In New Jersey, prenuptial agreements entered into between a husband and wife before the marriage are codified by statute and generally accepted by New Jersey courts. Internuptial agreements or mid-marriage agreements, entered into during the marriage, are neither codified by the legislature nor embraced by New Jersey judges, many of whom regard them as inherently coercive.
Often, the mid-marriage agreement is pursued by a spouse whose financial circumstances have significantly changed since the wedding. While the individual is not ready to divorce, he or she wants to protect their newfound wealth or reduce their exposure in the event of divorce. Another common triggering event for a mid-marriage agreement occurs when a spouse has strayed and the non-cheating spouse requires financial commitments as a precondition to continuing the marriage. These latter agreements are generally called “reconciliation” agreements.
We will use two couples to illustrate the strengths and weaknesses of mid-marriage agreements. Our first couple, Ted and Carol, have been married for 10 years and have two children. Ted has a six-figure income, and Carol works part-time as a social worker. Ted’s income has dramatically increased since their wedding. He was recently caught cheating with a woman from his office. Carol is willing to remain married, but only if Ted agrees to certain financial commitments.
Mid-marriage agreements that arise from these or similar factual circumstances will, in all likelihood, remain suspect but potentially enforceable if the proponent of the subject agreement can prove the following:
• The marital rift was sufficiently egregious so as to constitute consideration for the agreement;
• The agreement was not the product of coercion or duress;
• Full financial disclosure was made;
• Both parties were represented by counsel; and
• The agreement was fair when executed and when it is invoked.
It is this last requirement that the agreement be fair when invoked that is understandable but problematic. New Jersey judges have broad discretion, and if the single most important criteria is that the agreement be “fair” when invoked, it is very hard to predict enforceability. There are, however, a number of measures that may be taken, among others, that would enhance but not ensure that this agreement will be found to be enforceable, including the following:
• The agreement should be specific as to what rights and obligations Ted and Carol would otherwise have under New Jersey law that are being released or amended under the agreement. Specific examples of how property division and support issues would be handled under the law and how the agreement changes that should be included.
• The standard for enforceability should be defined, as much as possible, keeping in mind that two private parties cannot dictate to a judge how she will review an agreement. This circumstance raises interesting issues as to the freedom of private parties to define their marital relationship which will be addressed later in this article.
• Both parties’ financial circumstances should be defined and quantified. If one spouse is paying for the other’s legal counsel, that fact should be stated and acknowledged by the parties and their respective attorneys. The attorney receiving payment from the other spouse should be required to acknowledge that her exclusive fiduciary duty is to her client.
• Both attorneys should sign the agreement as being in accordance with existing law and enforceable. Each party should use an attorney who is not fundamentally opposed to mid-marriage agreements.
• The parties can consider executing the agreement at a videotaped closing. Their attorneys would question Ted and Carol under oath as to their understanding of the agreement, ensuring that they are executing it voluntarily, without coercion or duress.
Although this sounds like a good idea, this procedure can also backfire. If, for instance, Carol responds like a robot with one-word answers to leading questions, her demeanor on the video will contradict the words being spoken. Narrative responses are encouraged to demonstrate full understanding and voluntary acceptance. Attorneys should prepare for this videotaped closing as if they were eliciting testimony at a trial.
Our next couple, Bob and Alice, have also been married for 10 years and have two children. Bob works as a stock analyst making $400,000 per year. Alice is an accountant making $175,000 per year. Neither has committed an act of marital infidelity. If Bob and Alice enter into an agreement without the extrinsic pressures of marital discord or financial change that affected Ted and Carol’s circumstances, the agreement takes on a significantly different status. In a peer marriage, when the husband and wife are intellectually and, at least in part, financially independent, a mid-marriage agreement loses much of its stigma and can conceivably be a positive step in a relationship.
In these circumstances, a mid-marriage agreement does not simply anticipate what will happen if and when the parties get divorced. It defines how they view each other and their respective positions in and contributions to the marriage. The agreement would be entered into between two people who want clarity, not just predictability. It is discussed and negotiated from equal and informed positions. It reflects, not changes, reality.
This agreement can and should identify who owns what and who is responsible for support now and provide parameters for the future. It should reaffirm their commitment to each other and their children. If circumstances change in the future, the agreement can be amended or if serious discord occurs, invoked as written.
Two of the emotions that harm a marriage are anxiety and uncertainty. Bob and Alice’s mid-marriage agreement helps reduce those concerns. The other measures discussed for Ted and Carol’s agreement, with the exception of measuring the degree of marital discord, would apply to Bob and Carol’s agreement.
We still have to deal with what criteria should be applied when the agreement is invoked; will a judge be free to apply his own perception of fairness to what Bob and Carol have put into their agreement? When it is clear that the agreement was entered into by two people of relatively equal bargaining power, it becomes more likely that a court will view the agreement as enforceable as written.
We derive a few general suggestions from this analysis. If you are to consider a mid-marriage agreement, you should do so before marital discord occurs, which is obviously easier said than done. In Bob and Alice’s example, the agreement is more like a prenuptial agreement and is therefore more likely to be regarded as enforceable by a court. Bob and Alice’s example also more closely follows the evolution of the demographics of marriage in the United States. The majority of marriages now are between two people who are working full time. The financial prospects for husband and wife are not as disparate as they have been in the past. Family obligations are more likely to be shared than imposed on one spouse alone.
If the mid-marriage agreement is approached and understood in the way that Bob and Alice did theirs, it becomes less likely that it will damage the relationship, and more likely that it will be enforced without amendment by a court.
Our legislature should consider codifying mid-marriage agreements, including criteria for enforceability that should be more restrictive than those applied to prenuptial agreements. The prenuptial statute, for instance, provides that those agreements will be enforced unless they are found to be unconscionable. A somewhat ambiguous definition is provided for “unconscionability,” one component of which would be that the agreement cannot leave the non-monied spouse in financial circumstances that are worse than those he or she enjoyed prior to the marriage. This low bar would be inappropriate for a mid-marriage agreement and, most assuredly, for a reconciliation agreement.
Reconciliation agreements, which require that the marital rift be significant enough to constitute consideration for the agreement, require the parties, and ultimately a court, to make a number of value and moral judgments that are problematic and for the most part beyond the competence and experience of parties, or courts for that matter, to uniformly and fairly consider.
New Jersey has all but eliminated marital fault as a factor in determining equitable distribution and alimony payments. We should be consistent in reviewing reconciliation agreements that purport to place a dollar figure on instances of marital misconduct. On the other hand, couples like Bob and Alice should be allowed the freedom to define their marital relationship as they see fit without undue interference and control from the government. •
James M. Andrews is based in Blank Rome’s Princeton, N.J., office and concentrates his practice in the areas of complex corporate litigation, environmental law, matrimonial and products liability defense. He can be reached at Andrews@BlankRome.com.