Let’s Talk About Prenups: Enforceability in New Jersey

Welcome back to Let’s Talk About Prenups, our blog series that will familiarize you with terminology that doesn’t need to be taboo. We will answer questions both simple and complex, debunk the myths, and illustrate situations and options.  Feel free to contact us with a particular issue or to schedule a consultation.

In the first blog of this series, we suggested that a prenuptial agreement be considered as a financial planning tool for a couple’s future together and as a way to have difficult and honest conversations before problems arise. In this second blog, we will address the elements needed for a prenup to be enforceable in New Jersey. As you’ll see, correct drafting and execution are critical.

The Prenup’s Role in Divorce Proceedings

One of the primary benefits of a well-crafted prenup is that it can simplify and streamline divorce proceedings.  This is done by addressing how financial matters will be handled in the event of divorce. A prenup can (and typically does) address:

• What constitutes separate (exempt) property vs. marital property subject to equitable distribution.
• How assets and liabilities that are subject to equitable distribution are to be distributed. 
• Spousal support (alimony)—whether by waiving it, setting specific terms (i.e., a lump sum buyout or buyout of the claim over time), or agreeing to a cap on amounts or duration.

By resolving key financial issues in advance, prenups can significantly shorten the length of divorce proceedings. Prenups give both parties a clear understanding of what to expect in the event of divorce, which can mean less time in court, lower attorney fees, and reduced emotional stress.

Legal Framework for Enforceability in New Jersey

A prenuptial agreement is, at its core, a legal contract created between two people before they get married. It outlines how assets, debts, and other financial matters will be handled during the marriage and in the event of a divorce or death.

In New Jersey, prenuptial agreements are governed by statute, specifically New Jersey’s Uniform Premarital and Pre-Civil Union Agreement Act, and by interpretation of the statute in case law.

Enforceability – Key Requirements

It is very important that each party understands the key requirements of enforceability when entering into a prenuptial agreement:

1. Full and Fair Disclosure – Each party to a prenup must fully disclose their financial condition, including income, assets, debts, and obligations. Typically, parties will disclose this information through an exchange of financial documents such as income tax returns and account statements. This transparency ensures that both parties are entering the agreement with complete knowledge of each other’s financial situation.
2. Voluntary Execution with Understanding – The agreement must be entered into voluntarily, without coercion, duress, or undue pressure. Both parties must have a meaningful opportunity to review the terms, with independent legal counsel (more on this below), to ensure they understand and accept what they are agreeing to.
3. Fairness and Absence of Unconscionability – The terms of the agreement must not be grossly one-sided or unjust at the time of signing. Courts will assess whether the agreement leaves one party at a severe disadvantage or results in financial hardship, which could render the agreement unconscionable and thus unenforceable.
4. In Writing and Signed – The agreement must be in writing and signed by both parties.  The parties’ signatures should be notarized.

Independent Legal Counsel for Each Party

Although New Jersey law does not mandate that each party to a prenup have their own independent legal counsel of their choosing, we highly recommend this approach. For each party, having their own counsel involved in the prenup process supports the enforcement of the agreement and reduces the risk of a court finding unconscionability or other legal challenges. With counsel advising each side, it is less likely that a party can claim that they did not understand the terms of the agreement.

Challenging a Prenuptial Agreement

Under New Jersey law, if a party is challenging the enforceability of a prenup, that person holds the burden of proof. In other words, the person challenging the validity of a prenup must demonstrate, by a legal standard of clear and convincing evidence, that:

• The agreement was signed involuntarily, meaning under duress or coercion, or
• The agreement was unconscionable at the time it was signed, due to a significant lack of disclosure or gross inequality in bargaining power.

7 Common Scenarios That May Render A Prenuptial Agreement Unenforceable

There are seven common scenarios which could render a prenuptial agreement unenforceable in New Jersey.

1. Lack of Full and Fair Financial Disclosure
   If one person hides information or fails to provide an accurate picture of their finances, the agreement may be deemed invalid due to a lack of transparency. If full disclosure is not provided, the other party must waive, in writing, a right to disclosure of the property/financial obligations beyond what was provided.

2. Involuntary Execution (Duress or Coercion)
   If one party can prove they did not sign the prenup voluntarily, and were pressured or coerced, or signed under duress, the prenup may be deemed unenforceable. One scenario is where one party is presented with the prenup right before the wedding, without time to review its terms.

3. Unconscionable Terms
   If the terms of the prenup were unconscionable at the time it was executed – meaning it was so one-sided or unfair that it would shock the conscience of the court, the prenup may be deemed unenforceable. An example could be a term where one party waived all spousal support or where one party is left in financial ruin while the other retains substantial wealth.

4. Lack of Independent Legal Counsel
   While not legally required, the absence of independent legal counsel for one or both parties can cast doubt on the fairness of the agreement. Courts are more likely to uphold a prenup if both parties had their own attorneys to review and explain the terms. In the event that a party does not have legal counsel, the party must waive, in writing, the opportunity to consult with counsel.

5. Inadequate Time to Review
   Signing a prenuptial agreement shortly before the wedding without sufficient time to review and understand it may be grounds for invalidation. Courts may consider whether a party was given time to consult an attorney or felt pressured to sign due to the upcoming marriage.

6. Improper Formalities
   Prenuptial agreements must be in writing and signed by both parties before the marriage. Failure to meet these formal requirements can render the agreement unenforceable.

7. Attempting to Govern Child Custody or Support
   A prenup cannot include legally binding provisions about child custody or child support. These matters are determined by the court at the time of separation or divorce based on the best interests of the child. While such provisions would likely not render the entire agreement unenforceable, specific provisions addressing these issues would not be enforced or upheld.

Summary Regarding New Jersey Enforceability of Prenups

In conclusion, while prenuptial agreements can offer significant benefits by providing clarity and protection for both parties entering into a marriage, their enforceability hinges on careful and knowledgeable preparation.

Couples should approach the process with transparency, fairness, and legal diligence to avoid pitfalls that could render the agreement invalid.

Engaging experienced independent legal counsel is crucial to ensure that the prenuptial agreement is tailored to meet the specific needs and circumstances of both individuals, complies with all legal requirements, and withstands potential challenges.

By taking these steps, couples can lay a solid foundation for their financial relationship and safeguard their interests for the future.

If you are considering a prenuptial agreement, we can assist. Please contact James M. DeStefano at 973-586-4941 or jdestefano@einhornlawyers.com.