PRENUPTIAL AGREEMENTS PRE-DATING THE UNIFORM PREMARITAL AGREEMENT ACT - A DIFFERENT STANDARD FOR ENFORCEMENT
Are prenuptial agreements entered into before the enactment in 1988 of the Uniform Premarital Agreement Act in New Jersey in New Jersey analyzed for enforceability under the standards set forth in the Act? The simple answer is no, since the standard for determining the enforceability was established by earlier cases addresses addressing the issue.
There is a three (3) prong test to determine the enforceability of these pre-Act agreements. To be enforceable: (1) there must be “full disclosure by each party as to his or her financial conditions;” (2) the party sought to be bound by the agreement understood and accepted the terms of the agreement; and (3) the agreement is fair and not unconscionable - it 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."
The party seeking to enforce the prenuptial agreement bears the burden of proving that there was full financial disclosure to the other party, the simplest way of which is to point to schedules attached to the agreement setting out – at least in general terms and with approximate values – the assets of the parties as well as their income over the past few years prior to the marriage. Simply put, a lack of full and complete financial disclosure in the agreement by one party prevents the other party from truly "accepting" its terms. The underlying rationale is that, with full and complete disclosure, the other party might have found the agreement unfair or might not have even gotten married.
Parties entering into a prenup are at their most vulnerable and trusting point in their relationship, oftentimes mere days before they are to be married. It is for that reason why the signing party must fully know and understand the rights to alimony and equitable distribution being waived. If the party is represented by an attorney or has an attorney review the document before signing, does even that provide sufficient evidence of one’s knowledge and understanding of the agreement's terms? Not necessarily. Even an attorney's advice to a party not to sign an agreement may be virtually meaningless if that party did not have full information regarding all assets or a complete understanding of the agreement's terms.
As to the third prong, the issue is not whether the agreement is unconscionable at the time of its execution, but rather at the time of enforcement. Essentially, the case law states that the analysis becomes one of “changed circumstances,” namely, if one party experiences a substantial change in circumstances from the marital standard of living to the post-marital standard, a modification of the agreement may be necessary to prevent leaving that party at a subsistence standard of living.
It was the enforceability of a pre-Act agreement that was recently at issue before the Appellate Division in the unreported decision of Hiemstra v. Hiemstra. In affirming the trial court’s finding that the agreement was enforceable under the three (3) prong standard, the Appellate Division analyzed the trial court’s findings under each prong in turn. As to the first prong, the Appellate Division affirmed that the plaintiff knew about the defendant’s assets before the marriage, especially since there were two (2) schedules of assets attached to the agreement itself, and the plaintiff was deemed to have an awareness of the assets from having visited the defendant’s various properties and having conversations with him before the marriage as to the “extensive nature of his holdings.”
As to the second prong, the Appellate Division noted that the plaintiff met with her attorney before signing the agreement, had cause to be mindful of the impact of executing the agreement without additional change having been previously married and divorced, and she did not even seek to have the agreement modified during a two (2) year period following its executing despite being permitted to do so by a subsequently signed addendum to the agreement. Finally, as to the third prong, the Appellate Division affirmed the finding that the agreement was not unconscionable, concluding that the trial court’s consideration of the plaintiff’s pre-marital standard of living was appropriate, and that the plaintiff herself had substantial assets as a result of her various inheritances.
As Hiemstra demonstrates, the enforceability of a pre-Act agreement is a very fact-specific analysis conducted within the confines of the three (3) prong standard. Each situation presents its own unique circumstances that a court must analyze to determine whether that agreement must be upheld.