It’s the Thursday before Thanksgiving and you’re getting divorced… tough as it may sound,  it’s important to put down your pad and pen, eat some Turkey (tofurkey works, too) and remember what you have to be thankful for.  Here’s a Top 5 for a little chuckle:

  1. You will get divorced…  For some that day may be soon and for others not soon at all, but whenever the day is, it will come!
  2. For those with children (four-legged count also), regardless of how you feel about your soon to be ex, your relationship gave you the wonderful kids that you may be doing this for!  For those without children, be thankful that once you are divorced, your connection to your ex will be minimal, if any!
  3. New traditions (and some may add no more Thanksgivings with your in-laws)!
  4. Prenuptial Agreements (whether this time around or next)…
  5. … And the capable counsel you have guiding you along this journey (who can even make you laugh once in a while)!

In all seriousness, the holidays are a good time to reflect and remember that you can take a step away, take a deep breath and just enjoy your time without focusing on your divorce… even the Courts are closed next week!

Back in October, I blogged about the potential amendments to the New Jersey’s Premarital Agreement Act.  As of June 27, 2013, the proposed bill is now new law.

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 usually 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 amendment to the statute essentially removes the “unconscionability at the time of enforcement” attack on agreements.  As noted in the last post, the reason for Amendment was as follows:

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.

This bill applies to all future prenuptial agreements and any agreements revised after the amendment.

So now, as long as there has been full disclosure, and the agreement is not unconscionable when it was entered into, it should likely be enforced.  This represents a major departure from the prior law.

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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 esolotoff@foxrothschild.com.

 

Yesterday, I posted on on the Petrakis case in New York where a coerced and fraudulently induced prenuptial agreement was set aside.  This case has been all the buzz in both the main stream news and the family law community nationwide. 

Many people are shocked by this decision because most agreements typically provide that the agreement is the entire understanding and that there are no "side deals" or parts of the agreement not in the document.  Similarly, most cases provide disclaimers for coercion, undue influence, not enough time, etc.. Generally, agreements are set aside if there was not full disclosure and/or there was significantly inaccurate disclosure or the agreement is unconscionable to enforce.  Depending on the jurisdiction, unconscionability is determined either when the agreement was signed or when it was to be enforce and in some jurisdictions, like New Jersey, both. 

Today’s New York Post reports that the husband plan’s on appealing the ruling to the Court of Appeals (the highest court in New York).   Interestingly, his lawyer, Stephen Gassman stated that the husband “did not anticipate the publicity and he wants his side of the story to be told.”’  The Court of Appeals can choose not to hear the case.  Stay tuned.

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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 esolotoff@foxrothschild.com.

How many prenuptial agreements have language in them that the parties are entering into the agreement free from duress, coercion, undue influence, etc?  The answer is all of them.  Some even ask people to waive fraud – how you can do that I don’t know because if you knew you were being defrauded, you probably wouldn’t enter into the agreement.  How many times is the agreement presented at the last minute, after the bride to be’s parents are out tens of thousands of dollars for the wedding?  How many times does the person presenting the agreement say "Don’t worry about it, it doesn’t mean anything", "don’t worry about it, I’ll give you more" or "don’t worry about it, I’ll rip it up in 5 years or after we have kids, etc?" 

This probably happens all to often or at least, more often then we want to believe.  In most cases, since you have said you have entered into the agreement free from duress, etc., you will have a hard time getting out of the agreement at the time of divorce.

But alas, comes the Petraikis case out of New York discussed in yesterday’s New York Post.  In this case, Elizabeth argued that Peter coerced her signature, threatening to call off the wedding even though her father had already paid $40,000 for the reception.  She also claimed that he told her that he would rip up the agreement as soon as they had children.  The trial court set aside the prenup on the basis that Peter fraudulently induced Elizabeth to sign it.  The Appellate Court upheld this decision.

In New York, prenups are usually particularly hard to overturn so many deem this to be a landmark decision.  The take away here is that despite the recitations in the agreement, the door is open to try to prove contrary behavior and/or that there were additional promises outside of the agreement.  One wonders whether a video taped signing with the usual questions that the agreement was voluntarily being entered into would have saved the agreement.  That said, for the proponent of the agreement, you need to be really careful about what you say to induce the other side to sign an agreement and what pressure is put on to get an agreement signed.

 

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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 esolotoff@foxrothschild.com.

 

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.

Continue Reading Prenuptial Agreement Reform in New Jersey Appears Likely

We previously blogged on the Appellate Division’s notable decision in Rogers v. Gordon, which addressed the legal standard applicable to prenuptial agreements signed prior to New Jersey’s enactment of the Uniform Premarital Agreement statute.  There, the Appellate Division reversed a trial court Order to the extent that it set aside the entire prenup, since, as to equitable distribution, the husband knew that the wife would likely be wealthier than him at the time of a divorce given her family wealth.  As to the issue of alimony, however, the Appellate Division modified the trial court’s Order by holding that the husband could seek alimony at a later date if he could establish "changed circumstances" pursuant to  Lepis v. Lepis, 83 N.J. 139 (1980).

Considering the level of acrimony involved in the divorce proceeding, which could be easily discerned from the first Appellate Division decision, it was no surprise that a second appeal was filed, this time as to the issue of counsel fees.  On this appeal, the wife argued that the trial court erred by allowing the husband to seek and obtain counsel fees as to his claim for alimony, since he was denied such a claim in relation to equitable distribution issues previously raised. 

The Appellate Division affirmed the trial court’s finding that the husband had expressly waived in the prenup his right to counsel fees in relation to equitable distribution, but that he had not done so as to alimony since the prenup provision regarding alimony did not contain a similar provision waiving counsel fees on that issue.  Ultimately, the Appellate Division remanded for a proper calculation of fees incurred as to alimony, but what struck me as interesting in reviewing the Opinion was the Appellate Division’s conclusion that the husband’s attorney had achieved some sort of success as to the alimony issue.  Specifically, while it noted that the attorney had not obtained for the husband an immediate benefit – i.e., he still was not entitled to alimony without establishing changed circumstances – the attorney was deemed successful in that he opened the door for the husband to make such a claim in the future.  This even though the husband could very well fail in making that future claim. 

The primary theme in the case was one of contract interpretation – while one paragraph contained language waiving counsel fees, another did not.  Since the prenup was the product of expert drafting, the Appellate Division found the lack of language waiving counsel fees as to alimony to be significant and, as a result, did not preclude the husband’s claim.

We have blogged frequently regarding prenuptial agreements.  There is also an advice piece on our firm’s web site entitled "Considering a Prenuptial Agreement – Should My Children Have One?"  We have also recently been involved in drafting and/or negotiating a number of prenups lately.  This has reminded me that one-size does not fit all when it comes to prenuptial agreements.

A lot depends on the stages in life that that the parties are in and what they are seeking to protect.  For instance, if there are two young people starting out in life, the agreement should probably be very different then one where the parties are older, and this is a second (or third, fourth or fifth) marriage for them. 

If both parties are young, and there is a desire to preserve premarital assets, family businesses, etc. that seems to be perfectly appropriate.  Whether alimony should be addressed in such a prenup is questionable.  However, I have seen cases where the alimony provisions in such agreements are punitive.  Moreover, for young people, it may not be fair to insulate from distribution earnings during the marriage, but if that if is going to be done, then perhaps there should be a fair fund in lieu of equitable distribution. 

For people who are both older in second marriages, perhaps the desire is to preserve the assets that each has for their children from their prior marriage.  The issue of alimony, or the waiver thereof, may depend on the ages, disparities in assets, etc.

For people where there is a large age difference, consideration must be given to being fair to the less financially advantaged spouse (usually the younger one), while perhaps protecting the estate for prior children, or protecting someone from someone inclined to "marry for the money."

The permutations are endless as are the options.  As I said, one size does not fit all. 

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. 

 

 

Continue Reading PRENUPTIAL AGREEMENTS PRE-DATING THE UNIFORM PREMARITAL AGREEMENT ACT – A DIFFERENT STANDARD FOR ENFORCEMENT

What is it about this time of year? I’ve been told that the holidays are the most popular time of year for couples to get engaged. While this a special time for the engaged couple, it is also a time when some couples should consider a prenuptial agreement or premarital contract. A prenuptial agreement is a contract between the engaged couple that addresses equitable distribution, alimony, and other issues that may arise if the couple were to divorce.

A prenuptial agreement may not be for everyone, but in many instances it makes sense. For individuals with substantial assets, a business, family wealth or children from a prior marriage, a prenuptial agreement is usually a good idea. Sometimes people think a prenuptial agreement is a reflection of how an individual feels about the potential outcome of the marriage. But in reality, this is rarely the case. For instance, a family business or assets an individual would like to leave to children from a prior relationship, are assets that need to be protected.  Often the parents who own the family business insist that their children have prenuptial agreements to prevent the prospective spouse from ever having a claim to the business.

Continue Reading The Season of Engagement – Should It Lead to the Season of Prenups?

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.