What is a prenup?
A prenuptial agreement (a "prenup") is a written contract between two people who are about to be married in California, which is signed before the wedding. In this contract they specify exactly how they want their respective property to be distributed if they were to get divorced or one of the spouses were to die.
Prenup concepts:
- premarital asset protection;
- provision for one or both parties in the event of a divorce; and
- how the couple wants to handle their property during the marriage.
Prenups also play a role in ensuring that a spouse will have adequate financial support if the couple splits-up or one of them dies.
Parties are not required by law to enter into a prenup , so why do people sign them?
- to protect the interests of a business that one of the spouses own;
- to make sure that children from a previous relationship are protected;
- to provide greater financial security in the event of a husband or wife’s death;
- to limit ownership rights in property bought after the wedding;
- to prevent marrying person from having to pay a share of a business that his/her spouse will inherit;
- to qualify for loans that require a spouse to sign documents;
In some cases parties might have entered into prenups without seeking independent legal advice or understanding fully their contents, leading them to later seek declaration that such agreements be set aside. One California court of appeal in 2007 stated that a prenup was not enforceable because the wife had been pressured to sign it by her husband, her mother-in-law, and her brother-in-law.
California legal requirements
A prenuptial contract executed in this means must be signed by both the prospective spouses, either before a notary public or by at least one witness. There is no California law requiring that the prenuptial contract contain framer language or be prepared by an attorney. Nonetheless, a prenuptial contract is binding and enforceable in California only if:
Any provision of a prenuptial contract pertaining to the children of the marriage is unenforceable except in accordance with the law relative to child custody and child support.
Typical terms to cover in a prenup
One of the most common reasons that prenups are challenged is because they are ambiguous or contain clauses that may appear to have no practical effect — or worse, they contradict each other elsewhere in the agreement. You should consult with your attorney about the exact language that should be included in your forms, but there are a few key clauses you should consider including. While these will not be appropriate for every couple, California courts usually uphold these three clauses, so they provide an excellent starting point.
Property Division: The most common clauses in prenups address the division of property. These clauses should clarify the ownership of all property before the marriage and provide for division of property upon divorce. These clauses could include such aspects as managing property and debt acquired during a marriage, and the timing of the division of property. Spousal Support: Also known as alimony, spousal support is the financial support one spouse owes to the other after a divorce. While not all couples will need to address this, the family court has exclusive jurisdiction over awarding spousal support in a divorce. If a couple has a high-value estate — or if the couple expects the future income of one or both parties to change significantly — they may find it beneficial to include these clauses. Debt Issue: Debts incurred during a marriage fall into two categories — debts that were incurred for the "benefit of the community" and those that are individual obligations. While you cannot contract away the court’s ability to divide marital debt upon divorce, this type of clause attempts to force the parties to honor their debt obligations.
A look at the California Family Code
The California Family Code, sections 760 -770 (hereinafter "the Family Code") is very clear about how we’re to do PRAs in this state; this means the rules cannot simply be ignored or skipped over. The provisions in the Family Code, including family law "case law" (e.g. case precedent) are the rules that we need to be familiar with to draft effective PRAs. They set out the substantive and procedural requirements for the enforceability of PRAs, and we must be aware of them. Here’s an example of what I mean: One of the requirements in the statute is that both parties to the PRAs shall sign the complete document separately, signed by the other spouse. This means that the PRAs each need a separate signature page which include the signatures of the parties separately. It cannot be identical signatures for both parties – "Mr. & Mrs." of "Mr. & Ms." with one signature for both spouses. We need to follow the language of the statute in the drafting of the PRAs to meet the legal requirements for the validity of the PRAs. PRAs must also be consistent with and enforceable under the law. For example, if your client wants to give up spousal support if there a divorce, we must know whether that is something that can be waived, and how. There are restrictions within the law as far as giving up spousal support rights on a going forward basis. Substantial and complete waivers of support upon divorce are not enforceable, while general waivers of support are.
Common misconceptions
Common recent misconceptions about prenuptials agreements include:
- Prenups only benefit the rich – This simply is not true. Prenuptial agreements are intended for couples of all financial means. Consider that even a high school graduate often has significant assets prior to marriage. For example, an individual may have a retirement savings account, a vehicle or other personal possessions such as jewelry, along with student loans for education. Then there’s income potential, which can large vary depending on the couple’s profession or education level. Plus, the types of debts individuals bring to marriage can alter the balance of negotiating leverage.
- Prenups are only for cheaters – Many people associate a prenuptial agreement with a lack of faith in the relationship. However, a prenup can protect both spouses in the long-term. Should divorce ever occur, these agreements can actually minimize conflict by protecting each person from the cost, stress and emotional pain of a court battle over asset division.
- Prenups are only needed when one spouse has much more wealth than the other – Those with far greater incomes are often the ones most concerned with protecting what they’ve worked so hard to earn. Yet, prenups also benefit those in less favorable financial positions. It may be easier to retain an attorney who will represent them rather than their partner, leaving them unprotected . If divorce is on the horizon, it could leave a spouse largely unprepared to support themselves – especially if children are involved. A prenuptial agreement could be essential for the spouse who is likely to pay or receive spousal and child support.
- Prenups can provide for custody and child support – Most family law attorneys advise against trying to cover custody and child support in a prenup agreement as the courts will likely consider this unenforceable. Because children’s needs can change over time (and are prioritized), it’s important for parents to approach these matters when the time arrives. Plus, family court judges are always required to approve custody and child support orders, which cannot be pre-negotiated by parents beforehand via these legal contracts.
- Prenups are only for focus for the wealthy – Some individuals mistakenly believe that prenuptial agreements are simply for the wealthy. This is not true. Modest-income clients, with and without children, can benefit immensely from prenups. If divorce occurs years down the line, having a prenuptial agreement will put an immediate end to the cost, stress and pain associated with a contested divorce. Prenups establish how marital assets and other matters will be handled, rendering protracted court proceedings unnecessary. Additionally, prenups can cover property division, debt responsibility and even what will happen with any inheritances obtained during the marriage.
The need for legal help
The importance of obtaining the advice and representation of an experience family law lawyers, prior to executing a premarital prenuptial agreement is essential. California Family Code Section 1615 codifies five requirements that must be satisfied for a prenup to be enforceable. At first glance, the items don’t seem that complicated. But I often am consulted after a divorce has been filed, and one of the parties is seeking an annulment based on the argument that they did not fully understand what they were signing.
Merely reading the agreement is not enough to absolve a party of the more onerous provisions or even the basic terms of the prenup. If there’s any question about what the prenup is saying, the lawyer is invaluable. While CA Family Code still requires that the agreement be signed by the lawyer, it is a good practice to ensure that the attorney at least reviews the prenup so that if the spouse later tries to vacate the entire agreement, the lawyer can testify that he/she went through the terms of the prenup with his/her client.
Under Paragraph B, there’s a 7 day requirement. There may be a circumstance in which a party must waive this requirement, Good Wealth LLC v. Jefferson, and the waiver must be memorialized in writing. It’s still important that both parties consult with a lawyer as to whether the terms of the agreement are being fully understood. A savvy attorney will advise on items from the prenup that could be improvident, and suggest that the terms be amended/amplified in order to ensure there is adequate protection for that party. I’m often consulted to review a prenuptial agreement because certain provisions of the prenup simply do not comply with CA rules that govern prenuptial agreements, for example, those items California law considers to be "spousal support" as defined in CA Family Code § 1610 (referring to support orders made during marriage).
As experienced family law lawyers that review and prepare prenuptial agreements, we are there to help clients determine what kinds of matters should be included in the agreement, offer advice about things to consider when entering into these arrangements, and what happens should a future event (i.e., death of a spouse, serious illness, disability, etc.) occur.
How to prepare a California prenup
When you decide that you are going to get a prenup, you have to make an appointment with a divorce lawyer from Forsythe & Thomas. The reason is that, by California state law, a prenuptial agreement can only be drafted by a lawyer (and only by one who does not also represent the other spouse). This requirement is there to ensure that both parties have independent legal counsel. While this is not actually the same as meaning that the independent counsel must give separate advice, it would actually be unreasonable for both lawyers to give separate advice. The attorney has to give half the advice to each of you and focus only on your individual interests. In effect , the independent attorney will help you understand what you are really giving up and help you understand the terms of the prenup. Your lawyer can’t negotiate it for you and his job is not for him to automatically just agree with you. The prenup should be as independently negotiated as possible and your attorney will be there to guide you through the process.
The first thing that you should do is to discuss the prenup with your fiance. You should talk about what you want in the prenup and how it should persue your interests and asset protection. If you each have some independently developed assets, then your lawyer may suggest that you do a prenuptial agreement. They will discuss whether you will need a qualified joint trust or a family trust instead. If just a prenuptial agreement is required, you and your lawyer will draft the form and then you and your husband will sign it. There is a 7-day waiting period before the prenuptial agreement can be finalized in California. Once the 7-day waiting period passes, then the prenup can be filed with the courthouse.
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