As a Certified Family Law Specialist, Certified by the State Bar of California, Board of Legal Specialization, I have experience drafting many customized premarital (prenuptial) agreements
Prenuptial or premarital agreements
Clients have the right to enter into written agreements that would alter or confirm their legal rights or obligations under California law. They are normally designed as a roadmap to address “what if” the parties end up in divorce. These agreements may be set aside as invalid if found to be substantively unfair at the time of enforcements. Simply put, premarital/postmarital agreements are not tantamount to an insurance policy despite the fact that agreements meeting certain procedural requirements that are entered into free of coercion are generally honored.
If you are contemplating entering into a premarital agreement, consider doing so with a Mediator or using Collaborative Divorce attorneys.
There are many reasons that clients come to our office seeking to draft a premarital (also called prenuptial) agreement. Here are some examples, (a) one spouse stands to inherit a significant sum of money or interest in a parent’s business and wants to shield the asset from claims in a divorce (b) one spouse already has an existing business with significant goodwill and value and wants to avoid having to do a buy-out to settle claims in the event of a divorce from his/her spouse.
In some instances, premarital agreements for first marriages can be used as a roadmap to the couple’s finances. Care should be taken not to make a premarital agreement coercive as to the financially weaker spouse, especially for young couples just starting off. We find that premarital agreements are more favorably viewed by many in a second or third marriage, e.g., in cases where each spouse has independent businesses, real estate interests, and children from a prior marriage.
Are you wondering whether you need a premarital agreement or if it is a good idea for you? Consider these advantages and disadvantages.
Advantages offered by a premarital agreement:
- Keep your income as your separate property. In California, without a premarital agreement, each spouse’s income is community property. That means half of your income belongs to your spouse and vice versa. A premarital agreement can provide that you income remains your separate property and your spouse’s income remains his or her separate property, which may be desirable if each of you is self-supporting.
- Protect yourself from your spouse’s debts. If your spouse is mired in debt, without a premarital agreement, creditors may be able to satisfy that debt using your community property and income. A premarital agreement can help avoid or minimize your liability.
- Protect your children from a previous marriage. If you have children from a previous marriage, a premarital agreement will help ensure that you are able to provide for them now and on your death. With a premarital agreement, you can preserve your separate income, so that you can gift it to your children or they can inherit it. You can also provide that real estate you own will remain your separate property. You will then be free to leave it to your children when you die. If you wish, you can leave your new spouse a life estate in the property so that she or he can live in it or collect the income from it. Then on your spouse’s death, the property can pass to your children. This may help create separate buckets, that is yours, ours and theirs (for your children).
- Protect business and real property interests and specify property division in the event of divorce If you don’t have a premarital agreement, your property will be divided between you and your wife in accordance with California law if you divorce. The result may not be what you want. In a premarital agreement, you can determine which property remains separate and whether you wish to create any community property or joint bank accounts. You can attach schedules to your premarital agreement itemizing any existing property and your proposed division.
- Develop a roadmap for your finances during your marriage.Couples often use a premarital agreement as a road map for managing their finances. Some of the decisions that can be spelled out in the agreement include:
- Whether to have separate or joint bank accounts.
- Whether you will file joint or separate tax returns.
- Who will be responsible for paying the mortgage on a home.
- Whether businesses started by either of you will be financed with separate or joint funds.
- How either spouse’s education will be financed.
- That each spouse’s separate property debts will be paid with that spouse’s separate funds.
Disadvantages associated with premarital agreements
- State law limitations. State law places some limits on what can be accomplished in a premarital agreement. For example, a premarital agreement cannot: (a) promote divorce (b) restrict custody and visitations rights, or (c) limit child support.
- Ineffective for non-financial matters. Provisions for non-financial matters, such as custody and parenting plans or division of household responsibilities maybe unenforceable.
- Can be unfair depending on how they are drafted.Great care and sensitivity should be used when negotiating and drafted a premarital agreement especially where the less financially fortunate spouse is being asked to waive significant rights that she/he would otherwise be entitled to under California law. I have been asked to review premarital agreements which were grossly “one-sided” and were designed not only to protect the wealthier spouse and his family’s multi-million dollar business, but greed knew no bounds, and wife was being asked to waive any future interest in the business, any income derived from the business, and spousal support. Even with a twenty year marriage, this young wife was being asked to forever waive spousal support though she had no profession of her own on entering the marriage. After having been engaged for quite some time, future wife was emotionally devastated by the request to sign the premarital agreement weeks before the parties’ wedding.
Post-nuptial or post marital agreements
To be valid in California, a post-nuptial agreement or post-marital agreement must be:
- In writing.
- Voluntarily signed by both parties.
- Accompanied by a full disclosure by both parties of all their assets, income, and debt.
In addition, both parties must have legal advice and an adequate opportunity to consider the terms of the agreement before signing.