Going through a divorce presents many difficult decisions and tasks that may be simplified by the existence of a prenuptial agreement, particularly if it is your second marriage or significant assets are involved. New Jersey divorce lawyer Cipora Winters discusses who can most benefit from a prenuptial or postnuptial agreement and explains how New Jersey courts treat both types of agreements.
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Divorce Magazine Podcast: New Jersey Divorce Lawyer Cipora Winters on Prenuptial Agreements and Postnuptial Agreements
Hosted by: Diana Shepherd, Editorial Director, Divorce Magazine
Guest speakers: Family Lawyer – Cipora Winters. A partner at Keith, Winters & Wenning, LLC, Cipora Winters has been exclusively practicing family and matrimonial law for almost 20 years in New Jersey and New York. She has the knowledge and experience to help divorcing individuals in the face of complex circumstances. For more information about Cipora or her firm, please visit www.kwwlawfirm.com.
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How does a prenuptial agreement differ from a postnuptial agreement?
Winters: A prenuptial agreement is created prior to a marriage and a postnuptial agreement is created during a marriage. They are each a function of when they are created; however, they are different in their requirements. A prenuptial agreement requires independent counsel for each party, full disclosure of assets at the time it is entered into, and it must be fair at the time that it's created.
A postnuptial agreement, which is created during the marriage, has the same requirements as a prenuptial agreement. However, the court would not enforce a postnuptial agreement unless the parties were on the cusp of a divorce or already separated – those are the only times New Jersey courts believe the parties are in a position to appropriately and fairly negotiate an agreement.
What items are typically included in a prenuptial or postnuptial agreement?
Winters: The agreements are primarily financial. They address the division of assets, the allocation of property, and can also address issues of spousal support or alimony.
What is the value of obtaining a prenuptial agreement or postnuptial agreement in New Jersey?
Winters: There is significant value to having a prenuptial agreement. A divorce can be prolonged, expensive, and include a lot of animosity. Having a prenuptial agreement that sets out the parties’ rights and creates the road map for financial allocation provides a great deal of benefit in the divorce process.
Unfortunately, a postnuptial agreement provides very little benefit in New Jersey. Some states, like New York, embrace a written agreement between parties, whether it was created before or during the marriage. New Jersey courts are embracing prenuptial agreements more strongly and holding them to be valid, but postnuptial agreements are widely dismissed by the courts. Spending the time, effort, and money to create a postnuptial agreement doesn't provide value, because they are ineffective.
Who should get a prenuptial agreement or a postnuptial agreement?
Winters: Anyone can use a prenuptial agreement, but it's most effective when the parties are entering a second marriage. They may want to preserve assets for children of their first marriages, particularly older couples who have already amassed assets and real estate, such as homes or businesses, and want to preserve both the value and the inheritance of those assets for their children.
Regarding postnuptial agreements, very few couples benefit from them at all because they're rarely upheld in New Jersey. However, it would likely be most effective in a circumstance where somebody uses premarital money or inherited funds – which would otherwise be exempt from equitable distribution in a divorce – to purchase an asset in a marriage, such as a home. They might want to carve out that asset from an eventual divorce and make it theirs, rather than an asset of the marriage. It might be worth creating a narrow postnuptial agreement based on one issue, which could potentially be upheld.
What is required of a couple in order to create a prenuptial agreement?
Winters: There are three elements you need for a valid prenuptial agreement in New Jersey.
First, each party should have independent counsel.
Second, there must be full disclosure of not only the assets themselves, but also the value of the assets. A valid prenuptial agreement will use each party's tax returns for the last two or three years to provide a disclosure of income, as well as a balance sheet listing all assets and the value of those assets. Bank statements, retirement statements, and other indicia of the value of assets are often included to fully preserve the validity of the agreement. The more complete the disclosure of assets, the greater the chance the agreement will be held valid.
The third requirement for a valid prenuptial agreement is that it was fair at the time it was created. Until recently, a New Jersey court would only uphold the validity of a prenuptial agreement if it was fair at the time it was drafted and fair at the time it was sought to be implemented, which was very difficult to prove in cases where the net worth of marriage changed as the marriage progressed. The result was that many prenuptial agreements were held invalid at the time of the divorce. However, the statute recently changed and now the only requirements are independent counsel, full disclosure, and that the agreement was fair at the time it was drafted – which dovetails with the requirement of counsel. Most attorneys are able to tell you what a judge would find fair when considering the assets of the parties at the time of drafting a prenuptial agreement.
Do prenuptial agreements always stand up in court or can they be set aside?
Winters: An agreement can be set aside if there was not a satisfaction of the three requirements at the time it was drafted. If a party was not represented by counsel, they entered into the agreement without an understanding of what it said and what legal rights they might have waived by signing it, so the agreement could be set aside. If there was not full disclosure of a party’s assets or income at the time the agreement was entered into, then one party signed without knowing the true financial landscape, so the agreement could be set aside. A prenuptial agreement can also be set aside if it was unfair at the time it was drafted.
What does it mean for a prenuptial agreement to have been unfair at the time it was drafted?
Winters: It means it was unfair legally. There are three categories of requirements for a prenuptial agreement. If one party didn’t have counsel at the time it was drafted, that would be unfair in terms of the representation. If each of the parties had the assets they disclosed in the prenuptial agreement at the time of divorce, what would a court order be by way of equitable distribution, allocation of property, duration of alimony, and the amount of alimony? How would these categories be adjudicated in a divorce? If the prenuptial agreement deviates significantly from what a reasonable divorce resolution would have been, then it might be considered unfair – but it has to be a complete departure from the legal standards.
Can a prenuptial agreement be used to handle parenting issues that might arise in a second marriage regarding visitation and custody of children from a previous marriage?
Winters: No. A prenuptial agreement cannot affect anything related to child custody or parenting time, or it will be stricken immediately. In the divorce process, the judge performs the role of the child’s parent and must understand the circumstances in order to make decisions regarding custody and visitation.
The guiding principle in New Jersey as to custody and parenting time is determining the best interest of the children. A couple cannot know at any given point what a child's needs will be five, ten, or fifteen years into the future. What will the child’s emotional, psychological, social, and academic needs be? Which parent will be in the best position to fill those needs?
No one can predetermine a child's best interest in a divorce scenario before the marriage, before the blended family has come together, or before the children have matured emotionally, psychologically, academically, and socially. Children’s issues can only be decided at the time of the divorce and cannot be determined beforehand.
Can a prenuptial agreement protect the rights of children from an earlier marriage regarding child support and inheritance if the second marriage produces children?
Winters: Yes. Inheritance is where a prenuptial agreement comes into play and is upheld by judges to a great degree. A parent may enter a second marriage and say, “It's very important that my children from my first marriage receive the home I'm living in or the business I've created or certain assets that belong to my family. Whether or not these assets grow in value during the course of our marriage, we must carve them out so that my children keep their inheritance, irrespective of my second marriage.” Courts very often uphold prenuptial agreements regarding issues of inheritance.
A prenuptial agreement can’t do much in terms of support, because child support must be calculated at the time it is going to be paid. Child support is always a function of the parents’ current income. A prenuptial agreement is of less value from a child support perspective, but of great value when it comes to preserving assets or inheritance for your children.
Can you change a prenuptial agreement after it has been signed?
Winters: You can, but should not. The affect of changing a prenuptial agreement during a marriage is turning it into a postnuptial or mid-marriage agreement. The courts in New Jersey are so disrespectful of mid-marriage agreements that changing a prenuptial agreement during the marriage converts the character of a document supported by New Jersey law into an agreement the courts disdain and won’t uphold. It is better to maintain the original character of the document than to convert it into a mid-marriage agreement and lose the viability of the entire agreement.