Jun 6

Prenups & Premarital Agreements: Top Questions and Answers Everyone Should Know

Prenups & Premarital Agreements: Top Questions and Answers Everyone Should Know

IS THERE A DIFFERENCE BETWEEN A “PRENUPTIAL AGREEMENT” AND A “PREMARITAL AGREEMENT”?

There is no difference between a prenuptial agreement (“Prenup”) and a Premarital Agreement as both terms refer to a legal agreement made before marriage.

WHAT IS A PREMARITAL AGREEMENT?

A Premarital Agreement can be entered into by a couple before marriage so that it will become valid upon marriage.

WHY WOULD I WANT A PREMARITAL AGREEMENT?

Property – Premarital Agreements generally deal with property.

Spousal Support – Premarital Agreements can also address spousal support in the event of divorce. For example, the parties can agree to set or eliminate spousal support in the event of divorce. This provision requires both parties be represented by an attorney to be valid. However, even this is not guaranteed, spousal support waiver provision will be evaluated at time of divorce. If its application creates an “unconscionable” result, the spousal support waiver provision will be unenforceable.

Establish that each party’s earnings during marriage will be their separate property and not Community property.

The biggest misconception about prenuptial agreements is that they are necessary to preserve existing assets. In fact, a prenuptial agreement is better suited to alter the assets earned during marriage. California is a community property state. That means assets, and debts, earned or incurred during marriage belong to the parties equally. Income earned by parties during marriage is also community property.

Separate property is the property (assets and debts) earned by an individual before marriage, after separation or that they received by gift or inheritance.

As such, upon divorce the assets and debts that are community property will be equally divided between the parties (even if only one spouse worked during the marriage and the other spouse did not). Likewise, separate property remains the property of the party it belonged to before marriage.

Marriage does not turn separate property into community property.

Prenuptial agreements are regularly used to establish that each party’s earnings during marriage will be their separate property instead of community property.

Often during marriage there may be community assets and separate assets that are “comingled.” There are different rules for separate property used to acquire community property and vice versa. These formulas will not be addressed here but generally follow a pro rata concept of valuation – The community gets the interest proportionate with what it paid and the separate property owner gets the proportionate interest for what he or she paid.

CAN CHILD SUPPORT BE IN A PREMARITAL AGREEMENT?

Child support cannot be in a premarital agreement but the more accurate statement is a Premarital Agreement cannot “adversely affect” child support. Thus, if child support would be $1,000 and the Premarital Agreement says it will be $2,000, that provision will not violate this rule. As such, most attorneys will leave child support out of the prenuptial agreement all together.

ARE PREMARITAL AGREEMENTS LEGAL?

Premarital agreements are legal in California. Agreements entered into after January 1, 1986 are governed by the Uniform Premarital Agreement Act (FC §§1600-1617). After January 1, 1986 they must be in writing and signed by the parties.

WHAT WILL MAKE THE PREMARITAL AGREEMENT INVALID?

Prenuptial agreements are invalid if the terms of the agreement “promote divorce.”

Also, a prenuptial agreement is a contract and contract defenses apply. Contracts entered into “under duress” can be set aside. In the area of prenuptial agreements, it is often not a good idea to hand a prenuptial agreement to the other party 2 weeks before the wedding. This will allow the spouse to dispute the validity of the agreement upon divorce based on duress in the event of divorce. Attorneys prefer for the prenuptial agreement to be addressed many months before the wedding.

A good practice is to get it started 6 months before the wedding date, and to not delay in getting the agreement circulated and finalized. Another good practice is to begin the process before a wedding date is set. That way the “duress” of a pending wedding cannot be asserted.

The idea is that the Court does not favor parties planning to marry, making plans, inviting guests, making reservations, etc., and then having the party with the assets “spring” a prenuptial agreement on the other party at the last minute. This is the essence of “duress” where prenuptial agreements are concerned.