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Steele v. Steele: A Closer Look at the Enforceability of New Jersey Post-Nuptial Agreements

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Most are familiar with the concept of pre-nuptial agreements, or the contracts spouses sign prior to marriage to settle matters like alimony and asset division in the event of a later divorce. Lesser known - but no less important - are New Jersey post-nuptial agreements (also known as mid-marital agreements). These are similar contracts entered into by two people who are already married. While both are considered “marital contracts” by the Courts, mid-marital agreements tend to be given heightened scrutiny by the Courts.

Relevant New Jersey case law typically divides marital agreements into one of three categories: Pre-marital agreements, mid-marriage agreements, and property settlement agreements. Key to the enforceability of any contract is fairness. That doesn’t mean it involves a 50-50 split, but premarital agreements generally have the presumption in favor of enforceability and fairness, whereas post-nuptial agreements do not.

Why Post-Nuptial Agreements are More Carefully Scrutinized

The reason is that with a prenuptial agreement, one party is free to walk away from the whole thing before the marriage takes place. Post-nuptial agreements are approached with greater skepticism because they are considered to be “inherently coercive.” They’re generally entered into when at least one of those involved wants the marriage to survive. Post-nuptial agreements are ripe with the opportunity for one party to use the threat of divorce to bargain themselves into an advantageous position.

That’s not to say prenuptial agreements are always enforced or post-nuptial agreements are always unenforced, but our Hackensack divorce lawyers know it’s important for clients to understand the presumption going into negotiations.

Recently, the New Jersey Superior Court Appellate Division weighed a divorce claim involving a post-nuptial agreement and considered the types of contracts entered into by engaged and married couples. The case was Steele v. Steele.

Was it a Pre-Nuptial or Post-Nuptial Agreement?

In the case of Steele v. Steele, the pair started dating in 1989. They started living together the following year, with the boyfriend, who said he operated several businesses, relocating from California with his son from a previous marriage to New Jersey, where the girlfriend, a schoolteacher, lived. The year after that, they learned they were pregnant and arranged to be married in Paris. He would later go on to say that while he told her he came from “reasonable wealth,” he never told her how much he made, even when she asked.

Prior to proposing, the boyfriend began drafting a premarital agreement with the help of an attorney. It contained disclosure of his primary assets (interest in stocks, revocable and irrevocable trusts, a co-op apartment in New York City, a trust and other property/personal effects). His net worth was placed at around $12 million, and it was noted “these values could go up substantially over the years).

A few weeks after proposing (she said yes), the husband-to-be informed his wife-to-be for the first time that he wanted her to sign a premarital agreement. She resisted the idea. He later testified that despite several more conversations in which she was unwilling, she ultimately relented and agreed to sign one - though it wasn’t actually signed until after marriage and the birth of their first child.

Although there were early drafts of a premarital agreement that included a financial disclosure statement, there was no evidence presented indicating she’d seen this draft. In fact, when asked by the Court whether he showed her this or prepared financial disclosure statements prior to her signing, he testified, “probably not.” He also said he probably hadn’t asked his accountant to even prepare a financial disclosure statement. She would later testify that her fiancé told her “people would or might lose their jobs” if she didn’t sign the agreement.

Neither said the husband-to-be refused to marry or divorce if she refused to sign. However, the wife would later say anytime her fiancé raised the question and she was resistant, he would become frustrated, angry, clearly upset and withdrawn. She described feeling “enormous pressure” from him to sign. He would go on to say disclosure of the exact sum didn’t matter because whether he was worth $0 or $1 billion, the pair would have married anyway, being very much in love at the time.

In any case, the two didn’t begin negotiating the terms of their “premarital agreement” formally with two attorneys until after the wedding. The wife retained an attorney recommended by her husband’s lawyer. Curiously, her attorney made no request to modify the proposed agreement to include a provision for life insurance or other benefits to the child after her birth, even though she was pregnant at the time. Husband’s lawyer wrote to the wife’s attorney and requested the agreement include a clause indicating the parties fully intended to enter into the agreement prior to marriage, but married before its execution. The wife accepted this change.

Shortly after the birth of their daughter, the wife signed the agreement. She’d been earning $11,000 annually, but quit her job when her daughter was born. She would later explain she was breastfeeding every two hours, totally sleep-deprived and only signed to make her husband happy and abate his relentless pressure about it. She said she didn’t fully understand the agreement and “never felt like my attorney was my advocate.”

When the wife’s former attorney testified about her role in the case, she said she had no recollection of her client being pregnant or having health problems. Asked if she would have had concerns about a pregnant woman who is married and about to give birth or who had recently given birth entering into a post-marital agreement, she said, “I think so.” When asked if she had known her client had just given birth weeks before the agreement was signed, she would have advised her not to sign it.

The agreement indicated each party would retain ownership of any separate property and marital property was described as any property the parties acquired/purchased during the marriage owned or jointly held by them. It excluded all real property jointly owned or held that is used for residential or vacation purposes.”

Husband later bought numerous residences during the marriage in his name alone. Per that agreement, his wife retained no interest in those homes. Further, beyond a joint bank account into which the husband deposited his wife’s monthly allowance, no property was purchased or acquired in joint names throughout the 24 years they were married. The agreement also stated the custodial parent who remained in the marital residence was responsible for all carrying charges on the home.

The wife stayed home to raise the couple’s children until 2013. Two years later, when the husband filed a complaint for New Jersey divorce, she had only just re-entered the job market and was making just $16,000 annually. Mediation was not successful, but the husband sought a declaratory judgment to enforce the marital agreement. Wife sought to have it declared void, citing lack of equitability and financial disclosures when the agreement was negotiated.

A trial Court judge sided in favor of the husband, finding the wife didn’t rely on her husband’s disclosures because she admitted she hadn’t even read much of the agreement. Her signature, the judge found, endorsed her support that whatever disclosure was provided was sufficient and held that her attorney had obtained more favorable results for her.

The ex-wife appealed, arguing the trial Court erred on numerous points.

In its ruling, the appellate Court agreed this contract didn’t fit neatly into any of the three categories: Premarital agreement, postnuptial agreement or property settlement agreement. However, given the totality of the circumstances, the Court ruled it deserved the heightened degree typically given to post-nuptial/mid-marital agreements.

Even if it was the intent of both parties to consider this a prenuptial agreement (as indicated by that one clause), it was not negotiated or executed in contemplation of marriage by prospective spouses. They could have - but didn’t - negotiate a premarital agreement when they became engaged or pregnant. The wife didn’t retain an attorney to represent her in the negotiations until they’d already been married a month. The first time she saw a draft of the agreement, she was well into her pregnancy. They purchased a home before signing the agreement. Given all this, the husband was not entitled to the presumption in favor of enforceability that would generally be given to a prenuptial agreement versus a post-nuptial agreement.

If you live in New Jersey and you are considering drafting a prenuptial agreement or a postnuptial agreement, it is imperative that you work with an experienced attorney who is truly advocating for your best interests.

Contact our Hackensack, New Jersey family law attorneys today at (732) 810-0034 to schedule an appointment.

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