Wedding season is coming around the corner and more couples are contemplating a pre-marital agreement (commonly called a “Prenup”), especially those marrying later in life and millennials (with their parents in their ears). In the old days, prenups were for the wealthy. Nowadays, with the divorce rates constantly on the rise and the corresponding expense of a
divorce increasing exponentially, entering into a Prenup provides an opportunity to set out your rights and obligations to attempt to avoid a messy, expensive, and time-consuming divorce or legal separation, if things go south.
What is a Prenup? A Prenuptial agreement is a contract between two parties anticipating marriage. It’s an agreement to define many of each spouse’s respective rights, obligations, entitlements, and liabilities, should the marriage end up going down the path of divorce or legal separation.
California is a community property state. This means that assets and debts acquired during the marriage are presumed to be owned/owed equally by both spouses (with certain exceptions such as gifts and inheritance, which are the separate property of the spouse receiving same). Assets acquired before marriage, or after separation, are presumed to be the separate property of the spouse receiving same. In the common situation where each party brings assets and debt into the marriage and are married a long time before one party files for divorce or separation, it can generally be difficult to trace when the assets/debts were acquired, potentially causing a party to be forced to walk away from a substantial separate property claim. A properly prepared Prenup can replace this need to trace separate property through statements and other documentation. By specifically identifying the assets and debts (and their values/balances) in a Prenup, the parties will have sufficient evidence and not have to undergo the painstaking and expensive process of attempting to gather documentation (some of which may no longer exist as financial institutions purge their records after certain periods of time) supporting their pre-marital entitlements. Further, parties to a Prenup can modify California community property law by agreeing that assets and debts acquired during the marriage are the separate property of the spouse receiving same.
In California, we have adopted the Uniform Premarital Agreement Act, which provides guidance on what can and cannot be included.
What can be included:
- Defining characterization and entitlement to property and responsibility for debts that were acquired before and/or during the marriage.
- Identifying how each party’s income shall be characterized during the marriage and how that income is to be used.
- Agreeing to limitations/restrictions on entitlement to spousal support.
- Including a Sunset Clause, which voids the Prenup after a certain number of years a couple has been married.
What cannot be included:
- Terms that address custody and support of children.
- Things that might deemed “unconscionable.”
- e.g. Including a waiver of spousal support for a person whose income and resource are, and always will be, substantially less than their soon-to-be spouse. Such as a plastic surgeon earning $800,000 a year seeking a waiver of spousal support from his fiancé, a public elementary school teacher, who earns much less.
- Provisions that punish or penalize, since California is a “no fault” divorce state.
- e.g. Including a provision that says if one spouse has an affair, the other spouse gets monetary damages.
Other requirements for a valid Prenup:
- Each party must receive a full financial disclosure from the other party. This includes a complete list of assets prior to marriage, a complete list of debts, and each party’s respective income.
- Each party must be allowed at least seven days to review the document prior to signing it. There really isn’t a rule addressing how long prior to the actual wedding date must the agreement be signed but the closer you get to that date and the more time and money (non-refundable deposits) invested in the wedding preparation, the greater the possibility of a duress or undue influence claim (e.g. “either sign the agreement or the wedding is off”).
- Each party must have the opportunity to seek an advice of a lawyer/attorney to advise them. It is not mandatory to be represented by an attorney if you have a prenup that only addresses for the property and debt matters (not touching spousal support). But each party must be represented by counsel if spousal support restrictions/limitations/waivers are included.
Let me be clear: There is NO SUCH THING as an “iron-clad Prenup.” In this litigation-happy society, any agreement is subject to scrutiny when money is involved. Therefore, it is very important for parties contemplating entering into a Premarital Agreement to attempt to address and minimize potential factors that could invalidate such an agreement. These include: Was there any obvious duress to one party or the other (did one party threaten the other with calling off the wedding after a lengthy engagement)? Was one party pregnant? Did one party (or their family) invest large sums of money in wedding preparation and then a one-sided Prenup was presented to them by the other party? Did one party commit fraud by willfully failing to provide adequate financial disclosures? Any one of these can lead to a Judge tearing up (sometimes literally) the parties’ Prenup.
With so much on the line and so many potential pitfalls, it is very important to consult with an experienced attorney to see if a Prenup is right for you and to make sure your agreement can withstand the Court’s scrutiny. A Final Tip: Do not wait to make an appointment to consult an attorney a few days before the wedding. Prenups can take between a few weeks or even up to a few months to prepare, negotiate, revise, execute, and sign. In light of the fact that there is a mandatory seven day waiting period built in to the process, procrastination may very well nix your plans to have a Prenup done or, at least, delay your nuptials.
Getting married or just have any questions regarding the above topic? The Law Offices of Ian S. Topf, APC offers a free consultation on a variety of issues, ranging from family law, bankruptcy, debt collection defense, estate planning, criminal defense, DUIs, and general civil matters.
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