What Is a Marital Settlement Agreement?
A marital settlement agreement in New Jersey is a contractual agreement between parties that outlines the terms of their marriage dissolution. Essentially, it is a path to finality in the divorce process. More specifically, it is the provision of terms that apply to all aspects of a divorce.
It is an agreement made in the indirect course of a matrimonial action and is intended to settle questions that arise in the context of a dissolution of a marriage. The terms and conditions of separate property, support, custody and visitation of children, alimony, and division of assets if any, are to be addressed in the agreement .
The agreement is submitted to the court for approval, and if approved, the terms are integrated into a final judgment of divorce and have the same effect as other orders of the court.
Whether or not it is strictly applicable, the agreement is often times referred to as a property settlement agreement (PSA) but the term marital settlement agreement appears to have gained greater familiarity in the divorce lexicon. When evaluating the enforceability of the agreement, the courts will analyze whether or not it is fair, and if it was entered into knowingly and voluntarily. That said, the agreement has inherently different application and effect depending upon the underlying claim of breach of the agreement.
Elements of a Marital Settlement Agreement
Marital settlement agreements are as varied as the individuals entering into them. However, certain components are common to most marital settlement agreements. These include, but are not limited to, the following:
• Preliminary Statement
• Individual Background Information
• Disclosure
• Division of Real Estate
• Division of Movable Property
• Division of Retirement Assets
• Health and Life Insurance
• Tax Claims and Refunds
• Debt Division
• Child Custody and Parenting Time
• Child Support
• Spousal Support (also known as Elozory support, alimony or palimony)
• Health Care Coverage for Children
• Life Insurance Benefits for the Children
• Tax Dependency Exemption
• Child Support Agreeable Modifications
• Attorney’s Fees and Costs
• Cooperation Clause
• Non-Coercion Clause
• Non-Appearance Clause
Agreements entered into after April 18, 2014, are required by statute to waive child support guidelines. A marital settlement agreement may waive child support guidelines, but it is not required to do so. When an agreement waives the child support guidelines, it must be recognized by the Probation Department as consistent with the guidelines, in most circumstances. In addition, a waiver of child support guidelines must be subject to re-examination upon the filing of a motion for a child support modification.
How To Create a Marital Settlement Agreement in New Jersey
As noted above, one of the important features of an uncontested divorce in New Jersey is that it is based on an agreement between the parties themselves. To reach this agreement in order to begin the uncontested process, you will likely need to consult with a divorce attorney. Your attorney serves as an advisor and negotiator so that you can begin negotiating the settlement terms of your divorce with your spouse. Once you and your spouse have reached an agreement on these essential issues, you will draft a written divorce settlement agreement in the form of a Marital Settlement Agreement (MSA). The MSA can take on many names, including, but not limited to, a Property Settlement Agreement, Settlement Agreement, or Stipulation of Settlement. While there is no statutory provision in New Jersey governing the specific format of these documents, these documents have common components. The MSA will: • Detail each party’s requests and agreements regarding the equitable distribution of all marital property; • Provide for child custody arrangements, visitation, and parenting time; • Determine the amount of child support to be paid, based on the New Jersey Child Support Guidelines; • Set forth the amount of alimony to be paid, considering the relevant factors set forth in the statute; • Address the payment of alimony and child support, including any provisions related to cost of living adjustments; • Set forth insurance provisions, including coverage for the parties and their children, and other related issues; and • Address tax-related provisions. Having an attorney to draft the MSA is essential to your interests. An attorney will prepare the document in a legally sufficient format and ensure that all relevant issues are included in the agreement. Because the agreement will ultimately become a court order upon the court’s dissolution of the marriage, it is crucial to the finalization of your divorce that your MSA be drafted correctly. If you have children, the court will review any issues related to custody/parenting time, child support, and health coverage for the children to ensure that these issues are child-focused and in the best interests of the children. The MSA must be signed by both parties and their attorneys. Following this, the MSA is submitted (together with the JOD and other court forms) to the court, where it is reviewed for approval. Upon approval, a judge signs the MSA and it becomes legally enforceable.
Legal Standards in New Jersey
In New Jersey, the law governing matrimonial settlement agreements and approval of judgment can be found in the Rules Governing the Courts of the State of New Jersey, Rule 5:5-2. Judicial supervision of marital settlement agreements is not allowed to be solely by court rule. Instead, the reviewing Judge must exercise the discretion prescribed by judicial decision to determine whether the agreement is procedurally and substantively fair pursuant to the principles of Innes v Marzano-Lesnevich, 423 N.J.Super. 551 (App. Div. 2011).
Any facet of the terms of the agreement that violate statutory provisions or public policy cannot be approved. Since marital settlement agreements are a result of negotiations, the reviewing Judge may not possess the kind of information, such as facts, weighing factors, analyses and cultivation of a settlement, which a trial Judge could avail themselves to if the matter went to trial.
A marital settlement agreement could be incorporated into the final judgment of divorce either voluntarily or involuntarily. The inclusion of the agreement in the form of a consent order removes any need for compliance with time frames of Rule 5:5-2. Additionally, a judicial order incorporating a matrimonial settlement agreement form the final judgment of divorce could be either partially or completely tentative, meaning that it could contain language dictating that it will only become binding upon the fulfillment of all of the conditions precedent to such effectiveness. However, the final judgment will not become binding upon any party until all conditions precedent have been fully satisfied.
Common Errors to Avoid
When entering into, negotiating, or even proofreading a marital settlement agreement (MSA), there are a number of common pitfalls that individuals often fall prey to. Of course, the more personalized the advice is that is offered, the better suited it will be to ensure that you do not make any common mistakes with your MSA.
MSA review is by far one of the most important role that an experienced NJ divorce attorney fulfills during the divorce process. However, the clients themselves often play important roles in avoiding common mistakes.
Some of the most common mistakes include:
- Failure to use specific language While you don’t want to go overboard in your MSA, this is a legal document and the language should be very precise and specific. Two issues can arise out of failure to include specific language. First, the most obvious, if the language is imprecise, it can leave too much of the MSA open to interpretation. This can cause some very big problems for your agreement, and possibly to you, in your future. Second, you may realize that language is imprecise when the other party is not abiding by the MSA as you intended. If you must go back to court for help with resolving the issues , you might have to argue that the language means something other than what it actually states. In this case, the language would often negatively affect you.
- Failure to have correct documentation An experienced attorney will have in-house and/or network resources available to ensure that all documentation, including financial documentation, is accurate and complete. While you may have some of the forms at home, such as tax returns and pay stubs, you might not have, for example, a business valuation from a qualified expert. Your attorney will have all the right documentation and he/she will be able to point you in the right direction to obtain what information is needed and how to do it.
- Failure to read your MSA Your MSA is your immediate future, so you will want to make sure that you have the document thoroughly read before you sign. It’s a good idea to actually read the MSA yourself because you might find something confusing or alarming that you would not have found simply if your attorney read it for you. Once you are comfortable with your understanding of the MSA, and your attorney agrees that the language is correct and leaves nothing for interpretation, you will be ready to move forward and sign it.
The Role of Mediation and Negotiation
The most amicable marital settlement agreements are made not only through the parties’ best efforts to communicate but also through effective third-party assistance. For disputes over any issue, including valuation of property, taxes and other economic concerns, an experienced mediator can provide guidance to both parties. For some disputes, specifically those involving child-related issues, New Jersey has a court rule that requires (after an initial intake session) the parties to participate in at least one session with a qualified family law mediator. The mediator is trained to facilitate productive communication between the parties, thereby enhancing the likelihood that the dispute can be reasonably resolved without a trial.
The mediator’s role is qualified, however, because the mediator is not a judge and does not compel either party to do anything. The mediator, after learning what the parties want out of the mediation, has a duty to provide advice that is fair to both sides. The mediator’s neutrality—his or her interest is not to adjudicate—means that much of a mediation can be based on the parties’ own efforts to reach a compromise.
Just as married couples work to reach agreement on issues such as finances and parenting during their marriage, whether they are separable (such as how to allocate personal property) or inseparable (like who is responsible for sharing debts), similarly divorced or divorcing spouses are well advised to work towards a mutually acceptable resolution of those same issues. A marital settlement agreement must be built on compromise, even if it is only the type of compromise that says you take Tuesday, I take Thursday and we can flip a coin for Saturday.
Mediation and negotiation provide a great opportunity for spouses to learn how to communicate more effectively with one another after they are no longer together. This is especially important if a couple has children, because post-divorce communication has to be clear and direct or serious problems flare up. Also, in preparation for future modification of agreements previously drafted, spouses are well advised to negotiate for provision of review clauses, which are evaluative provisions that are based on prospective changes that are likely to occur after the divorce.
Enforcing a Marital Settlement Agreement
After divorce, the parties are bound by the terms of their marital settlement agreement. The court retains jurisdiction over enforcement of matters pertaining to custody and parenting time, alimony, equitable distribution, and child support so as to ensure compliance with the agreement terms. Where one party fails to comply with the agreement, the aggrieved party is free to file an application before the court seeking relief from the court to enforce the agreement, whether by contempt motion or otherwise. That said, every alleged violation does not equate with a contempt motion, which is an extreme form of relief and a serious matter that can have consequences beyond the terms of the agreement. In these types of post-judgment motions (as well as many other motions and applications), the Court may issue any appropriate remedy. Although there is a presumption that the non-compliance was willful and that the aggrieved party is entitled to counsel fees, the presumption may be overcome by certifying that the conduct was not willful in bad faith, due to circumstances beyond control, or if there has been change in circumstances. For example, if a party has lost his/her job, is undergoing significant medical issues, the inability to comply with certain terms of the agreement may not constitute willfulness entitling the other party to be awarded counsel fees.
Modifying a Current Agreement
If the settlement agreement already exists, can the terms be modified? In some instances, yes. A provision in a marital settlement agreement that is court approved and incorporated into a judgment is generally no different than any other court ordered judgment in terms of modification. Unlike a decision at trial, where a final determination is made, when a matter settles, the contents of that agreement are not necessarily etched in stone when it comes to enforcement. If a case settles on the eve of trial, and that case discloses what were known to be outstanding issues (discovery issues, problems as to values, etc.), the pleading often contains an Order reserving the issues for future determination. In those cases, a determination on those issues will be made, but likely at some later date, based upon the respective proofs. Unfortunately, often times a party, usually the payor, seeks to modify an agreement almost as soon as one of the parties signs. New Jersey law has set the "standards" when it comes to Modifying support (which also includes child support). Essentially , the law says that an agreement should not be modified unless an aspect of changed circumstances makes the agreement no longer fair and just. The same is true with regard to child support. The law governing modifications of child support is both statutory and case law. The law, N.J.S.A. 2A:34-23, creates a rebuttable presumption of a significant change in circumstances when the child support amount automatically escalates or decreases by more than 20%. Therefore, if there is a dramatic change in the parties’ net income, alimony or child support, provided the change is not one which was expected, then seeking a modification may be appropriate. Pursuant to Court Rule 5:5-4(a), all applications to modify child support and spousal support shall be referred to a "Family Part Early Settlement Panel (ESP)" for an attempt at amicable and amicable resolution. Mediation is required. If, after mediation, a resolution cannot be reached, the parties will get a date for trial. Additionally, the income of both parties will be scrutinized by the Court. There will be a lot more to address at some future time in a Family Law Mediator – Parenting Coordinator setting.