Posted on December 16, 2008 by Eric S. Solotoff

ANOTHER CELEBRITY DIVORCE - WONDER IF THERE WAS A PRENUP?

The big news this morning was Madonna and Guy Ritchie's $92 million divorce settlement.  With such a large payout, it makes you wonder whether there was a prenuptial agreement in place (if you type that question into Google, you get differing responses), and if there was, if it was disregarded throughout the marriage. 

In any event, prenups are not just for celebrities.  A common type of prenuptial agreement is one where there is a family business, trust or generally a lot of money and property on one side that the parents do not want to get into the hands of the new spouse, no matter what.  In fact, I blogged yesterday on a new reported case where that was the issue.  To see that post, click here.  Sometimes those types of prenups are difficult to negotiate because the spouse with the family money may want to be more generous to the new spouse than his/her family is willing to be.   I have seen this cause great distress on the eve of a wedding. 

Another common theme for a prenuptial agreement is when people get remarried later in life (due to divorce or death of a prior spouse) and they have children who they want to pass their assets to.  Sometimes, both prospective spouses are in this situation.  These are typically easier to negotiate.  The bigger issues in these cases are how will bills be paid, whether there will ever be any joint assets created, and sometimes medical issues - does the spouse or the children make decisions. 

I was recently involved in one of these later in life pre-nups where a big issue was whether the children of an incapacitated spouse could bring a suit for divorce on behalf of their parent.  This was an issue because the non-monied spouse received something different at the other spouse's death vs. divorce.  Depending on where the parties were in their marriage, a maliciously motivated or more like self interested child could seemingly seek to pursue a divorce.  We had to craft language to protect the parties in this event.

Another circumstance where I have occasionally seen a prenuptial agreement, but questioned from the perspective of why the non-monied spouse would ever sign or go through with the marriage.  These are the cases where the parties are reasonably young, where one has more than the other (but not substantially so) or a premarital business which is not particularly successful and the less advantaged spouse is being asked to waive off on virtually all of the assets derived and/or income earned during the marriage, and perhaps also being to waive alimony too despite a clear disparity or soon to be disparity in income.  In fact, the parties plan to have children and the plan was that the non-monied spouse would be a stay at home parent. In one of these cases, the agreement was so unconscionable in my eyes, that I would not continue the representation.  I believe that the client signed anyway.  If there ever is a divorce, I suspect that she will either be very sorry she signed the agreement or will be in for a very expensive legal battle regarding the enforceability of the agreement.

For more information about prenuptial agreements in these or other circumstances, do not hesitate to contact any of the lawyers in Fox Rothschild's family law group.

 

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Posted on December 15, 2008 by Eric S. Solotoff

THE APPELLATE DIVISION RULES ON A PRE-ACT PRENUPTUAL AGREEMENT

On December 12, 2008, the Appellate Division released a reported decision in the case of Rogers v. Gordon which addressed the enforceability of a pre-statute prenuptial agreement.  To review the full text of the case, click here.  The case is interesting because it addresses again the standards to be applied to an agreement signed before the enactment of the Uniform Premarital Agreement Act in NJ.

In this case, the parties entered into a prenuptial agreement as a young couple.  The wife was a graduate of the Wharton School of Business and came from a wealthy family.  The husband was a high school graduate working for the Postal Service.

The parties married in 1981, had four children and were married for more than 24 years before the wife sought a divorce.  During the marriage, the wife went to work for her father's business, which she eventually purchased from him during the marriage.  In 1990, the husband left the Postal Service to work as a machine operator for the business.  In 2002, he was promoted to plant supervisor.  Not surprisingly, when the divorce commenced, he was demoted to a machine operator again.  The trial court made a finding that at the end of the divorce, there was not a "snowball's chance" that he was going to keep the job given the wife's intense animosity for him evidence during the trial.  In fact, the judge found her to be totally incredible regarding this topic.

At the time of the divorce, the husband's income was $63,000 - the wife's was more the $600,000.

The Uniform Premarital Agreement Act was enacted in NJ in 1998 and applies to all agreements entered into after its enactment.  As such, because the agreement in this case was entered into prior to the Act, the Court had to apply the case law from prior to the act.

In citing the Marschall case, the court noted that there was a three prong test for enforceability, as follows:  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, ie. 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 the D'Onofrio case which said that the alimony provisions in the agreement need not cover all contingencies because the Lepis or change of circumstances standard would apply.

The trial judge felt it irrelevant to look at the pre-marriage lifestyle given the passage of time.  The judge found that the agreement was unconscionable and set aside the entire agreement.

An interlocutory appeal was taken by the wife and joined by the husband.  The Appellate Division reversed the Order to the extent that it set aside the entire agreement.  As to the assets, the husband knew that the wife would likely be wealthier than him at the time of a divorce given her family wealth, etc. 

However, the Appellate Division accepted the decision of the trial court as to alimony - but modified it.  The reason for this is that the husband had yet to be fired by the wife.  As such, the Appellate Division modified the trial court's conclusion to allow defendant to seek alimony if and when he demonstrates substantially changed circumstances under the standard articulated in Lepis v. Lepis, 83 N.J. 139 (1980).

Of note, the Appellate Division rejected the wife's claim that the court had to determine the issue of unconscionability when the agreement was executed, as opposed to when it was enforce.

Under all of the circumstances in this case, the Agreement did what it was supposed to do - that is, protect the family wealth.  However, given the time of execution (i.e. pre-act), the wife may ultimately have to pay alimony if she terminates the husband.  Post-act, she may not have had to pay alimony at all.
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