Marital Agreements: The Elements Of Enforceability

Often, it is difficult enough for an engaged couple to determine whether or not to execute a pre or post nuptial agreement with respect to their finances and estates. Since New York City has higher divorce rates than most of the country, a New York couple is, unfortunately, far more likely to have to use their agreement. Therefore, it’s even more crucial that any marital agreement executed be enforceable in a New York court. Set out below are some of the important rules to obey when executing a prenuptial or postnuptial marital agreement.

Engage in Fair Distribution

Although the point of a marital agreement is to protect the assets of at least one of the partners, courts are far more likely to void or toss out a document that are unfair or grossly unequal in one or more areas. These include:

• Division of Assets: New York courts look unfavorably upon marital agreements that give the monied spouse most or all of the assets. In particular, courts are likely to toss out an agreement that prevents a spouse from sharing in assets that were accumulated during the marriage, as New York views marriage as a partnership. Additionally, courts are more likely to uphold agreements where the longer the parties are married, the more a less-monied spouse is entitled to receive. The logic here is sound: the less-monied spouse in a three year marriage hasn’t put in the same effort to a marital partnership than the less-monied spouse in a twenty year marriage.

• Title of the Assets: New York courts are more likely to void marital agreements that state title of the assets controls their distribution. This is because in many marriages, one spouse may have their name listed as title on more assets than the other. This could be due to credit scores, finances, or ease of the parties. However, if distribution is based on title alone, this could be, in a divorce, extremely unfair to one of the spouses. Therefore, courts in New York are more likely to uphold and enforce an agreement that keeps title out of it and focuses more on percentages of division and contribution by the parties to those assets.

Generally, the more “fair” an agreement appears to be (such as higher payments for longer marriages, and non-title based distribution), the more likely it is to be enforced in the event of a divorce.

Take Special Considerations into Account

Certain waivers, such as waiving the right to “elect” to take a statutory share of each other’s estate or waiving the right to certain retirement benefits can raise concern for the court, especially where marriages are longer in duration. A way to protect the validity of the agreement and these waivers is to have them “expire” when the marriage reaches a certain level of duration (for example, 25 years). This plays into New York courts favoring agreements that provide more for spouses as the marriage endures.

Also, it is imperative to be clear with respect to language and disclaimers. State the name of the independent counsel obtained by each party. State that they are independent. State that the parties negotiated the terms and that they each separately reviewed the agreement at least a certain amount of time (such as a month) before the wedding. This way, those facts cannot later be disputed in any subsequent divorce litigation. The same applies to terminology such as the agreement being the entire understanding between the parties (invalidating oral promises), or items that will or will not invalidate the agreement at a future date (such as infidelity or the birth of children). Be over-inclusive vs. under-inclusive.

Engage in Fair Bargaining and Execution

More important than anything else is ensuring that your partner is represented by independent counsel. New York courts will typically set aside agreements that had a less savvy or experienced spouse signing without review of the agreement by an independent attorney. An independent attorney means one obtained by your fiancé, not one obtained by you, working in the same firm as your attorney, or one recommended or referred by your attorney.

A second crucial aspect is that the agreement cannot be signed under duress. Courts will set aside agreements that were presented to the party seeking to vacate right before the wedding and/or with ultimatums (for example “if you don’t sign, I won’t be at the ceremony tomorrow”). New York courts will look with extreme disfavor upon these sorts of tactics and will be eager to find a way to set aside any terms obtained this way. Additionally, make sure that the terms are negotiated before the parties sign. A “take it or leave it” approach is looked upon very negatively by the courts as well.

Don’t undervalue your assets. Courts will also set aside agreements where one or both parties hid what the actual value of their assets were, or hid additional assets that they had at the time of the signing. Although value can change over time, especially with real estate or businesses, it is better to be honest than have an agreement set aside so something can be “revalued” or “added into” the marital pot for equitable distribution.

In sum, behave in a way that is conscionable. Don’t lie about what you have, don’t seek to take advantage of your partner or coerce them into something they would not otherwise agree to. Although it is important to protect yourself, marriage is supposed to be a partnership founded on loyalty and affection, and courts will punish those who tried to exploit their alleged “loved ones” through clearly unfair agreements and/or despicable tactics.

If you adhere to the principles laid out above, any prenuptial or postnuptial agreement you have is far more likely to be upheld in a New York court.