Introduction to Prenuptial Agreements in California
What is a prenuptial agreement?
A prenuptial or premarital agreement (also known as a “prenup”) is a contract signed by a couple before marriage (or domestic partnership) that specifically describes how the couple’s assets will be divided in the event of divorce. However, prenups are not limited to the division of assets. Prenuptial agreements can set terms and conditions for many other aspects of the marriage.
In California, the right to a prenuptial agreement is codified by California Family Code section 1500, which states: “The property rights of spouses prescribed by statute may be altered by a premarital agreement or other marital property agreement.” People often forget that the terms and conditions of marriage are already governed by law, specifically the California Family Code. A prenuptial agreement allows couples to change those standardized terms and conditions as they wish--within some reasonable limits, as discussed below.
What aspects of a marriage can a prenup affect?
California Family Code section 1612 outlines all matters a couple can address in a prenuptial agreement. Under this statute, a prenuptial agreement can modify rights and obligations of each spouse regarding property, the allocation of property, the makings of wills and trusts, death benefits, choices of governing law, spousal support, or any other matter that does not violate public policy, a criminal statute, or the right to child support.
As evidenced by the length of this list and the reference to “any other matter,” prenuptial agreements provide couples with an almost unlimited tool to customize their marriage contract.
What shouldn’t be in a California prenup?
An important rule in drafting prenups is that the terms cannot violate public policy. In California, preserving the power of the courts to act in the “best interests of the child” is a matter of public policy. See e.g. In re Marilyn H., 5 Cal. 4th 295, 307 (1993) (“the welfare of a child is a compelling state interest that a state has not only a right, but a duty, to protect.”). Therefore, couples would be well advised to avoid agreements that touch on the future rights of their children, such as child support or child custody. Including such terms in your prenup may be seen as violating public policy and invite a court to disregard those terms--or even the entire agreement.
Some attorneys recommend to their clients that they leave out mention of spousal support as well. This is because it is viewed as waiving an important marital right, which might leave one partner or the other in a vulnerable financial position after marriage.
In a California prenup, avoid any provisions that could be viewed by a court as “promoting divorce.” In California, it is against public policy to promote divorce. See In re Marriage of Noghrey, 169 Cal. App. 3d 326, 329 (Ct. App. 1985). Thus, a prenup which provides for a large payment to be made to one spouse only in the event of divorce (e.g. “I will pay you ten million dollars if we get divorced”) would likely be unenforceable as promotive of divorce.
Another public policy related to prenuptial agreements in California is the concept of “no-fault” divorce. A prenup that provided for penalties in the event of sexual infidelity was found to violate the public policy of “no-fault” divorce in California, since the agreement sought to find the offending party at fault and impose a penalty. See Diosdado v. Diosdado, 97 Cal. App. 4th 470 (2002).
When can I get a prenup?
Generally, you can get a prenup anytime before marriage. The prenuptial agreement of Barry Bonds was famously upheld by the California Supreme Court despite being signed the day before he married. However, the rules have become more strict since then--if one of the parties to the prenuptial agreement is not represented by an attorney, a seven-day waiting period applies under California Family Code section 1615(c) and the rule of In re Marriage of Cadwell-Faso & Faso, 191 Cal. App. 4th 945 (2011).
Nonetheless, it is recommended that you allow some time between executing the prenup and your wedding day to avoid any appearance that one partner was ambushed or forced to sign, which could invalidate the agreement.
Can my partner and I use the same attorney?
It is important for each partner contemplating a prenuptial agreement to have his or her own attorney. Not having your own independent attorney means that the agreement might be unenforceable in court. This is to ensure that the agreement is fair to both sides.
Technically, it is possible for both partners to use one attorney in relation to a prenuptial agreement, however ill advised. In order to do so effectively, it is critical that both partners sign separate documents waiving independent representation, as described in California Family Code 1615(c)(1).
What steps should I take before contacting an attorney?
For both partners, make a list of all of your personal assets and debts. This includes statements reflecting balances in bank and investment accounts, as well as any significant personal property (e.g. car, Picasso painting, golden statue) and real property (i.e. land, houses) that you own. For debts, the most common include student loans, mortgages, and credit card debt. Get your credit score and your partner’s. It is absolutely critical to note in your list any business that you have an ownership interest in before the marriage so that your attorney can take steps to keep your business separate from the marriage--unless you want to have your spouse as a business partner!
If you have any property that you already own jointly with your partner or joint bank accounts, take note of those items for your attorney. If you are planning to have children, and one partner is planning to be a stay-at-home parent while the other works, make sure to advise your attorney of these plans as well. If one partner has plans to go to college or graduate school full time while the other partner works to support them, let your attorney know. In general, it is best to have a comprehensive and open discussion with your partner and your attorney about your financial plans for your marriage, but starting with the points listed above will help you avoid some common pitfalls.
Do I really need a prenup?
This is a matter of opinion. Some attorneys take the position that partners should always have a prenuptial agreement before marriage to protect themselves and set the terms for their own marriage. Other attorneys say they are not necessary; some even view prenups as destructive to a nascent marriage.
Many attorneys will agree that for a young couple with relatively little assets, who are both getting married for the first time, a prenuptial agreement will have less importance. Such a couple has less at stake; without substantial initial personal assets, there will be little difficulty on divorce regarding distinguishing personal and community property. Conversely, individuals who are on their second marriage or beyond or who will be coming into the marriage with substantial personal property should seriously consider having a prenuptial agreement to ensure those assets are kept separate, if such is desired.
If you are considering a prenuptial agreement, it’s important to consult with an attorney as soon as possible to find out whether a prenup is right for you and your partner, and whether any particular terms one or both of you may be considering will be appropriate in a California prenup. If you’d like to learn more, please don’t hesitate to call or e-mail attorneys Ames Smith or Roxana Ahmadian today.
