Prenuptial Agreements (Prenups)
A prenuptial agreement, also called a prenup, is an agreement between prospective spouses, made in contemplation of marriage and intended to become effective upon marriage (FC 1610(a) [Italics added]).
Essentially, a prenuptial agreement is a contract between two people, who are about to be married, that identifies how the couple would like to divide property or spousal support, in the event of death or divorce.
Strict legal requirements apply to prenuptial agreements in order to render them enforceable. The following covers many of the common issues that are covered in prenuptial agreements.
Marriages supported by prenuptial agreements last longer
Discussing a prenup with your prospective spouse can be a sensitive topic. Most engaged couples do not want to talk about divorce or death, especially just before marriage. However, statistics show that couples that sign prenups are more likely to remain married. Some marriage counselors believe that the process of drafting a prenup promotes early and healthy communication about important financial issues and expectations in the relationship. Historically, prenuptial agreements were mostly signed by the very rich or celebrity couples; today, nearly twenty percent (20%) of all California marriages are supported by prenuptual agreement.
Common prenuptial agreement terms:
Spousal Support: A prenuptial agreement can set the amount of spousal support (alimony), if any, that may be awarded by a family law judge upon divorce of the parties.
Prenuptial agreements can also be used to protect a spouse's income during marriage. Note: Without a prenuptial agreement, income earned during marriage, by either spouse, equally belongs to both spouses, even if the spouses use separate banks accounts or earn different income.
Business Assests: Prenuptial agreemets may predetermine the amount, if any, to which a spouse is entitled to the assets or income of a business. Without a prenuptial agreement, the family law judge can divide a business, even a business started solely by one spouse before marriage, equally.
Inheritance Rights: Prenuptial Agreements can be used to protect any inheritance rights for a child from a previous marriage. Without a prenuptial agreement, a child from a prior marriage can lose his or her inheritance rights, if any, to the living spouse's right to the property. Without a prenuptial agreement, the living spouse's elective share rights apply even if the dying spouse executed a will to the contrary.
Property: A prenuptial agreement may predetermine a spouse's rights to existing or future property upon death or divorce. Property includes real estate, personal property, and intellectual property.
Pets, such as dogs, cats, etc., are considered property in a marriage and a prenuptial agreement may set out in advance which spouse will be entitled to possess and care for a dog or cat in the event of a divorce. Crops and trees (timber) are considered real property until harvest, at which time they are considered personal property. Farm animals may be considered pets, personal property, or a business asset tied to the real property.
Note: Sometimes property can change its form after a prenup is signed. For example, a piece of land (real property) may be sold for cash (personal property). Prenuptial agreements are drafted to protect rights to property even if the property changes form. Without a prenuptial agreement, the couple may spend thousands of dollars in lawyer fees trying to trace the property from a changed or comingled form to its original form.
Finance Management: Prenuptial agreements may spell out which spouse is entitled to manage the day-to-day finances of the marriage, or, which spouse will have the ability to sell, transfer, or encumber property or assets.
Debt: Prenuptial agreements may explain which spouse is responsible for which debts, if any, that are incurred by either spouse, or both, before, during, or after marriage. Prenuptial agreement terms that cover debt are usually included when one spouse intends to continue his or her education or business during marriage, or when one spouse comes into the marriage with substantial preexisting debt.
Estate Planning: Prenuptial agreements may include estate planning features, such as wills, trusts, and powers of attorney.
Retirement: Prenuptial agreements may predetermine the division, if any, of retirement benefits, such as any interest, vested or contingent, in a 401k, IRA, pension, etc.
Note: Waiver of the right to any retirement benefit must be in writing and signed by the party against whom enforcement is sought, on separate and subsequent documents to the prenuptial agreement, in order for the waiver to be enforceable.
Jurisdiction: Prenuptial agreements may include the law that will control any legal issue not covered in the prenuptial agreement. This is especially important for couples who intend to move out of state during marriage or for couples who are concerned that the law might change in the future.
Prenup Duration: If a prenuptial agreement is not modified in some way it will be enforceable to the end of marriage, whether the end of marriage is by death or divorce. However, most prenuptial agreements include self-imposed time limits on the prenuptial agreement itself.
Prenuptial agreements that end at a certain time in the future are said to contain Sunset Clauses. A Sunset Clause is common in prenuptial agreements between couples who have dated for only a short period of time before marriage. Sunset Clauses fulfill the desire of the couple to eventually share all property equally, but, because of the short engagement period, the couple would like to protect their respective assets in the event of an early divorce.
Terms not allowed in prenuptial agreements
- Any term that attempts to control child custody, child support, or child visitation, is not allowed in a prenuptial agreement
- Any term that violates public policy, such as a term that promotes divorce. For example, a term that allows for payment of money upon divorce is likely an unenforceable term as it promotes divorce, and therefore, the term likely violates public policy.
- Non-monetary terms, such as which spouse is going to take out the trash or wash the dog are unenforceable terms. Also, sexual promise terms are unenforceable.
- Any term in a prenupt that promotes a crime . For example, a term in a prenuptial agreement that predetermines which spouse will receive proceeds from the illegal sale of narcotics, is an invalid prenup term.
Modifying and updating prenuptial agreements
After marriage, a couple may modify their prenuptial agreement. The legal requirements to prenuptial agreements also apply to any modification, revision, or updating of the agreement.
Note: This includes the legal requirement that any waiver of spousal support (alimony) must be signed by an attorney at the time of the signing of the modified agreement.
Incidentally, a prenuptial agreement that is modified or revised before marriage is simply a new draft of the prenuptial agreement. If a couple has not executed a prenuptial agreement they may nevertheless execute an inter-;marital, or post-marital agreement.
Also, sometimes a spouse would like to be more generous than what is written in a prenuptal agreement. If a spouse, during marriage, has given more to the other spouse than he or she is required according to the prenup, it does not automatically waive the terms of the rest of the prenup. But to be safe, a restoration of rights term should be included in all prenups.
Note: Always use a divorce and family law attorney to assist in drafting prenuptial agreements.
Breaking poorly drafted & invalid prenups
Unfortunately, some couples might have their prenups broken due to a failure to follow very strict legal requirements in the drafting and execution of the prenup.
Remember, a prenuptial agreement is a contract. California contract rules, along with other legal requirements, apply to prenuptial agreements in order to make them enforceable. It is best to use a divorce and family law lawyer who is experienced in drafting contracts that concern divorce and family law rights, such as premarital, inter-marital, and post marital agreements (also called marital settlement agreements).
Never use a preprinted prenuptial agreement form without the advice of a divorce and family law lawyer.
For more information on California Prenuptial Agreements, Modifying a Prenuptial Agreement, or How to Break Poorly Drafted Prenuptial Agreements, call the divorce and family law attorneys at Dorado & Dorado today.
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WARNING: Any provision in a premarital agreement regarding spousal support, including, but not limited to, a waiver of it, is not enforceable if the party against whom enforcement of the spousal support provision is sought was not represented by an independent lawyer at the time the agreement containing the provision was signed, or if the provision regarding spousal support is unconscionable at the time of enforcement.
Also, an otherwise unenforceable provision in a premarital agreement regarding spousal support may not become enforceable solely because the party against whom enforcement is sought was represented by an independent lawyer (California Family Code 1612(c)).
Finally, independent documents, in additition to the premarital agreement itself, must be signed by a spouse who is waiving spousal support, which details the spouse's rights to spousal support, and is signed by and independent lawyer and the spouse who is waiving the support.
This means that in order for spousal support waiver terms in premarital agreements to be enforceable, several things must occur:
- The party against whom enforcement is sought must have been represented by a lawyer at the time of the signing of the agreement,
- The waiver of spousal support term is in the premarital agreement,
- The waiver of support is documented in a separate document, which informs the spouse of his or her rights to spousal support, and is signed by an independent lawyer, and
- Any waiver of spousal support is not unconscionable at the time of the signing of the agreement or at the time of enforcement of the spousal support term. (Unconscionable defined below)
Important: premarital agreement terms, other than spousal support, may also be considered unconscionable, and therefore, unenforceable. Always use an attorney who is experienced in divorce and family law issues to draft, review, and sign a premarital agreement.
Legal Requirements of California Prenuptial Agreements
The Uniform Premarital Agreement Act (UPAA) provides that prenuptial agreement terms are not enforceable against a spouse unless:
- The spouse against whom enforcement is sought received complete information (full disclosure) about the other spouse's property and finances prior to signing the agreement,
- The spouse against whom enforcement is sought signed the prenuptial agreement at least seven (7) days between receipt of the final draft and the actual signing of the document. Note: The burden of proving that the party against whom enforcement is sought signed the agreement no less than seven days after receiving it is on the party seeking enforcement of the prenuptial agreement term.
- The spouse was represented by a separate attorney when signing the prenuptial agreement, unless the spouse formerly waived representation by a separate attorney (very formal rules apply, and no waiver of spousal support (alimony) can be made without the signature of an independent lawyer).
- California Family Code Section 1615 provides that a premarital agreement is not enforceable if the party against whom enforcement is sought proves either of the following:
- The spouse against whom enforcement is sought did not execute the prenup voluntarily,
- The agreement, or any term of the agreement, was unconscionable when it was executed (an unconscionable term does not automatically render the remainder of the prenup unenforceable).
Voluntariness and unconscionableness are decided on a case by case basis but primary considerations are given to whether or not the spouse against whom enforcement is sought:
- executed proper waiver documents,
- observed proper time requirements,
- observed basic fairness rules under the circumstances,
- understood the prenup, its terms, and any ambiguous language,
- whether the spouse was represented by an independent lawyer.
Note: Remember, any waiver of spousal support in a prenup is automatically invalid, and therefore unenforceable, unless the party against whom enforcement is sought was represented by a lawyer at the time of the signing of the prenup.
Cautionary Note: Some terms in a prenuptial agreement to do not become effective automatically upon marriage. These terms are said to have a conditions subsequent, which means that some event must happen in the future that makes the term enforceable.
For example, a transfer of real property (land or houses) in a prenup is not enforceable until after the the property is actually transferred through a deed. Also, a retirement benefits waived in a prenup is not actually waived until the waiving spouse signs and files subsequent documents with the retirement funding company.
For more information on perfecting any property transfers after the signing of a prenuptial agreement, contact the divorce and family law attorneys at Dorado & Dorado, APLC today.
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