Divorce And Premarital Agreements

DIVORCE AND PREMARITAL AGREEMENTS

Marriage is not only a romantic relationship, but also a kind of a business relationship. For those getting newly married, this is a hard concept to swallow, but nonetheless it is true. 

This dual nature and purpose of marriage has led to the increased consideration that a premarital agreement (also called a prenuptial agreement or prenup, for short) can be useful to protect each spouse's financial interests. 

Given that the agreement is between two spouses who may have differing interests and goals in mind,

it is a good idea for each spouse to be represented by their own attorney when signing a premarital agreement. There are many pros and cons to making a premarital agreement, including some that are financial and others that are emotional in nature.

A Brief List of Pros

  • Protect the inheritance rights of children and grandchildren from a previous marriage

  • Protect the interest of your own business or professional practice so that it is not divided and subject to the control or involvement of your former spouse upon divorce.

  • Protect a spouse from having to assume the obligations of the other spouse who may have significantly more debt

  • Ensure that you will be compensated for a lucrative career you sacrificed for the marriage if eventually the marriage does not last.

  • Address more than the financial aspects of marriage, and cover any of the details of decision-making and responsibility sharing to which the parties agree in advance.

  • Limit the amount of spousal support that one spouse will have to pay the other upon divorce.

  • Protect the financial interests of older persons, persons who are entering into second or subsequent marriages, and persons with substantial wealth.

A Brief List of Cons

  • You may, if dictated in the premarital agreement, give up your right to inherit from your spouse's estate when he or she dies. Under the law, you are entitled to a portion of the estate even if your spouse does not include such a provision in his or her will.

  • If you contribute to the continuing success and growth of your spouse's business or professional practice by entertaining clients or taking care of the home, you may not be entitled to claim a share of the increase in value if you agree otherwise in a premarital agreement. Under the laws of many states, including California, this increase in value would be considered divisible marital property.

  • A contract that sets forth the specifics of what will happen upon death or divorce can create a diminished sense of trust.

  • Because it is difficult to project into the future, what may seem like an inconsequential compromise in the romantic premarital period may seem more monumental and burdensome later on.

  • A low- or non-wage-earning spouse may not be able to sustain the lifestyle to which he or she has become accustomed and a premarital agreement may limit spousal support and division of assets upon divorce.

  • One spouse may agree to terms that are not in his or her best interests because during the romantic phase either spouse is "too in love" to be concerned about the financial aspects and can't imagine the union coming to an untimely end.

To revoke or make any changes to the premarital agreement, the revocation or change must also be in writing and signed by both parties. For the agreement to be enforceable, both parties need to have entered it voluntarily, they need to have full knowledge and understanding of the terms of the agreement, and the terms must not be unfair or too one-sided.

Legal Requirements of California Prenuptial Agreements

  • The Uniform Premarital Agreement Act (UPAA) has applied to California prenups since 1986. In general, this law states that written premarital agreements signed by both parties will automatically become effective once the couple marries. An agreement can cover a couple’s present and future property rights, as well as other matters related to the marriage, but it cannot negatively affect a child’s right to child support, or take away a court’s power to control child custody and visitation after marriage.

  • Principles of general contract law also apply to premarital agreements. Agreements require valid consent, meaning that a person must have the mental ability to consent, and that consent cannot be the result of fraud, inappropriate influence, or mistake.

  • Amendments to the UPAA that apply to California premarital agreements made after 2002 state that agreements will be enforced against a spouse only if that spouse:

  • Received complete information about the other spouse’s property and finances prior to signing the agreement

  • Had at least 7 days between first receiving the agreement and signing it (to allow enough time to have an attorney review the agreement), and

  • Was represented by a separate attorney when signing the agreement, unless the spouse: 

  • Received full information in writing about the terms and basic effect of the agreement, including any rights and obligations the agreement would nullify, and

  • Signed a separate document acknowledging receipt of such information, identifying the person who provided the information, and expressly waiving the right to an attorney.

Unenforceability Factors During Divorce

The creation and enforceability of prenuptial agreements is governed by the California Premarital Agreement Act. A prenuptial agreement will not be enforced, due to the following: 

  • Not Voluntary 

If their agreement is not based on free will, it is not enforceable. Each party to have separate legal counsel. If the party waives his or her right to independent legal counsel, he or she must sign the waiver in a separate writing outside of the prenuptial agreement. It must also be shown that the party waited a minimum of seven days before signing the prenuptial agreement.

  • Unconscionable and Disclosure Requirements Not Met 

To be "unconscionable"—meaning extremely unfair—at the time of enforcement. It isn’t clear exactly how unfair the results would need to be, but if a situation is extreme—for example, if one spouse would be forced to turn to welfare while the other still had ample means to provide support—the court would probably not uphold the agreement. There must be an absence of meaningful choice and the agreement must unduly favor one party. Additionally, a prenuptial agreement requires each spouse to make full disclosure of his/her assets (no hidden assets).

  • Violation of Public Policy

Another instance when a prenuptial agreement will not be enforced is if it violates public policy. Making sure that children's rights remain under the control of courts that will act according to the “best interests of the child" is one such public policy. 

Another example of public policy prohibition is to include provisions related to domestic services, companionship or provisions regarding the religious upbringing of a future child. Provisions that promote divorce are also void due to being against public policy, such as a provision requiring a spouse to pay a lump-sum payment to the other spouse upon divorce. 

  • Spousal Support Provisions

Provisions concerning spousal support will not be enforced if the party against whom the agreement is being enforced did not have independent legal counsel at the time of signing the agreement. A waiver will not suffice for this right. Additionally, these provisions are tested for fairness at the time of enforcement of the premarital agreement, not at its inception like with other provisions in the premarital agreement.

  • There are certain rights that can’t be conclusively bargained away in a prenuptial agreement because of other

legal requirements. For example, a future spouse can’t waive the right to share in an ERISA (Employee Retirement Income Security Act 1974) governed employee benefit plan because federal law states that only a current spouse can do that. In order to accomplish this, couples have to complete the necessary documents after they're married.

Is a Prenup Right for You? 

If you and/or your future partner are considering a prenup, you will each need the assistance of an experienced family law attorney. In fact, it's crucial that each partner consult a different attorney (from different firms) to ensure the rights and interests of each are covered. 

​If you need help with the financial issues of your divorce, please contact me. I'm here to support and empower you through the whole divorce process!

Tags: Prenuptial agreement and divorce, prenup, premarital agreement, child support, spousal support

This information is not intended to be a substitute for seeking legal advice from an attorney. For legal or tax advice please seek the services of a qualified attorney and/or qualified tax professional.

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