In Part I of this post, I described the wisdom and benefits of prenuptial and postnuptial agreements.

In Part 2, we will review a Case Study in Postnuptial Agreements and consider some important caveats and takeaways in the use of prenuptial and postnuptial agreements.

A POSTNUPTIAL CASE STUDY

Some years ago, I worked with a young couple on their postnuptial negotiations, and the result became a highlight of my law and mediation practice.

The couple’s therapist sent them to me. They had gotten off to a bad start as newlyweds, and the marriage was in trouble. The foundational crack involved a house purchase, which one party was in a position to fund and the other was not. The funding party really wanted the house. The other party was sure she could not afford it. To mollify his fiancée, the funding party had agreed before marriage that he would put the house title in joint name after marriage, but after the marriage he never did. In protest, the wife stopped contributing money to the roof expenses, even though she lived in the house and could afford to contribute to the roof expenses.

The therapist sent the couple to me to serve as a neutral attorney, which is permissible under the NJ Rules of Professional Conduct, RPC 2.4. I advised the parties that I could help them solve their problem, but that I could not represent either of them.

After hearing from the parties and considering their circumstances, I made the following recommendations, which they adopted in full.

I suggested that they go back in their minds to the date of the initial house closing, and ask themselves these questions:

Would the funding party have been willing to lend the other party 1/2 the down payment and cash due at closing, to be repaid, without interest, when the house was sold for any reason (divorce included)?

Would the other party have been willing to borrow those funds, to cover a purchase that she otherwise was not comfortable making — and perhaps could not afford without the spousal loan?

Both parties answered “yes” to both questions, without hesitation.

I then asked them, “In exchange for Wife’s IOU signed and received, is Husband prepared to immediately convey a Deed to Wife for her undivided 1/2 share, and is Wife ready to pay her 1/2 of the carrying charges, effective on and after the date of loan signing and title transfer?”

Again, without reservation, both spouses said “YES!!”

With that understanding, and at their express request, I drafted the loan document and Deed, to be reviewed before signature by each party’s separate legal and/or financial advisors.

When those documents were signed and the Deed was filed, the parties declared the foundational crack fixed — and they went on their way, together.

Over the years, I have seen that lovely young couple around town. When they see me, they always greeted me happily and say: “You saved our marriage. Thank you so much.” I tell them: “The two of you saved your own marriage. I am glad for whatever advice and guidance I was able to provide. Congratulations and keep up the good work.”

SOME KEY TAKEAWAYS

Here are some important caveats and takeaways on preparing and using prenuptial and postnuptial agreements:

1. New Jersey has a statute that prescribes formal details for prenuptial agreements, including full disclosure, separate legal advice for each party, and that the agreement must be reasonably fair (and not shocking to the conscience), measured as of the time at which the agreement is sought to be enforced. Prenuptial agreements most often vary from the rights a party can expect at the time of a divorce, so they must be carefully drawn.
2. There is no statute governing the creation, execution, and/or enforcement of a postnuptial agreement. The only NJ court cases discussing their existence and enforceability express skepticism about them, based on the facts of those cases. The judges warn that parties who present postnuptial agreements to their spouses, saying “sign this or the marriage is over” thereby nullify the agreement, even if signed.
3. Public policy supports marriage, and does not encourage divorce or the threat of divorce as a tool to create an enforceable legal contract. A prenuptial agreement does not offend public policy (unless it is substantively lacking in fairness), as it sets conditions on — a marriage.
4. A postnuptial agreement, on the other hand, could be deemed to violate public policy, if a party uses the threat of divorce to pressure the other party’s signature, even if the contract terms otherwise are deemed objectively fair and reasonable.
5. A too-harsh judicial reception could push some parties to an early and bitterly contested divorce, whereas an enforceable postnuptial agreement could have either saved the marriage or created a more peaceful and harmonious dissolution.

CONCLUSIONS

When considering prenuptial or postnuptial agreements, the parties must ensure that they are created, offered, accepted, and executed in a manner that ensures their validity. The parties should only entrust these important matters and documents to lawyers who handle them regularly.

Source: Forbes, “Why You Need A Postnup And Other Points To Consider Before Leaving Your Paid Job To Be A Stay-At-Home Mom,” Jeff Landers, Jan. 22, 2015