in a divorce or separation action will ask whether both parties had independent counsel throughout the process. If not, an agreement can be overturned. This is particularly pertinent as one party may have more leverage over the other, and may pressure the other in order to obtain a more favorable split of assets or a spousal support award.
Is a postnuptial agreement filed with the court?
No, postnuptial agreements are not usually filed with a court or recorded with the county, though they are admissible as evidence during a court dispute, if necessary.
What happens if one party goes back on a postnuptial agreement?
That will depend on the situation. As a postnuptial agreement is entered into during the marriage, the same legal principles that govern a prenuptial agreement apply. The key is to determine whether or not the agreement was entered into voluntarily. If not, it is likely unenforceable.
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