Is prenuptial agreement reform coming to New Jersey? It appears to be the case.
Prenuptial Agreements are meant to fix parties rights and responsibilities in advance, so as to avoid litigation and aggravation in the future. In fact, right up front in many if not most prenuptial agreements there is a "Statement of Intention" as follows:
It is the intention of the parties in entering into this Agreement that in the event of the termination of the marriage by divorce or death, certain rights shall be fixed in advance. It is their intention to avoid litigation and intrusion into their professional and personal lives and the lives of their families and business associates, which would perhaps otherwise occur if this Agreement had not been entered into.
Unfortunately, unlike in many other states, where prenuptial agreements are ironclad as long as there was full disclosure and the other procedural requirements are met, that has not been the case in New Jersey. The major reason for this is that in New Jersey, aside from setting aside a prenup due to failure to follow the procedural requirements, including full disclosure, agreements can be set aside if they are deemed to be unconscionable, not only when they are entered into, but when they are to be enforced at the time of the divorce. As a result, I have heard judges say that they have never enforced a prenuptial agreement. I have heard other judges give the rationale that because you don’t know what is going to happen in the future, it is unfair to enforce the agreement against a spouse where she/he waives alimony or the equitable distribution rights. That rationale misses the point as that is the entire reason for a prenuptial agreement.
I have even had cases where the judge allowed the entire case to go forward, including the appointment of forensic accountants to value a business that was excluded in the prenuptial agreement as a separate asset, not because the adverse party was arguing fraud or unconscionablity up front, but because they wanted to see if they could go on a fishing expedition in discovery to try to come up with something to set it aside.
The result of all of this is to gut the reason that people enter into prenups in the first place. Well, just as they have done with palimony previously, and are attempting to do with alimony, New Jersey law makers have stepped in and have proposed legislation to reform the law on prenups too. The proposed statute has already been passed in the Senate. Yesterday, it made it out of committee in the Assembly and will be going to a vote before the entire Assembly.
The proposed bill essentially removes the "unconscionability at the time of enforcement" attack on agreements. The proposed bill notes:
The bill eliminates this statutory definition as well as the determination of unconscionability on the basis of when enforcement of the agreement was sought. It instead provides that a premarital or pre-civil union agreement could not be deemed unconscionable unless the agreement was unconscionable when executed because the party seeking to set aside the agreement: (1) was not provided full and fair disclosure of the earnings, property, and financial obligations of the other party; (2) 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; (3) did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party; or (4) did not consult with independent legal counsel and did not voluntarily and expressly waive, in writing, the opportunity to consult with independent legal counsel.
If passed, the proposed bill would take effect immediately and apply to all premarital and pre-civil union agreements which have not been the subject of an enforcement proceeding filed with a court as of the effective date.
While the palimony statute and proposed alimony reform may be more controversial, one would think that prenup reform should not be. When presented with a prenup wherein a party is giving up future rights, they have two choices. Either negotiate a better deal and if you can’t, then don’t get married. However, shouldn’t people be entitled to rely on the contracts that they enter into?
Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild’s Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or firstname.lastname@example.org.