New York Separation Agreements: 4 Things You Need to Know Before You Sign
A surprising number of people enter into marital agreements that they do not fully understand, or which they have not carefully reviewed. This can lead to disastrous consequences. Because "buyer's remorse" is not a sufficient basis for challenging the enforcement of a New York prenuptial agreement or separation agreement, it is important to carefully read the fine print, and to make sure that you have received (and provided) complete financial disclosure prior to signing.
Here are some things that you must consider before signing a marital agreement.
- New York Courts Generally Deny Challenges to the Validity of Marital Agreements
The most common types of marital agreements are: (a) prenuptial agreements; (b) postnuptial agreements; (c) separation agreements; and (d) stipulations of settlement. Regardless of the type of agreement that you are contemplating, you should be aware that New York law imposes a difficult burden upon anyone attempting to challenge the enforceability of a contract. Quite simply, you should not assume that a court will subsequently set aside an agreement merely because it is one-sided or you did not have full information at the time of signing.
For example, in the case Barocas v. Barocas, Justice Ellen Gesmer of the New York County Supreme Court rejected the defendant-wife's contention that the parties' prenuptial agreement was unenforceable because it was one-sided. In Barocas, the prenuptial agreement resulted in the husband retaining "essentially all of the property." In her decision, Justice Gesmer ruled that "courts will not set aside an agreement … simply because, in retrospect, the agreement proves to be improvident or one-sided."
The standard that New York judges use to determine whether an agreement is "unconscionable" is very high. A contract (including a marital agreement) is unconscionable only if no person in his or her senses and not under delusion would enter into it. That is an incredibly difficult burden. On its face, it reads a bit like the standard for an insanity plea.
The bottom line: in divorce proceedings, New York judges are overwhelmingly likely to enforce the terms of your agreement. If you have questions about the fairness or appropriateness of an agreement, discuss your concerns with an experienced New York divorce attorney before you sign. You may also wish to review some sample New York separation agreements for guidance.
- Family Courts May Ignore the Child Support Provisions of Your Agreement.
Although New York courts rarely set aside marital settlements or separation agreements as unconscionable, there are a number of reasons why the child support provisions in an agreement may later be ignored by a judge.
For many couples, signing a marital settlement agreement does not actually resolve their disputes. Instead, the agreement merely serves as fuel for further disputes. This phenomena is particularly common in cases involving minor children. In some instances, there are disagreements about the interpretation of child support provisions. In other cases, a parent may seek modification of child support. In such scenarios, the parties frequently find themselves in front of a Family Court judge. However, New York's Family Courts do not have jurisdiction to resolve contract disputes. Accordingly, although the parties have entered into an agreement regarding the amount of child support, or their respective obligations regarding tuition, the Family Court may give little, if any, attention to the parties' agreement. Even many New York divorce lawyers are unaware of this limitation.
Recently, in a decision entered by the Albany County Family Court on January 24, 2013 (in the case Lynn B. v. Joseph T.M.), the court ruled that it had "no authority" to rule on the parties' oral agreement regarding private school tuition for their child. In its decision, the court relied upon Section 413(1)(c)(7) of the Family Court Act, which states that the court's decision regarding educational expenses must be based on "the circumstances of the case and of the respective parties and in the best interests of the child." Some people might reasonably conclude that a prior agreement between the parties is, indeed, a "circumstance" of the case – and thus within the scope of things that the court should consider in its decision. However, the Albany County Family Court certainly did not interpret that statute that way. You should not assume that a judge presiding over future proceedings in your case will view your agreed-upon child support provisions as binding.
Bottom line: Although marital agreements are rarely set aside as unconscionable, their terms and provisions relating to minor children may simply be disregarded by a judge. The focus of the Court is the "best interests" of minor children, rather than the enforcing the parties' agreement.
- Consider the Age of Your Children in Drafting and Evaluating the Appropriateness of Particular Visitation Arrangements.
Many inexperienced divorce attorneys rely upon formulaic provisions from standard forms in drafting marital settlement agreements. That practice can present a pitfall for the client, particularly because most standard forms do not contained nuanced, age-appropriate visitation provisions. The type of parenting time that is appropriate for very young children is very different than the visits appropriate for young teens. Similarly, the nature of the parties' relationship, and details such as the amount of time required for travel, should be considered in crafting visitation provisions. The core consideration should be the best interest of the child.
Visitation arrangements for very young children can be particularly challenging. When a parent has not provided regular hands-on care for the child prior to the parties' separation, overnight parenting time may not be appropriate until the parent and child have developed a predictable and comfortable daytime care taking routine.
- Your Agreement Regarding Qualified Retirement Accounts is Not Sufficient: You Also Need a QDRO
Many people are surprised when then hear that their retirement benefits (such as pensions, 401K's, etc.) constitute marital property that is subject to distribution in divorce. The second surprise often occurs when they learn that their agreement to divide a pension or other qualified retirement asset is not, independently, sufficient. Rather, division of qualified retirements assets requires an additional document: the QDRO. The term "QDRO" is an acronym for Qualified Domestic Relations Order." There are very specific rules that govern the drafting and filing of QDRO forms. You need to consider these rules before you sign your separation or marital settlement agreement. If you wait until later, you may have already (unwittingly) sacrificed your rights.
The language that you use in your marital settlement/separation agreement is pivotal because a court cannot issue a QDRO that is more expansive or encompassing than what is provided for in your agreement. Thus, if you are the nontitled spouse and you have entered into a separation agreement that makes no mention of early retirement benefits, the court will not enter a QDRO giving you an interest in such benefits. When a proposed QDRO conflicts with the language in a stipulation of settlement upon which it was based, the stipulation of settlement controls. Thus, the critical decisions regarding retirement accounts must be made before you sign a marital settlement agreement.
QDRO's are complicated, and use language that is beyond the understanding of many non-lawyers. Before you sign your marital agreement, you should try to acquire some basic information about QDRO forms, and applicable New York and federal (ERISA) law.
Marc A. Rapaport
February 12, 2013
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