What is a Premarital Agreement under California Law?
A premarital agreement is only for unmarried parties. There are different types of contracts for domestic partners and cohabitating couples. For purposes of premarital agreements, the parties are non-married parties. A valid California premarital agreement must be voluntary, made in writing, signed by both parties, and voluntary after the preparation of the premarital agreement.
Section 1601 of the California Family Code provides the following definitions:
(a) "Premarital agreement" means an agreement between prospective spouses made in contemplation of marriage, which is to be effective on marriage. It is sometimes referred to as a "prenuptial agreement."
(b) As used in this division, "property" means anything or value owned.[1] The purpose of a premarital agreement is to control how specific issues are addressed after a divorce. These issues can include spousal support/alimony, attorney fees, how the separate property will be used and what each party’s rights and duties are during the marriage and divorce. For example, a party can indicate that even with their income and assets during the marriage that they will never be entitled to spousal support/alimony should the couple divorce. Each party will be completely aware of what their rights are in a divorce. Most importantly , a premarital agreement can be binding and help a divorce process run smoothly. Hours if not years of litigation may be avoided with a clear premarital agreement that clearly addresses all issues relating to the divorce. This is why many divorce attorneys suggest that premarital agreements be entered into before entering into a long-term relationship.
Please note that you cannot waive community activity. In California, you cannot contract your way out of child support in a premarital agreement.
Unlike other states, in California the premarital agreement is set up so that the parties bite the bullet and address all issues because they know that it is binding in a divorce. One other California requirement of a premarital agreement is the requirement that financial disclosures be made to each party. The financial disclosures should be full and fair. A financial disclosure is a written financial statement that reveals everything about the income and assets of a person.
California is a community property state. This means that everything earned during the marriage is community property. Any property owned before marriage is separate.
Requirements for Valid Premarital Agreement
In California, the enforceability of a premarital agreement requires that the agreement be supported by proper disclosures by each party, as well as meeting certain formalities for the execution of the agreement. The general rule is that a premarital agreement is invalid unless it is in writing, is signed by both parties, and becomes effective upon marriage. California Family Code § 1610(a). Further, the statute requires that the proposed agreement be presented to the party to be charged not less than seven (7) days before the cutoff for signing (the anniversary of the wedding day), or if the person to be charged is represented by independent counsel, not less than five (5) days before such time. California Family Code §§ 1610(b), 1615(a)(6).
In addition to the general rule, the statute mandates certain disclosures that must be made at the time the agreement is presented. The form and manner of these disclosures are outlined in the statute, and presumed sufficient for compliance with the requirement of full, fair, and reasonable disclosure. California Family Code § 1615(c)(1-2). These disclosures, and the requirement for independent counsel if the agreement is between existing spouses, must be met to ensure compliance with the notion that the agreement was entered into knowingly and voluntarily.
Finally, the statute goes a step further to suggest nine (9) factors that would indicate whether an agreement was unconscionable at the time it was signed. These nine factors are applied to determine whether a party to the agreement could have had any meaningful understanding of the terms of the agreement and whether the material provisions were so one-sided that it unreasonably favored the other party. California Family Code § 1615(b). Although this list is non-exhaustive, the factors set out by the statute are:
California Premarital Agreement Examples and Templates
There are many examples of premarital agreements from which California residents can take inspiration. Those who are looking for California-specific language to make their marital agreements will appreciate the use of a sample agreement that can be used as a template.
It may be possible to find California premarital agreement samples online. A couple that has decided to enter into a premarital agreement will be able to use a sample agreement as a guide to what should be included in the document. Through the use of a sample premarital agreement, the couple will be able to decide together what provisions should be included in the document. The sample agreement can help to organize the couple’s thoughts and serve as a draft to be refined after reading through the entire contract.
It is important to remember that a couple must agree to all of the terms of the premarital agreement, and that it is a good idea to work with an attorney who has experience writing this type of agreement. Agreeing to the terms without having fully considered the impact on each person might result in an unfair financial burden later. Through the use of a sample agreement, you are able to make sure that all of the issues have been properly covered before signing.
In general, the topics that are often covered in a premarital agreement include all real estate, personal property, investments, debts that each spouse brings into the marriage, insurance obligations for each person and how any funds received through injury, inheritance, gift or tax refunds will be divided. A premarital agreement does not need to be lengthy or complicated. It only needs to include the topics that are of the most importance to each spouse.
California Premarital Agreement Essential Terms and Provisions
One of the core considerations in drafting a California premarital agreement is to determine what you do not want to lose in the event of divorce. Thus, the essential provisions typically focus on property division, spousal support, and the enforcement of prenuptial agreements when the marriage ends.
Property Division
The most basic of these provisions will be how you want property to be divided should the marriage fail. Typically, the property is divided based on what it was before the marriage (i.e., acquired before the marriage) and once it is converted once acquired during the marriage. In other words, no property acquired during the marriage will be considered community property and thus subject to division. However, community property may include property that is defined as such in the premarital agreement, an inheritance of one party, or a gift made to one of the parties. Additional details may also go into the property division clause , such as the percentages that each party should receive.
Spousal Support
The parties to a premarital agreement may also decide whether spousal support will be an issue should the marriage end. Some want to waive their rights to it, while others will pay nominal spousal support. There may also be clauses related to whether permanent spousal support will be paid and if so, for how much time. Other considerations, such as the duration of the marriage and the ages of any children that may be born, are included in the contract.
Testing
Because premarital agreements are made before the marriage, this contact also sets out the terms in which the parties will review their contract terms. They typically include the requirements of uniformity in the contract as well as times for review at regular intervals. It may specify the need for a meeting at least once per year to determine whether the terms are being met. Even after divorce, these contracts can be reviewed for purposes of other items, such as child custody, visitation, and spousal support.
Amendment and Potential Challenges to a California Premarital Agreement
Although premarital agreements are generally binding contracts, there are situations in which they may be challenged. The most common of these situations involve one spouse failing to make a required disclosure, intentionally misrepresenting an asset, or signing an agreement under duress or coercion. In cases where a spouse can successfully challenge an otherwise valid premarital agreement, California law states that the court can redistribute property as though the agreement did not exist at all. The success of such challenges, however, depends heavily on the facts and circumstances at issue.
If circumstances change after a premarital agreement is signed, then either person may want to propose changes to the agreement. For example, the acquisition of substantial business debt after marriage may require an amendment. However, any amendments must be made in writing and signed by both parties. It is therefore a good idea to include terms in the original agreement that give your spouse the right to review periodic financial statements, so that they have accurate, up-to-date information if or when it comes time to make changes to the agreement.
Importance of Legal Counsel Drafting Premarital Agreements
Obtaining legal counsel when preparing a premarital agreement in California is not only important: it is required. Family Code Section 1615(d) specifically provides that if a spouse does not have independent legal counsel, then the contract is not enforceable against him or her. We have previously talked about the problems that arise when one party does not have legal counsel, or is not permitted to consult with a legal counsel (commonly due to threats or duress). Of course, legal counsel may not be required where the contract is not unconscionable and both parties are provided 7 days in which to review the document before signing. However, if both parties do not have a sufficient opportunity to review the contract, or if the deal is so unfair to one that the agreement must be set aside, then the 7 day provision may be ignored. By definition, most premarital agreements tend to be implicit in an even exchange, since they typically provide one spouse with less than their statutory share should a divorce occur. Therefore, it is a good idea to discuss the agreement with a lawyer before agreeing to it so that you will understand the ramifications if the agreement is enforced as written.
However, having independent legal counsel is not a guarantee that the deal offered will be considered fair and equitable by the court. Section 1612 applies to contracts before marriage, and Sections 1614 and 1615 apply to marriage contracts. The general rule is that courts respect the freedom of spouses to enter into contracts , and will permit them to divide their community property as they see fit. Domestic Relations Code § 51.5 states: "There is no marital or family relationship in the state of California. A marriage creates only the status of husband or wife and imposes respective rights, duties, and obligations upon the parties under this part, and no other." A marital agreement that is free from deception and fraud is much more likely to be respected by the court. Certainly, if either spouse has hidden income or other assets, or purposely misled the court about their circumstances or the circumstances of the other spouse, the validity of the contract is in jeopardy.
It is important to try to present your case carefully so that any challenges to your premarital agreement can be defended. The court is likely to try to do the right thing by the parties and will listen carefully to the evidence presented to them. An experienced attorney can answer the questions and help the spouse to feel comfortable enough to present their story. It is important to know what the law is in order to be prepared for questions from the judge, who may know little about financial accounting methods or how economic issues should be addressed. The lawyer should be prepared to show what assets were owned by the parties at the time of marriage, and how those contributed to the net worth of each spouse at the time of divorce or death.
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