Do Prenups Really Work?

A prenuptial agreement must be entered into voluntarily and legally - otherwise it may not be valid.

I once read with interest that a premarital agreement drafted on behalf of Major League Baseball superstar, Barry Bonds, was ruled invalid by an Appellate Court in the State of California. This was interesting because I knew that Barry Bonds had signed a contract about ten years before which paid him approximately $42,000,000.00 over a six year period. My first thoughts were, "Oh my! If Barry Bonds had as much money as necessary to hire the best legal counsel in the land, how did he end up with a premarital agreement that was ruled invalid by the California Appellate Court?"

In Mr. Bonds' case, there were three glaring problems surrounding the execution of his agreement:

1. The agreement was signed the day before his wedding;

2. His fiancé did not have her own attorney; and

3. Mr. Bonds' attorney told his fiancé that if the agreement was not signed today, there would be no wedding the following day.

The signing of a premarital agreement is usually requested by a party who is in a superior economic position to that of his or her future spouse. If your fiancé has asked you to sign a premarital agreement, you can rest assured that he or she is doing so because in the unfortunate event of a divorce, your future spouse is hoping to leave you with less than you otherwise would be entitled to without a premarital agreement. Public policy in New Jersey offers a modicum of protection, but not much. Public policy still envisions marriage as a permanent concept: “ ...in sickness and in health... for better or worse ...till death do we part.”

The idea of one fiancé asking for a prenuptial agreement of the other as a condition for marriage is still unsettling. New Jersey courts are particularly concerned that coercion, duress, fraud and unconscionability could easily enter into the picture when the prenuptial agreement is sought after the dress is purchased, the hall has been booked, and the honeymoon planned.

The New Jersey courts first considered the enforcement of prenuptial agreements in 1978 in the case of Chaudry v. Chaudry. The Chaudry’s were Pakistani. They entered into an agreement providing for Mr Chaudry to pay a sum of money to Mrs Chaudry in the event of the divorce. The agreement was consistent with the laws of Pakistan. Mr Chaudry filed for divorce pursuant to Pakistani law, and paid Mrs Chaudry the agreed sum. Mrs Chaudry immediately filed in New Jersey where Mr Chaudry lived to set aside the prenuptial agreement. The Superior Court determined that without the prenuptial agreement, Mrs Chaudry would have been entitled to more than the measly sum she was paid. One of the reasons the Superior Court set aside the agreement was that it found the agreement to be contrary to public policy.

The Appellate court disagreed and reversed. The Appellate court held that since the premarital agreement was freely negotiated, fair and equitable at the time it was entered into, the agreement was in no way against public policy. The agreement was enforced according to Pakistani law.

Based on the holdings in a number of cases after Chaudry, it seems clear that New Jersey courts are more likely to enforce a prenuptial agreement under the following circumstances:

1. The parties have made full disclosure of their assets. Be prepared to fully disclose 100% of your net worth including a list of all assets and their approximate values;

2. The agreement was freely negotiated. Have your attorney draft the premarital agreement as far in advance of the wedding date as possible. Have the agreement signed well in advance of the wedding date.

3. Both parties are represented by counsel. Insist upon your fiancé hiring his or her own attorney to negotiate the terms of the agreement with your attorney. If you have been asked to sign a prenuptial agreement, ask your attorney to vigorously negotiate the terms of the agreement which may include making demands that provide for your financial security in the unfortunate event of a divorce.

4. The parties understand the terms of the agreement. Spend time with your attorney. Ask questions. Have your attorney give you examples so that you understand the terms of the agreement. You will need to make more than one trip to the attorney’s office. This is not the time to be penny wise and pound foolish. Give yourself time to think about the agreement. . . BEFORE you sign.

5. The terms of the agreement do not substantially reduce the lifestyle of the receiving party. You should know that while the courts are often leary of prenuptial agreements as to the voluntariness, whether the agreement is unconscionable, or fraudulent, the courts recognize the principle there is a distinction between “unconscionable and “unfair. The court in the high-profile case of DeLorean v. DeLorean makes it clear that it would not refuse to enforce a prenuptial agreement simply because that agreement may be unfair.

Following these steps goes a long way towards solidifying the enforceability of your agreement, should it ever be challenged in court in the unfortunate event you find yourself in a divorce court.

If you have any questions about this topic, e-mail Cassandra Savoy, Esq. at: csavoy@cassandrasavoy.com

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