Prenuptial Agreements (also known as premarital and antenuptial agreements)
If you are anticipating your upcoming nuptials, let us congratulate you on your future happiness and success. If you are planning your wedding and considering a prenuptial agreement (also known as a premarital agreement) it means both your heart and your head is in the right place. At Murphy Family Law, we believe that all couples, regardless of socioeconomic status, can benefit from being fully informed and counseled about the implications of marrying and living in a community property state before saying “I do.”
While it is easy to get married, unfortunately most couples do not fully understand the financial ramifications of living in a community property state. If you are a teacher, you may not realize that your CalSTRS is a community asset to be divided upon dissolution, but you will likely not receive social security income, which is not divided, and which your future spouse will receive. Or, if you are a homeowner prior to marriage, and you have a mortgage, your earnings become community property and all payments on your mortgage will give your spouse an interest in that home upon dissolution or death. The same with a business – you may have started your business prior to marriage, but the profits from your work, efforts, and labor all become community upon marriage and your spouse will likely to begin to obtain an interest in your business. These consequences may ultimately be fine with you, but it is important to become educated about the possible responsibilities you will be assuming upon becoming married in a community property state. Thus, we encourage both you and your soon to be spouse to receive legal pre-marital counseling to help you decide what pre-marital planning, if any, you should engage in, including whether entering into a pre-marital agreement is sound investment in your future. Of course, no one wants to plan the demise of their marriage, but going into a marital contract without a full understanding of the laws and consequences of doing so is not advisable. For commonly asked questions about premarital agreements, see more below.
Postnuptial agreements are a bit trickier because once you are married, you owe fiduciary duties of loyalty and fair dealing to your spouse. Agreements regarding the division and characterization of assets or debts made after marriage are presumed to be made under undue influence, meaning that the law presumes that you only agreed to the agreement because you wanted to please your spouse, and not because it was a good business deal for you. Agreements made under undue influence are far more difficult to uphold and courts are eager to strike them down. For that reason, postnuptial agreements are often found to be unenforceable, no matter how airtight they are drafted. Unless one party receives some sort of fair and equitable consideration for giving up an interest in a community property asset, or taking on debts that would ordinarily be the responsibility of both parties, these types of agreements are extremely difficult to enforce. Many attorneys will not even draft them because the risk of malpractice is real if the agreement is later found to be unenforceable. Thus, you should always seek the advice of an attorney experienced in drafting post nuptial agreements prior to entering or signing any agreement.
Which statutes cover pre-marital agreements?
See the Uniform Premarital Agreement Act, which is California's primary source of law on prenuptial agreements. Family Code sections 1600 through 1617 are part of that Act. Case law has also had a significant influence on the validity of pre-marital agreements, such as the Barry Bonds case (See Barry Bonds Case).
What types of issues can a pre-marital agreement address?
While a premarital may address many topics, agreements typically address three primary issues:
- Property (assets) division and/or characterization, including community and separate property.
- The allocation and characterization of debts.
- The payment (or option out of) spousal support.
Division of assets and debts upon death may also be addressed in your agreement. The primary purpose is often to define what the parties consider community versus separate property and how they want to deal with spousal support, which is also called alimony. A premarital agreement cannot address issues child custody or child support.
How can we address property in a premarital agreement?
A common goal of a prenuptial agreement is to avoid the creation of community property or debts during the marriage. This can be accomplished by a provision that states that each person's earnings during the marriage and anything they may obtain with those earnings remains that spouse's separate property. Likewise, any debts incurred by spouse during the marriage remains that spouse's separate debt. If one of the parties owns a home or business, this can be complicated and tricky.
Without a prenuptial agreement, it is easy to create a situation whereby the community gains an interest in a separate property asset. Just because property is owned before marriage does not mean it remains that way during the marriage, especially when there are marital contributions toward that asset (e.g. mortgage, or working a business). Accordingly, you should never leave the drafting to an attorney who does not have extensive experience and understanding of the laws related to community property.
What about spousal support?
This area of law has experienced significant changes over the years and is very complex. If both parties are not represented by independent counsel, provisions related to spousal support are generally unenforceable. With respect to spousal support, the advice of an attorney experienced in drafting prenuptial agreement is absolutely necessary because the legislature and the State of California is hostile to spousal support provisions in prenuptial agreements. Courts look for any way they can to strike down prenuptial agreement provisions as they relate to limitations on spousal support.
I signed a prenuptial agreement, but I no longer agree with the provisions. What can I do?
A prenuptial agreement is a contract; however, California law closely regulates prenuptial agreements and courts are predisposed to striking these agreements down rather than upholding them. Therefore, a person who wants to defend against a prenuptial agreement or otherwise claim it is not enforceable (partially or totally), may use contractual defenses available to them as well as defenses specific to prenuptial agreements. The easiest and best way to deal with this situation is to first see if your spouse is willing to revoke or modify the agreement in writing. If that is not an option, then there are many defenses to enforcement of a prenuptial agreement, but the primary defenses are as follows:
- Establish that the agreement was signed under duress, undue influence, or fraud.
- Prove that you lacked capacity to enter into the prenuptial agreement.
- Convince a court that the agreement is unconscionable and should not be enforced.
- Try to prove that that the other party breached the prenuptial agreement.
- If you did not have an independent lawyer to advise you regarding the prenuptial agreement, you may be able to convince a court not to enforce the agreement.
- Prove that there was a lack of complete or accurate financial disclosure by one of the other party.
- Convince a court that your prenuptial agreement promoted dissolution of marriage (for example, if the agreement provides for a very large payout to one spouse upon divorce that is not connected to any reasonable property or asset division).
- You didn't have seven days between the time you were presented with the agreement and the time you signed it (only for prenuptial agreements signed in the past few years).
Of course, these are not the only defenses to enforcement of a prenuptial agreement, but they are the most common ones we see. If you have questions about the enforceability of your prenuptial agreement, or if you have questions regarding pre-marital counseling, contact us to schedule a consultation to discuss your options.