What is a Prenuptial Agreement and Do You Need One?
A prenuptial agreement is a contract between two people who intend to marry
California law also refers to prenuptial agreements as premarital agreements.
Let's take a closer look at prenuptial agreements, what they are, how they work and what you must know before deciding whether you need one or should sign one.
Are there laws on prenuptial agreements?
California's "Uniform Premarital Agreement Act" is the main source of law on prenuptial agreements. Family Code sections 1600 through 1617 are part of that Act.
Those are not the only code sections or the only law on prenuptial agreements. Case law provides insight on what passes muster in your prenuptial agreement.
What is the purpose of a prenuptial agreement
Prenuptial agreements usually cover three topics.
- The first is property (assets), including community property and separate property.
- The second is debts.
- The third is spousal support.
A prenuptial agreement may include other topics but the above are the most common.
The purpose of a prenuptial agreement is to define what the couple (once they marry) consider community versus separate property and how they want to deal with spousal support, which is also called alimony.
Property in prenuptial agreements
Family Code Section 1610 defines property as an "interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings."
For example, the couple may want separate property one of them owned prior to the marriage (as two commons examples, a home or a business) to remain separate property. They can potentially do this even if there are contributions (time and money for example) toward that property during the marriage.
Spousal support in prenuptial agreements
Regarding spousal support, they may want to limit the amount of spousal support, limit the duration of spousal support, or agree on a waiver of spousal support altogether.
Whatever rights and obligations they want to cover by the prenuptial agreement is in their discretion so long as they comply with the Uniform Premarital Agreement Act and California law.
What about child custody and child support?
Child custody and parenting time is governed by the best interest of the children. Parties cannot before the marriage dictate in a prenuptial agreement how a court must rule on custody and parenting time.
Regarding child support, the topic is closely regulated by California law and prenuptial agreements again cannot dictate to the court what child support it must order in the future.
Put another way, even if a prenuptial agreement has terms on custody, parenting time and child support, a court is not bound by those terms.
What are prenuptial agreement pros and cons?
Assuming the prenuptial agreement is enforceable, the biggest advantage to it is two people can decide even before the marriage how they are going to deal with property issues, spousal support, liabilities, and other issues if they go through a divorce.
This can save significant time and money during the divorce process because the parties already have most of the issues worked out.
One of the cons of a prenuptial agreement is buyer's remorse. Sometimes, one of the parties regrets signing the prenuptial agreement because, in hindsight, they believe they got the worse end of the deal.
What are common prenuptial agreement clauses?
Let's discuss in a little more detail what we typically see in prenuptial agreements.
This is not intended to cover every possible term. Prenuptial agreements can be narrow or broad, cover one topic or multiple topics. The following are the most common prenuptial agreement subjects.
Prenuptial agreements and community property
A common feature or goal of prenuptial agreements is to avoid the creation of community property during the marriage.
Prenuptial agreements usually have a provision agreeing that each person's earnings during the marriage and anything they may acquire with those earnings remain that person's separate property.
The same can be true regarding debts and liabilities one of them incurs during the marriage.
This is a departure from how California law normally treats such property acquired during the marriage absent a prenuptial agreement.
Using a home as an example, if a person buys a home during the marriage with their marital earnings and pays for the down payment and the mortgage payments with those earnings, that home is community property.
However, if a prenuptial agreement states that person's earnings during the marriage are their separate property and any property they acquire with those earnings remains separate property, the home may now be separate property.
The issues are not that black-and-white. We are covering this topic generally and the language used in the prenuptial agreement makes all the difference.
Prenuptial agreements and separate property
Another common feature of prenuptial agreements is to maintain separate property owned before the marriage as separate property during the marriage, regardless of the money contributed toward it during the marriage.
This feature is especially important if one or more of the parties contemplating marriage has significant separate property assets.
Without a prenuptial agreement, it is easy to cause a separate property asset to gain a community property component. In other words, just because property is owned before the marriage does not mean it 100% remains that way during the marriage when there are marital contributions toward it.
A prenuptial agreement can take the uncertainty out of the process by keeping separate property owned before the marriage as separate property regardless of marital contributions toward it.
Remember that property is broadly defined so we are not just talking about real estate. This can apply to just about anything including a business, accounts with financial institutions, cars, insurance policies, retirements and much more.
Prenuptial agreements and spousal support
This area of law has gone through significant changes over the years. Whether and how prospective spouses can waive spousal support is different today compared to how it used to be 20 or more years ago.
We are not going to cover this issue in detail because the law on this issue may continue to evolve and change over time. The one thing we will say about prenuptial agreements and spousal support is the advice of an attorney experienced in drafting prenuptial agreement is an absolute must.
There are many pitfalls to including spousal support provisions in prenuptial agreements that are designed to limit the amount or duration of spousal support or waive it completely.
You may be familiar with the former major league baseball player, Barry Bonds. His prenuptial agreement made significant waves in the legal world and what happened in his case caused the California legislature to update the laws on prenuptial agreements to protect a person who is asked to sign a prenuptial agreement waiving spousal support.
Prenuptial agreements and debts or liabilities
Prenuptial agreements are not just for dividing assets or spousal support. They can also cover present or future debts and liabilities.
Just as the parties can contract in a prenuptial agreement to determine what is and is not community versus separate property, they can also contract on what is and is not a community debt or a separate debt.
This is especially important if one of the parties intends to undertake high-risk ventures or acquire property that may come with significant liabilities.
Prenuptial agreements do not necessarily bind creditors - the creditor did not sign the prenuptial agreement after all. However, so long as there is proper notice to the creditor, a prenuptial agreement may protect the spouse whose earnings and property were intended to be protected in the prenuptial agreement from the debt or liability.
A family law attorney who is experienced with prenuptial agreements can advise you regarding how such terms should be drafted and what notice creditors should receive.
It is common for the prospective spouses to also work with an estate planning attorney on such issues.
Is there a prenuptial agreement template?
No, there is no "template" for a prenuptial agreement.
There are certain terms that may be common from one type of agreement to another. However, an experienced attorney knows that customization of the agreement to fit the client's specific situation is important to the prenuptial agreement's validity and enforcement.
How do you nullify or defend against a prenuptial agreement?
A prenuptial agreement is a contract. The main difference between it and some other contracts is California law closely regulates prenuptial agreements.
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.
Here is a non-exhaustive (meaning some but not all) list of defense
1. Duress, undue influence, or fraud
2. A lack of capacity to enter into the prenuptial agreement
This means some or all the prenuptial agreement was unconscionable when it was signed.
4. One-party's breach of the prenuptial agreement
This means a party did not do what they were supposed to do pursuant to the prenuptial agreement.
5. Lack of an independent lawyer to advise regarding the prenuptial agreement
This becomes a powerful defense in a situation where California law requires representation by an independent lawyer (also called independent counsel) before a provision of the prenuptial agreement is enforceable.
A common example is prenuptial agreement provisions that limit or waive spousal support.
There are situations where a person can waive the right to representation by an independent lawyer but that also has specific requirements set forth in the California Family Code including but not limited to the requirement of a separate writing.
6. Lack of complete or accurate financial disclosures by one of the parties
Full disclosure is important because without it, how can the agreement be fair? A big part of fairness or reasonableness is knowing all the facts, especially if one party is waiving significant rights.
7. Prenuptial agreements that promote a dissolution of marriage are also not enforceable
Over the years, there have been several cases in our appellate courts that cover this issue.
This issue often comes up when there are significant payments to one spouse if there is a dissolution of marriage, but those payments have little to no relationship to a reasonable or fair division of assets.
Those terms read more like a punishment to the spouse who is required to make the payment in the event of a divorce.
A good question to ask is what is the purpose of such large payments to one spouse? Is it tied into something that the spouse gave up or should receive? Or is it intended to punish one spouse for filing for divorce or for otherwise causing a breakup of a marriage.
Such agreements may also be invalidated because they may encourage the spouse receiving the payout to file for a divorce, just to get the payout. This once again may be considered promoting a dissolution of marriage.
8. The law has specific provisions regarding timing of signatures by the prospective spouses
Once again, advice from a family law attorney representing you is important in this situation, so you better understand what the law is or was as of the date you signed the prenuptial agreement or intend to sign one.
The above are not the only defenses.
Do you really need a prenuptial agreement and a lawyer's help?
Prenuptial agreements are not just for the wealthy.
Middle-income and upper middle-income people can also benefit from it, especially if they have assets to protect (such as a business or home) or intend to acquire assets during the marriage.
On simple estates however, drafting the appropriate living trust and avoiding commingling separate property with community property may be sufficient. What is right for you and your situation is obviously not something any article can answer.
Before you start spending money on a lawyer to draft a prenuptial agreement, you should first ask an experienced prenuptial attorney whether you need one.
If you consult with an attorney experienced in prenuptial agreements, that attorney can tell you if you have a situation that really needs a prenuptial agreement or if estate planning, by itself, will be enough to protect what you have.
Contact our family law firm when you need help with a prenuptial agreement
Partner, Nicole Nuzzo, of our family law firm is an experienced and respected family law attorney. She has represented many prospective spouses who needed help with a prenuptial agreement.
Her attention to detail, knowledge of the law, and ethical approach to prenuptial agreements has helped many achieve their goals.
There are no shortcuts if you want it done right. Nicole Nuzzo will help you do it right.
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