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Separation and Pre-marital Agreements: What should they contain?

            "Antenuptial" or "pre-nuptial" agreements refer to documents 

            executed before marriage. In our experience, the trials and 

            tribulations of negotiation become a significant reason why two 

            lovers may not marry. "Opting-out" or "post-nuptial" agreements are 

            those made between spouses during marriage, where they failed to 

            execute an antenuptial agreement when the prospect of divorce or 

            dissolution was not a factor, or during a reconciliation after a 

            separation. "Separation" and "property settlement" agreements, which 

            are sometimes known as "stipulations", usually refer to agreements 

            made before or during a separation of the spouses, or during 

            litigation by spouses who are married and intend to live separate or 

            dissolve their marriage. Each of these agreements governs the 

            respective rights and obligations of spouses in the event of a 

            dissolution.

            The public policy of each state encourages those who are married or 

            about to be married to "opt out" of the statutory system and to 

            create their own provisions for support and property division upon 

            the dissolution of a marriage.

            An agreement made before or during the marriage is usually valid and 

            enforceable in a matrimonial action if the agreement is in writing, 

            voluntarily signed by the parties, and acknowledged, where required. 

            The necessary formalities vary from state to state. New York requires such  

             agreements to be acknowledged or witnessed in the same form as necessary to  

             entitle a deed to be recorded. These agreements 

            generally include a provision to make a testamentary provision or a 

            waiver of any right to elect against the provisions of a will; 

            provisions for the ownership, division or distribution of separate, 

            community or marital property; provisions for the amount and 

            duration of maintenance or child support, and other terms and 

            conditions related to the marriage relationship; and provisions for 

            the custody, care, education and maintenance of any child of the 

            parties.

            Each state's public policy limits what may and may not be covered in 

            these agreements, and should be given careful scrutiny before the 

            drafting of any documents. In most jurisdictions marriage is 

            considered a fiduciary relationship and agreements between spouses 

            are subject to strict standards. Their terms must be fair and 

            reasonable at the time of the making of the agreement. While the 

            permissible subject matter of such agreements has been greatly 

            expanded in recent years there remain limitations upon their terms.

            To be enforceable and to "opt out" of the statutory system, the 

            matrimonial agreement must not violate the declaration of public 

            policy expressed in state statutes. For example, in many states 

            parties are not free to waive their duty to provide support for the 

            other if that party is about to become a public charge. The public policy of most  

     states is to ensure that minor children receive adequate financial support from their

     parents. The terms of a settlement agreement must provide for the welfare of the

     children. An inadequate child support provision is usually voidable 

            and cannot bind an appropriate court from remedying the inadequacy, 

            nor can it bind a parent from seeking to remedy the inadequacy. Many 

            states prohibit parents from waiving child support or providing for 

            arbitration of custody disputes. At most, parents may allocate 

            custody rights and child support duties, so long as their terms are 

            not detrimental to the welfare of the children.

            While there is restricted freedom of the parties to contract 

            regarding custody and child support, they have relative freedom to 

            waive inheritance rights, to fix the amount and duration of 

            maintenance, and to distribute property as they see fit, by an 

            agreement. Caution: New York law requires that child support agreements

      comply with the provisions of the Child Support Standards Act.

            Parties are encouraged to reach an agreement and to settle between 

            themselves. We will list and define the essential 

            clauses that should be part of these agreements.

            CONSIDERATION: 

            The consideration for an antenuptial agreement is the mutual promise 

            to marry. The consideration for separation agreements or "opting 

            out" marital agreements are the mutual promises contained in the 

            agreements. These agreements are generally authorized by the 

            Domestic Relations Law of the particular state, as long as they 

            comply with the statutory requirements; "consideration" may be 

            unnecessary.

            EFFECTIVE DATE:

            The antenuptial agreement becomes effective upon the marriage of the 

            parties; it should specifically provide that it becomes effective 

            upon the marriage.

            SEPARATE RESIDENCE:

            In a separation agreement, a provision providing for the parties' 

            separation must be in the agreement, (i.e., "The Parties will live 

            separate and apart as if such parties were single and unmarried.") 

            This is not, however, authorization to engage in adultery.

            NON-MOLESTATION CLAUSE:

            This clause requires each spouse to leave the other alone during the 

            period of the parties' separation and not to interfere with the 

            other or sue to compel a resumption of cohabitation. A covenant 

            against molestation in a separation agreement is an independent 

            condition, and its breach does not terminate the agreement or 

            relieve the other spouse from his or her obligations.

            DEBTS:

            This clause designates the party responsible for past, present and 

            future debts, or specifies the division of obligations. It should 

            also provide the penalty for a breach.

            MUTUAL RELEASES/GENERAL RELEASE:

            Each discharges the other, his/her heirs, executors, 

            representatives, etc., from all past claims under law (except causes 

            of action for divorce, separation or breach of the agreement). A 

            general release clause is the standard format for this provision.

           MUTUAL WAIVER AND DISCHARGE OF RIGHTS IN ESTATES:

            This provision assures that each party waives the right to take an 

            elective share against the estate of the other, to act as 

            administrator or executor of the estate of the other, including the 

            right to inherit from the other pursuant to a previously executed 

            will. As the caption indicates, rights to claim in the estate of the 

            other party are waived. This provision does not in any way eliminate 

            or reduce the rights of children.

            SUPPORT AND MAINTENANCE OF THE SPOUSE:

            A key to this provision is to be explicit concerning the amount and 

            duration of maintenance. This may be or may include a weekly or 

            monthly cash allowance which separates maintenance from child 

            support for tax purposes. Termination events should be clear and 

            specific. Generally, maintenance continues during the payor's 

            lifetime until either the death or remarriage of the recipient, 

            whichever is earlier, or the termination of the obligation period to 

            pay maintenance. To assure maintenance deductibility, payments must 

            terminate on the death of the payee. Other elements of support 

            include:

              Auto Expenses 

              Costs of operating the Marital Home 

              Exclusive Occupancy 

              Credit Cards 

              Medical, Hospital, Psychiatric, Orthodontic, Pharmacy and Dental 

              Expenses and/or Insurance Coverage 

              COBRA 

             SUPPORT AND MAINTENANCE OF THE CHILD(REN):

            This provision sets forth that the father/mother will pay during 

            his/her lifetime weekly support of $_____[(to cover food, clothing, 

            shelter and other basics)]. Likewise, it must state when child 

            support terminates.

           Education - The parties should provide in this provision, where 

            appropriate, for private school, university or college, professional 

            or graduate school, if any. Often the terms include the requirement 

            of the payor's consent to the choice of school, which consent will 

            not be unreasonably withheld. Exactly what expenses are included 

            should be detailed in the Agreement.

            Medical, Hospital, Psychiatric, Orthodontic, Pharmacy and Dental 

            Expenses and/or insurance coverage - This section usually provides 

            that payor will pay for medical, hospital or dental insurance for 

            the child (comparable to that which presently exists). In addition, 

            the payor will generally pay all reasonable and necessary medical, 

            dental and hospital expenses for the unemancipated child; this may 

            or may not include cosmetic or elective treatment/surgery, unless 

            the payor is consulted and agrees. The custodial parent must comply 

            with all requests for documentation. Again, the custom is, except 

            for emergencies, that the custodial parent must obtain the payor's 

            approval before committing the child to a course of care or 

            treatment.

            Camp - Payor to pay for a camp, teen tour, or summer activity, 

            provided payor is consulted in advance and consents to it, which 

            consent will not be unreasonably withheld). The exact expenses 

            included must be detailed in the Agreement.

            EMANCIPATION:

            The Agreement should provide the age at which child support payments 

            terminate if sooner than age 21. Where an agreement makes provision 

            for the support of the children of the marriage, the paying spouse's 

            obligation for each child, respectively, terminates upon each child 

            attaining age 21. Child support obligations beyond age 21 cannot be 

            compelled unless the contract provides that a parent's obligation of 

            support will continue to a later date. In some states the child 

            support obligation ends at 18.

            THE INCLUSION OF ESCALATION/COST-OF-LIVING INCREASE:

            The inclusion of cost-of-living or escalation clauses should be 

            encouraged since they eliminate repeated court appearances for 

            modification, often accompanied by a concomitant renewal of 

            hostilities.

            CUSTODY:

            This provision should cover: The type of custody - Sole custody to 

            the (Mother)(Father); Joint custody; Shared custody; Physical 

            custody; Visitation/parenting/access schedule; who picks up and 

            delivers; when; where. Child not to be known by any other name. 

            Details as to dates and times of pick-up and return must be spelled 

            out and may cover, for example:

              Weekend parenting to the non-custodian (Friday night through 

              Sunday night); 

              Weekday dinner or visit or overnight visit; 

              Telephone access; 

              Internet or e-mail communication and access; 

              Immediate notification to non-custodian of any emergencies or 

              change of location; access to child when ill. 

              Alternate public and religious holidays, school recesses. 

              Summer vacation. 

              Father's day; Mother's day; child's birthday, 

              Relocation. Indicate if the custodial parent is to be restricted 

              to a state or mile radius. 

            JOINT DECISION MAKING WITH REGARD TO THE CHILD(REN):

            It is not considered consulting if the custodial parent makes the 

            ultimate decision when the parties are unable to agree. Joint 

            decision making means the parents must agree or resolve it through 

            Court or arbitration proceedings. Areas to consider include: 

            Education, Legal, Religion, Health, Confirmation, Bar/Bat Mitzvah.

             EQUITABLE DISTRIBUTION AND/OR DISTRIBUTIVE AWARD OR DIVISION OF

            COMMUNITY PROPERTY:

            Equitable distribution is a tax-free distribution not included in 

            the income of the recipient or deductible to the payor. Furthermore, 

            pension and retirement funds can be transferred to the recipient by 

            a Qualified Domestic Relations Order ("QDRO"), leaving its 

            retirement nature intact while avoiding violation of the 

            anti-alienation provisions of ERISA, with its resultant penalties 

            and taxes to the transferor. Likewise, the recipient will take the 

            transferor's basis in any real property, recognizing the gain only 

            at the time of the sale to a third party and only to the extent it 

            has appreciated since the time of purchase (not the date of 

            transfer). The transfer of appreciated property is considered a gift 

            for tax purposes. Other items to consider, for example:

           Cash - Consider an installment payment arrangement versus a lump 

             sum. Assuming a lump sum arrangement is preferred, be specific on 

            the date it is to be given and its form (check, wire transfer or 

            change of title on account).

            Stocks and Bonds - Be sure the value placed has a date, an 

            approximate value and an understanding that fluctuations in 

            valuation are not a basis for claiming fraud.

            Jewelry - Must be itemized - Description, purchase price, market 

            value, source of funds, separate or personal and total value.

            Art - Must be itemized - Description, purchase price, market value, 

            present location.

            Auto - The recipient is (or is not) responsible for all expenses 

            attendant to the operation of the automobile, including insurance, 

            upkeep, gasoline.

            Real Property - Indicate if title and possession are to be 

            transferred to the husband/wife or sold. Specify who pays the cost 

            of the transfer. If a joint tenancy or tenancy in common and title 

            is transferred to one spouse, provide for relinquishment of all 

            claims and rights to the property and release the transferor from 

            all notes and obligations attributable to the property. A hold 

            harmless clause should be employed as well as an agreement for a 

            party to use his/her best efforts to have her/him removed as 

            obligor. If the property is to be sold, specify the details of sale, 

            sale price, costs, brokers, expenses, legal fees.

           Real Estate Considerations in General:

              When to transfer title: Properties held jointly revert to the 

              survivor should one party die before the dissolution of the 

              marriage. To alter this position you may change the manner in 

              which title is held immediately upon execution of the Agreement, 

              but you must specifically provide for this in the Agreement. It is 

              recommended to have the transfer documents executed simultaneously 

              with the Agreement.

              All real property transferred, if any, must provide for the tax 

              consequences, costs of sale and carrying costs.

              Once a spouse removes from the marital home, he/she loses the 

              "principal residence" nature which will impact his/her ability to 

              roll over the sale proceeds into another residence.

            Exclusive Occupancy - Be sure that the occupant is obligated to 

            remove himself/herself by a date certain. If the residence is to be 

            sold, he/she must agree to leave the premises a certain number of 

            days from the execution of a contract for sale of the premises. 

            Specify who is responsible for any expenses attendant to operating 

            the home. Make provisions for penalty upon failure to leave. 

            Consider who will pay the moving costs and arrange the move. Make 

            provisions to access the premises for inspection or otherwise. 

            Photographing or videotaping the premises before leaving the 

            premises is wise.

            PERSONAL PROPERTY:

            Make lists, lists, lists and more lists of who gets what. The 

            knickknacks, bric-a-brac, crystal, china, furniture and the like are 

            nightmarish to divide, so forgotten items may be gone forever.

           PENSION PLANS AND RETIREMENT FUNDS:

            Generally, transferring a portion of these funds to the spouse as 

            part of the Equitable Distribution is advantageous, as previously 

            noted. The transferee receives the retirement funds on a tax-free 

            basis. They continue to accumulate tax free until distribution to 

            him/her from the plan. The transferor makes the transfer tax-free 

            and has no penalty. It is worthy of note, experienced practitioners 

            will net out the value of this tax free exchange in calculating the 

            Equitable Distribution.

           INCOME TAX RETURNS AND REFUNDS:

            Provide who is responsible for errors, omissions, penalties, 

            assessments, and interest on previously filed joint income tax 

            returns and the costs associated with opposing or defending an audit 

            or assessment, including accounting fees. So long as they remain 

            married, they can and should file joint tax returns. Determine how 

            the refund, if any, is going to be distributed. Make provision as to 

            who claims the child(ren) as an exemption. Unless provided otherwise 

            in writing, the custodial parent is entitled to the exemption. To do 

            otherwise, the custodial parent must sign an IRS form to entitle the 

            non-custodial parent to the exemption.

            LEGAL REPRESENTATION:

            Include the name and address of the attorneys who represented each 

            of the parties and a statement that each counsel was chosen freely.

            LIFE INSURANCE:

            Generally, a spouse purchases or maintains an existing policy for 

            the benefit of the child in an agreed upon amount (usually 

            sufficient to cover the child support obligations for the child 

            unless otherwise provided by will). It is not unusual for life 

            insurance to be purchased or maintained for the payor's maintenance 

            obligations or obligations to pay out a cash sum over a period of 

            time. Provision must be made to verify that the insurance remains in 

            effect and the premiums paid.

            LEGAL FEES:

            If one party is to contribute, partially or wholly, to the legal 

            fees of the other, it is generally best for the payor to contribute 

            a lump sum amount on behalf of the recipient's legal fees in payment 

            of the negotiation of the agreement, and any subsequent action for 

            dissolution. The recipient should hold the payor harmless for any 

            other fees and the recipient's lawyer should be required to waive 

            all other claims for the legal fees for the agreement or dissolution 

            proceedings against the payor.

            RELIGIOUS DIVORCE:

            Both parties should agree (if relevant). Make provision for 

            obtaining it by a specific date, payment of costs and fees, and that 

            both spouses must cooperate with religious authority.

            MUTUAL WAIVER OF OTHER ASSETS:

            Except as provided in the agreement, each spouse should waive all 

            rights and interests, if any, to the other's businesses, licenses, 

            professional degrees and other assets, real and personal, in that 

            party's possession, custody or control, whether or not mentioned in 

            the agreement.

            DISCLOSURE:

            Acknowledge the extent of disclosure and/or opportunities for 

            disclosure of assets and income of each party. It is suggested, at a 

            minimum, that each party provide a Net Worth Statement.

            VOLUNTARY EXECUTION:

            Acknowledge that the agreement was executed freely and voluntarily, 

            and was not the product of fraud, duress or coercion practiced by 

            either party or any other person upon either party. Acknowledge that 

            each party had full knowledge and understanding of all of its 

            provisions, and an opportunity to question his/her attorney with 

            regard to the provisions of the agreement.

            ARBITRATION OF DISPUTES:

            You can establish your own procedure to settle any future disputes 

            (a more anonymous solution) or utilize the American Arbitration 

            Association.

            MISCELLANEOUS PROVISIONS AND USUAL "BOILERPLATE CLAUSES":

           The term "boilerplate clauses" refers to the usual, commonly used 

            clauses that are almost always found in matrimonial agreements. The 

            most important clauses to consider are:

            Severability: a  provision stating that if any part of the Agreement 

            is held void or unenforceable, the balance of it will remain in full 

            force and effect. Without such a clause, if a material provision or 

            dependent clause of an agreement that does not have a severability 

            clause is held void, the entire agreement may be declared void.

            Independent Covenants: a  provision stating that each clause of the 

            agreement is independent of and may be enforced independently of any 

            other clause. This permits enforcement of the balance of the 

            agreement even after the breach of a particular provision, and a 

            party who has breached a portion of the agreement may continue to 

            seek enforcement of the balance of the agreement.

            Counsel Fees in Event of Default: a  provision that a party who is in 

            default of his/her obligations under the agreement will be liable 

            for the counsel fees and expenses of the other party incurred to 

            enforce the agreement in a plenary action. Without such a provision, 

            counsel fees might not be awarded in any plenary action to enforce 

            the agreement.

            Further Instruments: a  provision that each party will execute and 

            deliver all documents and take all further steps as are necessary to 

            effectuate the terms of the agreement, usually at no cost to the 

            other party.

            Entire Understanding: a  provision that there are no representations, 

            other than as set forth in the agreement, that are relied upon by 

            either party.

            Incorporation by Reference :a  provision regarding the incorporation 

            of the terms of the agreement in a judgment of dissolution or 

            support order, in the event of a divorce, dissolution or support 

            proceeding. This is extremely important to include.

            Survival or Merger: a  provision indicating the intent of the parties 

            as to whether the agreement survives or merges into a subsequent 

            judgment of dissolution. If it survives, modification may be limited 

            by state law.

            Modification and Waiver: a  provision setting forth the formalities 

            with which the parties must comply (such as a written and 

            acknowledged change) to amend or modify the agreement or waive any 

            of its terms.

            Laws Governing: a  provision setting forth the law which shall apply 

            to the interpretation and construction of the agreement.

     Binding Effect: a  provision stating that, except as otherwise stated 

            in the agreement, all the provisions of the agreement shall be 

            binding upon the respective heirs, next of kin, executors and 

            administrators of the parties.

            Reconciliation: a  provision that the agreement shall not be 

            invalidated or otherwise affected by a reconciliation between the 

            parties or by a resumption of the marital relations between them, 

            unless the reconciliation or resumption is documented by a written 

            statement executed and acknowledged by the parties.

     Notices: a  provision providing addresses to send any future notices 

            required by the agreement.