What is a Prenuptial Agreement in California
In the state of California a prenuptial agreement is generally defined as an agreement made in contemplation of marriage, and is signed by the parties before marriage. Spencer v. Spencer (1994) 29 CA4th 1308. Formally known as premarital agreements, these contracts are governed by the Uniform Premarital Agreement Act (UPAA) found in California Family Code Sections 1612-1620. Likewise, the California Supreme Court has held that a prenuptial agreement is a contract subject to a duty of good faith and fair dealing. Estate of Ruszala (1994) 25 C3d 833. Of course the most common motivation for the execution of a prenuptial agreement is to define the rights of each party in regard to support and property rights in the event of divorce. Generally , courts will enforce a prenuptial agreement unless it includes certain substantive factors, including a lack of voluntariness, unconscionability, or failure to disclose material facts. See In re Marriage of Bonds (2000) 20 C4th 846. Additionally, if a spouse was not represented by independent and competent legal counsel at the time the agreement was signed, the effects of that fact upon voluntariness and unconscionability may be taken into account. See Marriage of Erdel (1996) 13 CA4th 179. As prenuptial agreements have become more common in various states, so too have they become more complex and diverse.
Why Use a California Prenuptial Agreement Model?
A prenuptial agreement template can be a real time and money-saver, especially for couples with simple financial situations that want some legal structure to protect both individuals. It even lessens the potential for conflict – between each other and with your lawyers as a team – by giving a starting point for negotiations.
Most people think of prenuptial agreements as only opportunity for the rich and famous, but middle-class couples can benefit from the financial certainty it provides, at less the cost of litigation if a marriage does not work out.
Consider simple arrangements:
- Separate property previously acquired
- If one or both parties are not pursuing a career
- Debt from a previous relationship not pursued by the partner
If one of you is significantly wealthier, a prenuptial agreement can ensure that your spouse does not gain all your wealth upon death. Even with recent changes to California’s probate code, your spouse can still get 100% of your house. A prenuptial agreement can also prevent the more wealthy partner from losing majority control of a business.
Many states look at prenuptial agreements as "joint ventures with independent contractors." That means that arguments in court can focus on whether the prenuptial agreement was drafted to protect one party from the other – another reason many people end up going to legal battles during a divorce proceeding rather than settling amicably.
What’s the sense in spending thousands of dollars in legal fees for the attorney to draft an agreement from scratch? Why not follow a template that your attorney can use to tailor your specific arrangements? Save your money and your energy to start your new life together.
Key Provisions of a California Prenuptial Agreement
When executing a prenuptial agreement in California, it is important to be aware of the key clauses that are usually included. Some of the most important prerequisites for a valid prenup in California include the discussion of the rights, obligations, and constraints that will exist between married spouses, including property division, spousal support, and debt liability.
Property Division
The most prevalent clause in a prenuptial agreement is the property division clause. When parties execute a California prenuptial agreement, they must delineate the property that they will own after marriage in the event of a dissolution of their marriage or death. These property assets are either divided by agreement after the marriage has dissolved, or distributed pursuant to an already established agreement. The parties have a significant amount of freedom in distributing their property, as they can choose virtually anything to become a community asset after marriage (with a few exceptions like an inheritance).
Spousal Support (Alimony)
A prenup can affect spousal support in a number of ways. The parties can outline the financial obligations to be imposed on one spouse if they decide to divorce. If one spouse is not as economically capable of the other, a prenup can also include provisions for how much alimony they should receive in the event of a divorce, as well as the duration of the payments.
Debt Liability
Sometimes when beneficiaries are awarded property from a previous estate, they must pay the creditors of the estate the debts owed to each. Because of this, it is also important to include a debt clause in a prenuptial agreement. This clause requires parties to transfer whatever property or funds are required to satisfy debts. Thus, the clause can dictate how much one beneficiary will have to pay and will preserve equity.
The above requirements are necessary for most California prenuptial agreements. However, a California prenuptial agreement template must include additional clauses that relate to the specific circumstances of the parties.
Legal Prerequisites for California Prenuptial Agreements
Prenuptial agreements in California, referred to as premarital agreements, must comply with certain legal requirements and formalities imposed under California law, or else a prenuptial agreement could be declared invalid and unenforceable. The California Family Code in Section 1615 addresses premarital agreements. Under California law, a prenuptial agreement may renounce, release, alter, or limit any marital right, obligation, or liability. It can be utilized to settle future property disputes. This means that a prenuptial agreement can be used to address how the future marital estate would be divided, or how certain property will be allocated to one spouse or the other in the event of divorce, death, etc.
However, obtaining a prenuptial agreement relies upon certain legal requirements under California law. Unless the contract has been made while the parties were anticipating imminent separation or divorce, or if one party has not pursued independent legal representation, then the above conditions must be satisfied. When one party has not received independent legal representation, there are a variety of factors that will be evaluated when determining whether the prenuptial agreement is enforceable. Courts will examine both the substance of the agreement as well as the manner in which it was drafted.
The premarital agreement must be in writing and signed by the parties. The parties must have voluntarily entered into the agreement. A party could challenge that their consent was involuntarily obtained if it could be shown that the contract was unconscionable when it was signed, that the party was not provided a reasonable disclosure of the property or financial obligations of the other party, and the party was not given an opportunity to obtain independent legal representation. Other factors include that the party was not provided a reasonable opportunity to seek independent legal representation. A prenuptial agreement remains enforceable unless the party challenging the agreement proves that it was unconscionable when it was executed, or became unconscionable because of changed circumstances. The burden of proof lies with the party who is challenging the validity of the agreement.
A prenuptial agreement that has not been conscionable for one spouse may still be enforceable so long as the other spouse was given sufficient time to pursue independent legal representation prior to execution or within a reasonable time after the agreement was made. If both parties are represented by legal counsel at the time of the execution, there is a presumption that the agreement was entered into voluntarily. Where the issue arises is when the agreement has not been entered into voluntarily, but the other spouse had sufficient time to pursue representation. A prenuptial agreement will not be enforceable if it was the result of fraud.
The party seeking to invalidate the agreement must show that the terms of the agreement were unfair because the property and financial situation of the parties was not disclosed because of fraud or innocent mistake. In some circumstances, a lack of disclosure about the value or existence of specific property or debts did not prevent a party from consulting with independent legal counsel, or that the value of the undisclosed property was not greater than the disclosures made. A court will be reluctant to invalidate the entire agreement. Instead, the court has the authority to sever the unconscionable portion of the agreement and enforce the valid or conscionable portions of the prenuptial agreement.
Frequent Pitfalls to Avoid
When it comes to drafting a prenuptial agreement in California, a couple’s intentions can often be sidetracked by oversights or omissions that may jeopardize the agreement’s validity. One of the most common pitfalls is the failure to make a full financial disclosure. Both parties are legally required to provide each other with a comprehensive list of all their assets and liabilities. Failing to do so not only undermines the principle of good faith but may also leave one party with an unfair advantage should the agreement be challenged in the future.
Another common error is when one or both parties feel coerced into signing the agreement. This situation can arise when one spouse insists on a prenup and the other is either under significant financial stress or lacks the requisite legal representation to understand the document’s implications . To ensure that a prenup is considered valid, both spouses should be given adequate time to review the document with their respective attorneys before signing.
Finally, vague language and unrealistic expectations outlined in a prenuptial agreement can render it unenforceable. All terms and conditions must be explicit, equitable, and realistic in terms of the law. For instance, a provision for permanent spousal support in the event of divorce may not be enforceable under California law, so it is essential to work with an experienced attorney from the outset to avoid creating unenforceable terms.
In summary, the keys to forming a prenuptial agreement that is likely to withstand scrutiny are open and honest financial disclosures, the absence of coercion or duress, and clear and reasonable terms that are compliant with California law.
Consult a Legal Expert
Hiring a licensed attorney when drafting or finalizing any legal document is highly recommended. This includes prenuptial agreements in the state of California. Even if a couple chooses to use one of the previously discussed online prenuptial agreement templates, a legal professional should still review the document before it becomes official. While some people who have used a template since recommend having the document evaluated for its compliance with California law, others have reported that their attorneys said the prenup was legally sound. A California attorney will make the final determination regarding the prenuptial agreement’s validity. This may be critical in determining the enforceability of the document later. An attorney will confirm that both parties have signed willingly, that witnesses are properly stated and the proper disclosures are made. The attorney will also confirm that the prenup contains only valid provisions. It is impossible for anyone who is not a licensed attorney to accurately make these assessments.
How to Personalize Your California Prenuptial Agreement Model
After downloading your chosen template, it’s time to make sure that the agreement contains provisions specific to your particular situation. Consider the following tips to give the most common issues a thorough review:
1. Specific Assets
Most templates contain broad language about separate and community property. But the reality is that when two people marry, they will likely have some separate property (from before the marriage) and then produce community property during the marriage. So, you may want to make sure that the specific assets are clearly identified and address things such as how any appreciation in the value of separate assets or any rental income from those properties will be treated.
2. Individual vs. Marital Payments
It seems simple, but there could be gray areas that a judge would need to interpret should the couple divorce. So, be sure to identify the source of the "possessor’s" funds if he or she were to buy a new home. Is it from separate funds or marital funds? Is it an apportioned amount of separate funds so that both parties can benefit if one of them dies or divorces?
3. Specific Debts
As above, the parties should specifically enumerate debts and other financial obligations. How are debt obligations being divided? Will a spouse’s premarital debts remain the other spouse’s responsibilities also in the event of a divorce?
4. Marital Property Changes
The biggest issue for many people is not so much the property each one brings to the marriage, but what if any will be considered joint property. Will the bank accounts and assets that they create after the wedding be considered marital property? Or will those items be divided in accordance to whose funds were used to procure them?
It is crucial that any prenuptial contract accurately reflect what you intend for the future, so being specific is always better, according to the section below from Entrepreneur:
For example, what if the spouse who earned $10,000 a month is unemployed during much of the marriage, and the earning spouse is the only one making mortgage payments? A prenup specifying the appreciation of the value of the property will help in this case.
Try to be as detailed as possible when addressing individual property rights and the dividing of responsibilities for maintaining and paying for property. If there is a concern that one spouse might try to sell the property without the other’s consent, then consider adding provisions that specify "consent" so that there is no room for interpretation.
Wrap-Up: Ensure Your Protection with a Prenuptial Agreement
In conclusion, the benefits of using a prenuptial agreement template in California far outweigh the disadvantages. A prenuptial agreement can provide legal protection for both partners in case of a future divorce, as well as a peace of mind that can only come from knowing that certain financial and personal matters are already agreed upon. However , it is important to remember that a template may not cover all the specific needs of a couple, and having a lawyer to review or create a customized agreement can be invaluable. Either way, a prenuptial agreement is a powerful tool that every engaged couple should consider when getting married in California.