Prenuptial Agreements: How Mediation Can Help – Part I

Situations where parties have both opposing interests and shared interests are well-suited to mediation. Divorce settlements generally fall into this category. As we will discuss in this post, prenuptial agreements — often called “prenups”— fall into it even more squarely. This makes mediation a potentially useful process for negotiating such agreements. We will look more closely at the interplay of individual and shared interests in marriage, divorce and prenuptial agreements, but first let’s consider some of the basic New Jersey law on prenups.

New Jersey Prenuptial Agreements

In New Jersey, to be enforceable, a prenup must be voluntary and not unconscionable at the time the parties sign it. This generally means that neither spouse has been coerced, and that the agreement has been executed well before the wedding takes place. It also means that subject to certain permissible written waivers, each party has fully and fairly disclosed all earnings, property and financial obligations and consulted with independent counsel (NJSA §37:2-38). As a public policy matter, agreements are not enforceable to the extent that they negatively impact the best interests of children. They cannot, therefore, waive future claims to child support, or delineate an enforceable future custody agreement.

These legal requirements are critically important. Parties to a fairly negotiated agreement are likely to stand behind it. A prenup that serves only to kick off expensive litigation over enforcement years later defeats the entire purpose of the agreement, which is to avoid litigation and preserve assets. This underscores the importance of approaching agreements from a collaborative position at the outset.

Individual and Shared Interests in Marriage and Divorce

During a marriage, each spouse, like any other person, has individual interests and life goals. These include things like personal development and maximizing personal finances going forward. At the same time, the couple also shares many interests. These include the fostering of a happy family life and a maximization of the marital estate. These goals benefit both spouses and also benefit any children they may have together.

When a couple decides to separate, individual interests ascend in priority. Nevertheless, most spouses retain certain shared interests. These include a financial interest in preserving assets for distribution, including minimizing the costs of divorce. Separating couples generally also have a mutual interest in protecting privacy and avoiding emotional distress. Those with children share the additional powerful interest of ensuring that those children remain well-parented and secure. All of these shared interests can promote collaboration and add to the potential success of divorce mediation.

Individual and Shared Interests in the Prenuptial Period

During the period just before marriage, an engaged couple’s shared interest in the success of their marriage tends to be as strong as it will ever be. It is fortified by the love of two people who have recently decided to spend the rest of their lives together. They are planning their future, starting with a wedding to celebrate their love. They may have discussed a prenuptial agreement at some point, but it has not yet become a reality. Making it a reality requires each spouse to shift focus away from shared interests and towards potentially opposing future interests. These interests often include protecting others, such as children from previous relationships and business partners or shareholders in closely held businesses. Even when a prenup is handled delicately, this can be tricky terrain to navigate. What happens when instead, one party’s attorney approaches the matter aggressively?

A couple’s shared interest in a happy and successful marriage can be seriously threatened when one of the future spouses, generally the wealthier and higher earning of the two, hires an aggressive attorney to prepare a prenuptial agreement. The attorney, representing only that party, might draw up a draft stating that each spouse waives all claims and rights to the other’s separate property, including all inheritance rights, and that in the event of a divorce neither spouse will have any claim for alimony. It might also specify that all earnings and assets acquired during marriage will be the separate property of the earning or acquiring spouse. This may seem well and good for the wealthy high-earning spouse, but what does it mean for the other spouse?

Potential Consequences of Aggressive Prenuptial Agreements

For starters, the complete separation of shared earnings and assets may be completely contrary to the recipient’s understanding of what it means to be married. Depending on the circumstances, the agreement might not even be enforceable. Sometimes the intent behind a very one-sided draft prenup is only to stake out a starting position for negotiation. Nevertheless, many recipients will read such a draft with alarm—and often with good reason. They will then bring the agreement to their own attorney, who will affirm those feelings of alarm. Alarm gives way to heartbreak. Love partners expect to feel protected, not attacked and abandoned. There may be permanent damage to the relationship from this adversarial beginning.

Once the ball has started rolling in an adverse direction, it can be hard to correct course. The spouse producing the draft may feel terrible about the partner’s hurt feelings. Still, his[1] attorney’s advice has him focused on self-protection. He may also be subject to ongoing pressure from parents, other family members, or business associates. The less-moneyed spouse on the other hand, is now in a defensive position, possibly gathering input from infuriated friends and family members as well as from her own attorney.

Eventually each partner may retreat to separate corners while the attorneys attempt to negotiate a middle ground. Under such circumstances, neither spouse is likely to fully embrace the final product. Still, they have set the wedding date. They want to avoid further confrontation. So they both sign the agreement, even though it leaves a bad taste in both of their mouths. The seeds of resentment have been sown.

Mediation Can Be a Better Way Forward

All of the above demonstrates that approaching a prenuptial agreement from an extreme position may not be the best idea. Is there a better way? In our next post, we will look at the process of mediating a prenup, and consider how that approach might set a marriage on a better path.

If you and your future spouse are considering a prenuptial agreement and you would like to discuss negotiating your prenup with one of our trained mediators, contact us today for a free consultation.

[1] We choose this gender pronoun only based on the more common scenario. As time goes on, however, the genders are increasingly flipped. The more moneyed spouse is sometimes the “she” and the less moneyed spouse is the “he.”

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