What is a Prenup?
Marital agreements are a means of maintaining the status quo of assets and liabilities as either person has going into the marriage or until they mutually decide to change it. It is also a method of preserving to one another the full extent of any rights and privileges related to the property they brought into the marriage. A prenuptial agreement is a contract that creates a legal binding arrangement between two people who intend to get married with both persons disclosing their assets and liabilities to one another. Because California is a community property state, a prenuptial agreement can be used as a way to determine how each partner’s property is to be viewed in terms of having been acquired before or during the marriage . A prenuptial agreement allows a couple to enter marriage with an understanding of how previously held and subsequently acquired property is to be treated in case of divorce. As an example, separate property held by one person prior to the marriage may be determined to be joint property acquired during the marriage and vice versa. A prenup, at minimum, can establish what property belongs to whom, even if the marriage dissolves. It can also identify how community property will be divided. For couples seeking to outline specific complexities pertaining to their assets and debts, the prenuptial agreement can be ideal and detailed enough to alleviate potential future disputes.
Requirements Under the Law
California is governed by the Uniform Premarital Agreement Act (UPAA), codified at California Family Code Sections 1601-1613. This statute is a part of the California Family Code and is very specific about what a prenuptial agreement requires and how they can be created. The UPAA defines these contracts as "an agreement between prospective spouses made in contemplation of marriage." An agreement between existing spouses is generally called a postnuptial agreement. The law outlines several key factors that create a legally binding prenup under California law.
The contract must be made and signed by the couple in conjunction with their marriage. While it is not legally necessary for it to be signed before the marriage occurs, this is generally when it does occur. In most cases the couple signs the agreement and enters into a binding, legal contract before marriage and plans for it to take effect immediately with their vows. Typically, the prenuptial agreements that have worked well throughout the years have been negotiated well in advance of the marriage. UPAA §1612 is very specific about what terms are enforceable, which are not, and the circumstances under which the enforcement of each type of term is either allowed or not. While there are no requirements for any special formatting for the agreement; California courts have made it very clear that while prenuptial agreements used to be viewed as generally against public policy that is no longer the case. Courts in California now view them as a contract like any other that can be created.
Advantages of Using a Template
The advantages of a prenuptial agreement are actually magnified when you use a California prenuptial agreement template. First, you will save money. As I said, once the basic structure is agreed to between the partners, it simply needs to be dressed in a language that is specific to your agreement. How your agreement may differ from the template or how you may want to alter it is simply a point of discussion to have with your attorney. Remember, even if you and your partner have different interests, you are both interested in saving money.
It’s okay to state who is responsible for what debts. These agreements are simple and straightforward. They allow you to be clear with each other about your financial circumstances, which is very important. You will not need to spend days or weeks without knowing the true amount of debt either of you has. This is all out in the open in the beginning.
You don’t need to worry about being unprepared because of the terms you discussed with your partner. When you agree to terms and conditions, they are written down and signed by both parties so no one has to feel like they were duped. You have nothing to remember if it is all written down. An agreement template leaves no room for question concerning what was agreed to. Each person simply agrees to the document together.
Tailoring Your Own California Prenup
The beauty of pre-nuptial agreements is that they can be whatever you want them to be within reason. Given the right advice, there should be no issue with customizing your prenuptial agreement to fit your specific circumstances. We are social "creatures" by nature, each with our own cultures, traditions, and customs. Your prenuptial agreement should reflect these things. A good prenuptial agreement takes one size and adjusts it to fit you.
Here are some examples as to how a prenuptial agreement can be customized:
- You may want to waive spousal support.
- You may already be on social security or disability and want a waiver in the agreement about any rights to your benefits. There are even ways to compensate each other for money built up on social security.
- The parties may have children from prior marriages with financial support obligations in place; there may be an agreement about not interfering with those obligations.
- The parties may have business interests that are important to them or their families. There may be specific agreements relating to the operation of the business, price to buy out the business etc.
- You may want to include appointments for both you and your spouse in the event of an incompetent (i.e. having someone step in the place of the disabled spouse).
- You may want the form of divorce to be specified, a summary dissolution, for example.
- Some people want to spell out what happens in the event of a "death bed" divorce.
Bear in mind, though, that if one of the party’s has been married before, certain grounds for divorce may be limited by law.
There may be other areas that are custom, based on the party’s situation or family history. The important thing is for the attorneys to communicate well to get a basic framework in place and then for each of the parties to individually decide what works for them at that moment.
Typical Provisions of a California Prenup
A typical California prenuptial agreement will often address the division of property, payment of debts, and — sometimes — spousal support. Property division clauses commonly list separate property assets that belong to one party and are not intended to fall under the community property umbrella. Some prep sheets even provide detailed calculations for how marital community property is to be divided between the parties in a divorce – however, such provisions include an acknowledgement of possible future law changes. Since the method of dividing community property is set forth by California law (California Family Code Section 2550), courts may not always uphold these contractual provisions. Debt responsibility clauses identify which spouse is responsible for pre-marital debts and whether either or both spouses will be responsible for any debts incurred during the marriage, whether joint or sole in nature . Such provisions clarify debt ownership and help to avoid future disputes. Spousal support provisions vary widely in prenuptial agreements. However, it is important to understand that courts have the power to award spousal support, regardless of any provision to the contrary. California Family Code Sections 1612(a)(8) and 1615(c)(2) state that any provision allowing for the complete waiver of spousal support or any provision that waives, limits or adversely alters the right to spousal support "may be deemed unconscionable and thus invalid." In addition, California Family Code Section 1612(a)(8) invalidates any provision in a prenuptial agreement that would have the effect of eliminating spousal support for a long-duration marriage, i.e., a marriage of more than 10 years unless the duration of the marriage is less than 10 years. Several other areas are common topics for prenuptial agreements.
Common Issues and How to Fix Them
One of the most common mistakes made when creating a prenuptial agreement is a failure to fully disclose assets before marriage. Both parties in a prenuptial agreement must fully disclose their net worth, including all assets, debts, income, and expenses. Failing to do this can result in the prenuptial agreement being nullified. If you don’t want anything your fiancée does to come as a surprise after you marry, you should be transparent about your assets ahead of time. Another common mistake is jumping into the creation of a prenuptial agreement without first discussing your needs and desires with each other and coming to an understanding about what you both want and need. A failure to approach a prenuptial agreement from a collaborative standpoint can leave one partner feeling uncomfortable. There are times when a trusted friend or family member has recommendations on a good template. However, there are many pitfalls associated with the use of prenuptial templates. These pitfalls include: The use of templates can also be beneficial and help ensure you don’t go off track during the process. Keep in mind that any prenup template might not be suited for every couple. Templates tend to be more generic, often providing little advice when the couple has a child during the marriage. Most templates also focus on specific issues, leaving others out entirely. Even templates with extensive sections about children often lack good advice regarding what happens if one spouse dies or becomes disabled. Templates rarely include provisions about how the spouses will handle issues like health insurance, employee benefits, and retirement plans. Just because a prenup template includes a section to be filled in by the attorney does not mean it addresses the issues relevant to your family. While templates have strong points and can help you get started, an attorney can provide insight into terms and provisions that exist in templates but should not be included in your prenup. The advice of an attorney will help you and your fiancée avoid some of the common pitfalls above as well.
When to Seek Legal Assistance
Although it is possible to draft and modify a premarital agreement entirely on your own, some situations make a lawyer necessary (or at least highly recommended). People who are entering a second marriage or third marriage, or who have significant assets going into their marriage, are often advised to work with a lawyer at every step of the process. A lawyer can be helpful in drafting the agreement. They can also help with negotiation if your partner’s lawyer is involved in crafting the agreement. Questions or disagreements that you have resolved with your fiancé or fiancée may be re-opened when you’re closer to the date of your wedding. Having clear guidance from a lawyer can resolve your disputes more peacefully.
If your spouse-to-be insists on having a very tight schedule for the completion of the agreement, you should consult with a lawyer immediately. This is particularly true if your wedding is within 30 days and you have not yet signed an agreement. In these cases, financial disclosure is usually incomplete and stakes can be much higher than anticipated. A judge can refuse to enforce an agreement in these scenarios.
Finalizing Your Prenup
Before a prenuptial agreement can be legally effective, it must be executed as per the requirements of California law. According to Family Code §1610 every prenuptial agreement made in California must be in writing and signed by both parties. In addition, the document has to be executed voluntarily, and cannot be unconscionable at the time of execution.
While Family Code §1611 requires courts to give legal force to prenuptial agreements, it is important to know that a judge still has discretion as to whether the prenup will indeed be enforced. A party may petition the court for a change in an executed prenup if he or she believes certain twenty factors apply. Under §1615(a) a prenuptial contract cannot be enforced if one party did not have the ability to seek independent legal counsel.
Assuming these prerequisites have been met, the next step is working with your attorney to finalize and execute the contract as required by law. Both parties must be in agreement with the terms . Executors are advised to spend a considerable amount of time discussing terms, executing the contract, and preparing for what to do if the marriage dissolves before the contract has been satisfied. Once the terms have been agreed upon, it is up to the drafting party to provide the other with a fair and reasonable disclosure of the property. This may include use of appraisal and assessment to give an accurate sense of value.
If the drafted contract is deemed too severely disadvantageous to be enforceable, the court may refuse to enforce if the other party had no access to a fair and reasonable disclosure, the fair and reasonable disclosure was not provided voluntarily, the execution of the agreement failed to provide a reasonable opportunity to seek a professional or personal opinion, and if the agreement was reasonably unknown.
Once this has been settled, it is up to each party to execute the prenup. At that time, Family Code §1616 confirms that both parties have to sign before or after a notary public, judicial officer, or another person authorized to administer an oath.