What is a Separation Agreement?
A Separation Agreement is an understanding between both parties of a couple that choose to separate but remain married. It usually encompasses a variety of issues similar to a property settlement agreement, e.g., custody of children, parenting time, division of property, alimony and child support. The parties agree to comply with the agreement but remain married whereas in a divorce action, the marriage ends and both parties have the right to remarry . A separation agreement does not change the status of your marriage, whereas a property settlement agreement formalizes your divorce and terminates your marital relationship. A separation agreement can also usually be converted to a property settlement agreement should you decide to undertake the divorce process.
New Jersey Requirements
Legally, separation agreements in New Jersey require both parties to act knowingly and willingly. Separation agreements will not be binding if they are obtained through force, coercion or duress. However, it is not legally required that the parties be represented by separate legal counsel or that they file a joint complaint for divorce.
Though it is optional, it is typically wise for parties to consult their respective legal counsel before signing a separation agreement. Under certain circumstances, New Jersey courts may provide a way to set aside a separation agreement.
There are a number of separate issues under which a separation agreement will not be enforced:
In some instances, a separation agreement will be incorporated into a divorce settlement. A couple that has recently separated may use a separation agreement in lieu of a divorce decree. A couple may agree to incorporate the terms of the separation agreement into a divorce agreement as an alternative to enforcing the separation.
Even couples who eventually obtain an absolute divorce may choose to continue living separately. This is known as a separation. Separate, unmarried individuals may also use a separation agreement to divide their assets should they later divorce. Courts will consider all terms of separation agreements between unmarried individuals.
Separation Agreement Terms to Include
In New Jersey, a separation agreement is a legal and enforceable contract which spells out the rights and obligations of the parties during a legal separation. While New Jersey law does not recognize legal separations – where parties remain married but do not live together – a court will uphold a separation agreement as a legal contract. As with premarital agreements, a separation agreement must be fair, reasonable, and voluntarily entered into by both parties to be deemed enforceable by a court. It should be clear, concise, and well-written, as the language of the agreement can often become a point of contention if either party seeks modifications or enforcement of its terms. As with all contracts, a separation agreement should contain the following essential elements:
Asset/Property Division: Any property acquired during marriage is subject to division by New Jersey courts. The type and extent of property subject to division depends on what property is considered marital versus separate property. Marital assets can be subject to equitable distribution. Separate property is not subject to equitable distribution and remains the property of the individual who acquired or inherited it.
Spousal Support: Alimony may be awarded to either party and may continue indefinitely or until remarriage or cohabitation of the recipient spouse, or for a specified period of time. Although alimony is not available during a legal separation under current law, anything can be negotiated into a separation agreement that the parties push for – at least while the parties are separated.
Child custody and child support: Child custody may be joint or sole, and is determined by statute and the best interests of the child between parents. Similar to spousal support, child support is not available during a legal separation under current law, but parties may be able to negotiate into an agreement a provision for child support if they have children before things worsen and they cannot reach agreement.
What’s the Difference Between a Separation and Divorce?
In the New Jersey Family Law context, a couple is considered legally separated when they have started the formal divorce process but are not yet divorced. A couple may remain legally separated for years without ever finalizing the divorce.
The couple is not required to divide or distribute marital property before a divorce if they are separated; although some attorneys and the court will recommend doing so. Of course, if the couple does not formally divide marital property, when the time comes for the property to be divided in a divorce, the once separated couple will then have to go through the same process of dividing property as a newly separated couple. The time of the separation does not stop the clock on the date marital assets were acquired or value the assets were worth on that date. Rather, any assets acquired or appreciated during the period of separation would be considered separate property and therefore not divisible.
As mentioned above, couples are not required to divide and distribute marital property during a period of separation; however, for tax reasons, they might want to consider a negotiation and ratification of a settlement agreement. For instance, either party might be more amenable to a settlement if it involves some sort of financial remuneration. For example, if husband stays in the home during the period of separation, he might be willing to give wife some cash or other property.
There are also tax reasons for considering a settlement during a period of separation even though the parties are not divorced. If the couple were to wait until the divorce is granted to divide property, that may result in a significant tax liability for one or both parties. Any tax consequences that arise during the period of separation must be accounted for and allocated between husband and wife, unless the couple ratifies a separation agreement. Unless specified otherwise, in a separation agreement, tax consequences would be the responsibility of the party receiving the property with the income or tax consequence. In the aforementioned example, husband would be responsible for the property taxes on the adjoined real property. One way to avoid the possibility that there is no agreement on the allocation after the fact, the parties may state in the separation agreement that the tax consequences are split evenly.
Even though not mandatory, a separation agreement may provide some of the following benefits to a legally separated couple: (i) legally separating before a divorce allows for the collection of alimony during the time of the separation; (ii) separation agreements provide for the distribution of income acquired during separation; (iii) separation agreements can allow for the division of a 401(k) or retirement interest without incurring a penalty for withdrawal; (iv) separating before a divorce can prevent one party from incurring debt and being liable on the load; (v) parties that separate have the ability to move out of state if involve in a contentious marriage; and (vi) separating also allows for the continuity of insurance and pension coverage for the parties.
How to Prepare a Separation Agreement
Drafting a separation agreement should be taken seriously by both parties. Primarily it is advisable that a party consult with an attorney because separation agreements, although they are intended to be private, are enforceable in the same way as prenuptial agreements which was the subject of my prior blog: The Client’s Dilemma: When should you and/or your spouse seek the advice of an Attorney Post-Nuptial or Ante-Nuptial Agreements? The intention of the parties in entering into a Separation Agreement is to be legally binding. In fact , the law in New Jersey provides that in order to be enforceable the parties have to specifically disclaim any marital rights. Where there is no such disclaimer the agreements are subject to judicial review and possibly set aside if fairness is not shown.
First it is important to retain counsel who not only is experienced in preparing separation agreements but is also familiar with the family law judges that would likely hear any litigation arising out of the agreement. This is important because some judges will not approve agreements where a spouse waives the marital right to spousal support for example without the spouse first getting an award of permanent alimony. Many judges, like myself, feel that this is contrary to public policy although others do not. Therefore, if the judge reviewing the Agreement is the latter there could be an appellate issue if the Agreement is then not approved.
In drafting a Separation Agreement there are a few key points to remember:
I advise clients to have a certified divorce mediator draft the Agreement and then have their attorney review it. This way it is more likely that the agreement will be upheld by the court if there is any disagreement on its provisions.
Enforcement and Modification of Separation Agreements
Enforcement of a separation agreement entered into in New Jersey is as strong as a court order. If one party fails to meet his or her obligations under the agreement, the other party may seek judicial enforcement of the agreement. The non-compliant party is bound by the terms of the agreement as long as (i) the terms of the agreement are not against public policy, and (ii) the terms have been fully disclosed to the non-compliant party subsequent to the execution of the agreement. A marriage separation agreement, once decided, cannot be voided or modified through negotiation between the parties. However, the superior court may modify a separation agreement if it deems such a modification is in the best interest of the parties involved. N.J.S.A. 2A:34-23; Martin v. Martin, 182 N.J. Super 608, 613 (Ch. Div. 1982). Separation agreements and divorce settlements, like all contracts, require (i) offer and acceptance, (ii) consideration (this is typically love and affection in a marriage situation), and (iii) an intent to be legally bound. For this reason, if an ex-spouse makes a verbal promise to comply with the terms of a separation agreement after the divorce has occurred, that promise is not enforceable as a matter of law. Even if a change in circumstances may warrant such a modification, it can only be obtained through formal court applications.
Common Pitfalls when Drafting a Separation Agreement
A Settlement or Separation Agreement is meant to be a final resolution of the issues in dispute between the parties. To that extent, it looks similar to a Court Order but with each party’s input as to the terms. If prepared correctly, a Settlement Agreement is a final resolution and cannot be modified even if circumstances change after the fact. However, there are several pitfalls that parties encounter if not adequately addressed while negotiating and preparing for execution of a Settlement Agreement.
First, be careful discussing the matter directly during the negotiation phase. This can create problems later during the divorce when you now may be opposed to the matter which you previously acknowledged was acceptable.
Second, be sure to include the correct parties. If you are divorcing, have the Complaint for Divorce at the ready. If you have a child or children together, have the birth certificates available. If you have assets in joint names, have copies of the instruments convenient.
Third, be sure to explain the terms of the Agreement as it relates to Case Information Statement (CIS) figures. This is particularly important in cases where you have a support model in the Agreement or only want to use the CIS for support figures agreement.
Fourth, ensure that all parties understand the Agreement will be incorporated into the Final Judgment of Divorce and you are abandoning all other claims.
Finally, with regard to spousal support terms, it is important to avoid containing reimbursement language which is contrary to the strict requirements of the statute.
Do I Need a Lawyer?
Do you really need a lawyer for a separation agreement? The answer is yes. Even though a basic separation agreement may seem like an "easy in and easy out" document to prepare, without the proper legal advice, one could either be subject to embarrassing and maybe harassing demands from the other spouse or perhaps wind up losing much of what you had (and especially that which you have).
Although some spouses are able to communicate in such a way that an acceptable separation agreement can be negotiated that each feels is fair and reasonable, most couples are not. Even when spouses have the ability and desire to interact even if it is under stressful circumstances, there tends to be the desire on at least one of the couple to "get back at" the other not only emotionally but also financially. Without counsel or at least a trained mediator who has the experience and expertise to provide the level-headedness that is needed when things start getting tense , a hastily pulled together separation agreements can wind up being one-sided at best and can just exacerbate the problems that exist between the parties.
It even happens sometimes that the spouse with the most assets or income believes that they can pull over a quick one on the less moneyed. With the absence of training and experience, the oftentimes seemingly easy to understand legalese with an agreement can be confusing and misleading. However, even a party with great wealth can wind up being hustled into a less than satisfactory arrangement that was not meant to be.
A misrepresentation of facts, some of which cost you significant amounts of income or property can be attacked or even undone in a court. But unless you have the same type of trained, experienced representation that other spouses have had the benefit of having, your anger at being taken advantage of may not be replaced by what you would be able to get by way of a court. In a similar way, someone who understands the advantages available under the law is in a better position to negotiate a deal from a position that provides you with the leverage you need to get an agreement that gives you the financial and emotional well-being you deserve.
