Sills Cummis & Gross
Jan L. Bernstein, Lindsey de Stefan
March 26, 2019
Most people have heard of Prenuptial Agreements,
but few use the important tool of a Mid-Marriage Agreement. Mid-Marriage Agreements may be used to modify
Prenuptial Agreements, or to put into place an understanding concerning
finances, children, or roles and obligations in a marriage after the marriage
A Prenuptial Agreement may not have
been necessary, or emotionally practical prior to a marriage. However, during the marriage, financial
circumstances may have changed as a result of inheritance or professional
success; and the priorities of your family may have changed as a result of
children, or aging parents, or entrepreneurial endeavors. The changing circumstances during a marriage may
benefit from a Mid-Marriage Agreement.
While Mid-Marriage Agreements have a
similar purpose as a Prenuptial Agreement, the two are treated very differently
by New Jersey Courts. In part, this is
because the two types of Agreements raise different legal and equitable
Prenuptial Agreements generally will
be enforced so long as they are not obtained by fraud, duress, coercion, or
similar wrongful conduct; are entered into voluntarily and after full financial
disclosure by both spouses; and are fair at the time the Agreement is
executed. On the other hand, Mid-Marriage
Agreements must satisfy an additional hurdle: In addition to being fair at the
time the Agreement is executed, the Agreement must also be fair at the time it
is sought to be enforced.
Mid-Marriage Agreements are considered
to be inherently coercive because, unlike a fiancée who when faced with a
Prenuptial Agreement can walk away if the terms are unacceptable, a spouse
confronted with an ultimatum to sign a Mid-Marriage Agreement has a more difficult
choice. In many cases--at least according
to the court--such agreements are executed under threat of divorce. Thus, the spouse not initiating the agreement
likely has two options: either sign the
agreement and accept its terms, whatever they may be, and whatever the legal
and financial implications could be down the road; or risk harm to the marital
relationship, and perhaps divorce. If
there are children involved, the decision likely becomes even more
complicated. It is not a difficult
scenario to envision, and our judicial system’s concern about the obvious
potential for one spouse to use the threat of divorce to bargain himself or
herself into an advantageous position is sensible.
To ensure that a Mid-Marriage Agreement
is not the product of such strong-arming and intimidation, the New Jersey
Superior Court, Appellate Division has held that Mid-Marriage Agreements must
“be closely scrutinized and carefully evaluated.” The main considerations in evaluating such
- Whether the Agreement was obtained by
coercion and duress, and is, therefore unenforceable;
- Whether the Agreement was unfair at the
time it was entered into and is, therefore, unenforceable; and
- Whether the Agreement was unfair at the
time it is sought to be enforced and is, therefore, unenforceable.
In assessing fairness, a court may
consider, among other factors, the percentage of the marital estate allocated
to each spouse under the agreement. In
other words, what percentage of the estate would each spouse have gotten if the
parties divorced at the time they executed the agreement; and what percentage
would each get under the agreement at the time of the divorce?
Unfortunately, even if the terms of a
Mid-Marriage Agreement are perfectly fair and acceptable to each spouse when he/she
signs the Agreement, it is entirely possible that subsequent circumstances
could render the Agreement unfair. For
example, if a spouse waives his/her interest in the other’s business, which is
worth $1 million when they enter the Agreement, and the business prospers to
such an extent that its value is $20 million at the time of the divorce, a
court of equity, i.e. Family Courts in New Jersey, may not enforce that Agreement
as being unfair at the time of enforcement.
After all, the marriage may survive for many years after the parties
sign their Agreement, during which time the family may prosper due to the
efforts of both spouses. It would not
necessarily be fair to prohibit both spouses from sharing in post-Agreement
wealth. On the other hand, a family may
lose assets after entering into a Mid-Marriage Agreement, such that enforcing
it as written also would no longer be fair and equitable. Careful drafting of the Mid-Marriage Agreement
with appropriate language about the future as well as the current time is
critical, and may help to avoid these later possible pitfalls.
Of course, there are cases where
spouses amicably enter into a mutually agreeable Mid-Marriage Agreement, and
accept its terms if they later divorce.
For example, spouses may agree to transfer assets to one or the other,
and in the event of a future divorce exclude those assets from future equitable
distribution. A Mid-Marriage Agreement
has been enforced by the New Jersey Courts to do just that. In one case, the marital home was transferred
into the sole name of the other spouse to prevent that spouse from initiating a
divorce at the time the Agreement was entered.
The New Jersey Court enforced the Mid-Marriage Agreement; and The
marital home remained exempt from equitable distribution when the parties
divorced, which was the intent of the Mid-Marriage Agreement. Thus, a Mid-Marriage Agreement can be
enforceable even if one spouse later files for divorce, if the other factors
are met, and the language is clear.
this article discusses broad themes and considerations, it is important to bear
in mind that cases involving Mid-Marriage Agreements are highly fact-specific,
and results differ based on the circumstances of each case. For this reason, it is crucial to retain the
services of an experienced Family Law Attorney, who can help you decide if a
Mid-Marriage Agreement suits your particular circumstances, and how best to
achieve your goals and the enforcement of the Agreement if later
challenged. Mid-Marriage Agreements may
be used strategically to protect assets not protected by a Prenuptial
Agreement. These Agreements provide
options available to address marital issues short of divorce. Mid-Marriage Agreements are one option all
too often overlooked.
Ms. Bernstein is a Member of Sills Cummis & Gross and chairs the Firm’s Family Law Practice Group. She can be reached at firstname.lastname@example.org or (973) 643-5866.
Ms. de Stefan is an Associate in The Family Law Practice Group of Sills Cummis & Gross. She can be reached at email@example.com or (973) 643-5882.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect those of Sills Cummis & Gross.
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