Tag: Prenuptial Agreements

A prenuptial agreement (“prenup”) is a document that sets forth what will happen to your assets in the event of a divorce, separation, or death.

A prenuptial agreement can preserve and maintain the separate nature of property, instead of being subject to community property or the laws of equitable distribution.

Prenups have been around for thousands of years and were necessary for women in the United States during the 19^th Century – up until the Married Women’s Property Act of 1848.

Before the act became law, the prenup required that everything a woman owned or inherited had to be transferee to her husband. In the event that he died or divorced her, she could possibly lose everything.

Today, prenups are becoming more popular for a variety of reasons. There are more women in the workforce today with accumulating wealth. Men and women are getting married later in life, focusing on careers and acquiring property and financial independence along the way.

Prenuptial agreements are also popular when one partner has children from a former marriage and wants to make sure his or her separate property goes to those children.

Prenups are often used to protect the assets of wealthy spouses or preserve a family business. There is a long history of premarital agreements used to protect a wealthy spouse often at the expense of the other spouse.

History of Prenuptial Agreements

Originally, prenuptial agreements were studied carefully by judges because they were traditionally used to protect the property of wealthy individuals from less fortunate marriage partners. There were instances where the partner with fewer means was coerced into signing the agreement, and this often led to dissolved marriages.

Today, divorces are more prominent, and women are less vulnerable and have an equal footing in society. They don’t need as much protection as before, and most prenups are upheld.

But deciding whether or not to have a prenuptial agreement can be a difficult decision. There are many pros and cons to consider.

What A Prenuptial Agreement Covers

• The prenuptial agreement can protect the assets of one party while also protecting against assuming the debts of the other party.
• The prenup clarifies financial responsibilities during the marriage, avoids costly disputes in the case of divorce, and determines how a property will be passed on upon death.
• Prenups preserve family ties and inheritance; it keeps family property in the family.
• The agreement ensures that your estate will be settled according to your wishes used (along with other documents like Will and Living Trust)
• This agreement puts financial expectations on the table and forces partners to face financial issues that need to be faced.
• The financial well-being of children from a previous marriage is protected. The agreement spells out which assets a spouse may give to children or other family members if a death occurs.

What It Does Not Cover

• A prenuptial agreement is certainly not romantic. It can cause a great deal of stress.
• It may be thought of as a lack of commitment and an expectation to divorce at some point. It can lead to a lack of trust and resentment between spouses. Some people may look at the process as planning the divorce before planning the wedding.
• A prenup may be found to be invalid due to non-disclosure of all assets or evidence of fraud, duress or lack of representation.
• Prenups cannot contain provisions or instructions regarding anything illegal. Such provisions might jeopardize part or all of the agreement.
• A prenup does discuss financial issues, but it may not contain issues regarding child support or child custody. The court determines such issues based on the “best interests” of each child. For example, a prenup cannot dictate visitation rights or a child’s right to financial support or relationship with a parent.
• A spouse cannot waive a right to alimony. While some states do allow such waivers, most states do not or at least limit this ability.
• A prenup cannot use language that tends to offer a financial incentive for divorce. It is in the interest of the courts and society in general to limit divorce. Any provisions to divide property in a way that encourages divorce will not be accepted.
• The agreement must be financial, and not personal. It should not discuss child rearing, use of names, specified chores, vacation rules, or relationships. Mention of private domestic matters can lead to the rejection of the agreement.

What Makes It Invalid?

In addition to the above items which are not covered and can lead to rejection of the prenup, here are some more reasons.

• The prenuptial agreement must be in the form of a written document. If not, the agreement is not enforceable.
• The agreement must be properly executed and signed by both parties.
• The agreement is invalid if one of the spouses felt pressured to sign, by the other spouse, attorney or member of the family.
• The agreement was not read. Sometimes a spouse is given a pile of papers to sign, and this particular agreement is one of them and doesn’t get read. Or the spouse isn’t given enough time to read and understand the agreement. Either of these is grounds for making it invalid.
• Any false or misleading information, as well as incomplete pertinent information, can make the agreement unenforceable.
• Both sides should have independent representation and counsel. Some states require this. Having your own attorney is the best way to ensure your own particular interests are being represented. Without independent counsel, the agreement may not be enforceable.

The State Laws

States have different laws concerning prenuptial agreements and the distribution of property upon divorce. Community property states have rules that divide accumulated property equally.

Community property states include Arizona, California, Louisiana, Idaho, Nevada, New Mexico, Texas, Washington, Wisconsin, and the territory of Puerto Rico.

Other states have policies of dividing property assets on an equitable distribution basis.

For example, a judge may distribute property by giving the wealthier spouse a portion like 2/3 and the other spouse, 1/3 of the combined property. You should consult your own state to determine its specific rules governing distribution.

What to Consider When Creating A Prenuptial Agreement

If you and your spouse both think that a prenuptial agreement is a good idea for you and your situation, there are some things you should consider to make the experience a positive one.

Be honest with each other and considerate of each other’s feelings. This can be a very tense and emotional experience. You don’t want to jeopardize your marriage before it gets started.

You shouldn’t hide your emotions or disguise your feelings. Being open with one another is an important first step.

Discuss it early on, and don’t wait until just before the wedding. Walking down the aisle leaves little time for discussion.

Once you decide on the process, you should each hire separate attorneys and ask them for an affidavit of independent legal counsel. Keep this with the other forms you fill out as part of the prenuptial proceedings.

A good prenuptial arrangement should serve both your interests and leave you free to enjoy your relationship on a more personal level.

No one gets married with the intention of getting a divorce, but it happens – there are nearly a million divorces every year in the US. And with divorce comes the complicated process of splitting up two lives. If there are children, there are custody and child support concerns. There may be spousal support issues. Dividing up the assets the couple has accrued or brought into the marriage is also complex – it’s just not an easy process. That’s why couples use prenups (prenuptial agreements) – they agree in advance on how to unwind the financial aspects marriage so that in the case of divorce, the process is as painless as possible. The law on prenups is determined by each state, so let’s take a look at the rules in California.

How Prenups Work

A prenup is a contract that you sign before you get married. Prenups cover how the marital assets and debts will be split up in the event of a divorce. Generally, they cover the assets each partner brings into the marriage (usually stating that those assets will stay with the original owner) and the assets accrued during the marriage. Prenups can cover what happens to a marital home, car, or other property. They can also cover the division of marital debt. If one partner has student loans, for example, a prenup can address whether that debt will stay with the partner that accrued it or whether it will be split between the two.

Note that while prenups can cover pretty much any aspect of your finances, they cannot cover child custody or child support issues. The court will decide those issues based on what’s best for the child.

Prenuptial Agreement California Law

In California, prenups are governed by the Uniform Premarital Agreement Act of 1986 (UPAA). UPAA sets out certain basic requirements for the agreement to be valid. First, prenups are subject to the basic rules of contract law – both parties must be mentally competent to consent and must actually consent. The agreement is invalid if either party gives consent based on fraud or mistake (lying or making misleading statements about relevant information or genuinely misunderstanding the information or the agreement). If one of the spouses is not proficient in English, the agreement has to be translated to that person’s native tongue.

Finally, the agreement cannot be “unconscionable.” That means it can’t be the result of seriously unequal bargaining power. For example, imagine a prenup between a US citizen and a non-citizen that leaves almost all of the property to the citizen. The court may find that agreement to be unconscionable because the parties had unequal bargaining power – the non-citizen may have feared the loss of the chance at citizenship if he or she did not agree to the prenup. In general, the court will scrutinize any agreement that unduly favors one party.

• each partner must either have independent legal counsel or waive the right to independent counsel before signing the agreement
• if a partner is not proficient in English, the agreement must be translated to that person’s native language
• the agreement cannot be unconscionable – it can’t be the result of seriously unequal bargaining power and it can’t unreasonably favor one party

In addition to those general requirements of contract law, UPAA contains a number of provisions specific to prenups:

• both parties must have complete information about the finances and property of the other partner
• each partner must wait a minimum of 7 days after receiving the prenup before signing it
• each partner must receive full disclosure of the terms, rights, and conditions of the prenup
• each partner must either have independent legal counsel or waive the right to independent counsel before signing the agreement

If a party wants to waive their right to counsel, they must have complete information about the potential consequences of that decision. They’ll also need to sign a document separate from the prenup stating that they’ve received that information and want to waive their right to counsel. The document must also identify the person that provided them with the information about the consequences of the waiver.

Community Property And Inheritance

California is a “community property” state. This means that in the absence of a prenup, the property owned by each partner before the marriage will go back to that partner and property accrued or shared during the marriage will be split evenly. With a prenup, the couple can agree either to treat separate property as community property or community property as separate property.

Another aspect of the community property laws in California affects inheritance rights. You can create a will in California, but there are rules about spousal inheritance that will be enforced regardless of what’s in the will. Even if you expressly state that you don’t want your spouse to receive anything after your death, the court will still award him or her half of your community property. Prenups allow you to waive or alter your inheritance rights, as long as it won’t negatively affect your minor children.

Limits To Prenups In California

There are certain issues that prenups in California cannot address, usually due to public policy concerns. Provisions about child custody or how to raise children aren’t enforceable. Provisions about child support are also unenforceable, unless the provision is about providing more support than what the court orders – paying for a college education or supporting an adult child, for example. Prenups also can’t include provisions that penalize one partner for fault. For example, you can’t decide that one spouse will get nothing in the divorce if he or she is unfaithful.

Finally, even if all of the provisions of the prenup are theoretically valid, the court may examine the agreement and alter it or decline to enforce parts of it if they find that it’s extremely unfair in the first place or if one partner benefits way more than the other partner.

Getting A Prenup

There are a number of reasons to sign a prenup. First, they can help each partner protect valuable assets. They also allow couples to sit down and decide on a fair disposition of any assets while there isn’t any conflict – decisions made with cool heads are more likely to be fair and reasonable than decisions made in the heat of a contentious divorce. Finally, they make the divorce process much simpler. Most or all of the complex financial decisions associated with a split have already been made.

The rules governing prenups in California are complex and you’re generally required to have legal counsel to make sure that the agreement is fair and that you understand all the terms and conditions. If you’re getting married, congratulations! And you should consider consulting with an experienced local attorney to discuss whether a prenup is right for you.