What is the sunset clause in a New Jersey prenup?

On Behalf of | Feb 19, 2024 | DIVORCE - Prenuptial Agreements |

One of the most common causes of concern in a divorce is how to divide marital assets and property. Fortunately, there’s a way to ease that anxiety. Premarital agreements, or prenups, are legal documents that allow married couples to decide the distribution of specific properties or responsibilities. In most states, this agreement remains effective until a couple ends their marriage.

However, in New Jersey, a particular clause known as the ‘sunset clause’ could change this reality.

The clause and its place in a prenup

In New Jersey, couples often consider including a sunset clause when drafting a premarital agreement. This important provision acts like a built-in expiry date for the prenup. It lets the agreement end after a specific period or event, such as after 20 years of marriage or the birth of a child.

The Uniform Premarital Agreement Act, which governs premarital agreements in New Jersey, permits the inclusion of sunset clauses. However, for these clauses and the agreement to be legally valid, both spouses must agree to its terms willingly. They must also fully disclose all their respective assets. If they do not meet these conditions, it could make the prenup invalid.

The decision to include a sunset clause

A sunset clause can have significant implications during a divorce. This clause in the agreement signals trust and the expectation of a long-lasting relationship. However, there are also potential downsides. A sunset clause could give couples a false sense of security, believing their marital bond is secure after a certain period. The reality might be different, especially in divorces involving significant assets. Without a clear premarital agreement, disputes may come up over properties, businesses or investments. If the marriage ends after the sunset clause has taken effect, the couple enters the divorce process without the protection of a prenup. This could lead to unforeseen consequences, such as one party receiving a significantly larger share of the marital assets or one spouse being saddled with the other’s debts.

Premarital agreements are certainly a complex topic. For couples considering creating one, it could be beneficial to consult with a lawyer. This step can help avoid misunderstandings and provide a clearer understanding of the implications of a sunset clause.