Effects of Prenuptial Agreements on Community Property
California is a community property jurisdiction. Which means that there is a presumption that all the assets and debts that are attained during the marriage are community in nature, belonging to both husband and wife. This is only a presumption and it can be rebutted under certain circumstances. Our divorce lawyers often receive questions about how to protect their assets before or during their marriage.
We have created this brief overview of pre/post-nuptials, in an effort to help all of our potential Los Angeles clients. If you have additional questions about how pre/post nuptial agreements might affect your community property rights, call Berenji & Associates today for a case evaluation.
Prenuptial Agreements
One way that the parties can circumvent the effects of the community property presumptions is with a Premarital Agreement. These Agreements are entered into before the wedding.
California has some specific requirements that must be followed in order to make sure that these agreements will not be set aside by the court once the parties separate. When entering into these agreements it is very important to understand what terms you can and cannot enter into.
So long as the terms of your Agreement are not uncontainable or promote a divorce then parties to the agreement can:
- set limitations on how their estate will be divided at separation;
- how their debts will be divided at separation;
- the amount and duration of spousal support;
- treatment of assets during the marriage.
The issue of child support and custody/visitation cannot be limited. This is because California courts wants to ensure that minor children are adequately supported for, based on the parties respective incomes, at the time of separation. For custody, the best interest of the child is used to determine custody/visitation – what is in the best interest of the child at the time of marriage might not be the same at the time of separation.
The courts have continuing jurisdiction over child support and custody/visitation until the child is emancipated and one cannot set limits on these two issues in the Prenuptial Agreement.
Procedural Requirement of Prenuptial Agreement
When entering into a Prenuptial Agreement it is important to make sure that you follow certain procedural requirements, if you don’t the Agreement can be set aside at a future date if there is a dispute over its enforceability.
First, the Agreement cannot be given to the other party very close to the wedding date. The idea is that one side might be forced into signing an agreement even if they don’t want to because they are on the eve of their and if they don’t sign then the wedding will be cancelled. A spouse might be forced to sign the Agreement in order to avoid the shame they and their family might face if the wedding is cancelled.
This rule is in place to prevent one spouse from taking advantage of the other by using the threat of the wedding being cancelled as a tool to force the other into entering an unfair agreement. This rule is also in place to give an opportunity to the one who is receiving the Agreement to consult an attorney if they wish to do so.
There are cases that have determined that these Agreements must be given at least 7 days prior to the date of wedding. However, in practice it is recommended that the Agreements be given to the other side much longer than 7 days before the date of the wedding to avoid any arguments that the Agreement was given to close to the date of the wedding.
Second, the person who presents the Agreement to their soon to be spouse, has probably hired an attorney in advance to draft the Agreement. They have probably had an opportunity to consult an attorney and go over their legal rights and the effect of the Agreement on their rights. The person receiving the Agreement also has the right to consult an attorney of their choice to do the same but they are not required to do so. If the person receiving the Agreement decides not to hire an attorney to be advised of their rights, then there has to be a separate Waiver of Counsel document that must be signed by that individual. The Waiver of Counsel form cannot be part of the Agreement.
Third, the parties must exchange financial disclosures, identifying their income, assets and debts to ensure that each side is making a knowledgeable decision about their rights based on the other’s financial situation.
As stated above, the Agreement cannot be uncontainable nor can it promote a divorce. These are concepts at opposite extremes. If the Agreement is so lopsided and so unfair to the one spouse then it can be set aside. Inversely, if the Agreement puts one side in a much better financial situation if the parties get divorced then it can also be set aside.
California law is based on the notion of promoting a marriage and if the agreement promotes a divorce then it can be set aside. For example, if a wife stands to receive much more money if they get divorced versus staying married then that Agreement will probably be unenforceable. Some Agreements have cheating clauses which financially punish one spouse if they commit adultery during the marriage.
These clauses are enforceable and would not render the Agreement void because it is the act of adultery which gives rise to the financial advantage to one spouse, not just a divorce. Also, this clause promotes marriage by pressuring the couple to stay faithful to one another consistent with California public policy to promote marriages.
Post-Nuptial Agreements
These agreements are very similar to Prenuptial Agreements except for the fact that they are being entered into during the marriage. Once the Parties are married they have a fiduciary duty to one another which makes the disclosure more important. For example, while entering into a Prenuptial Agreement you must state the assets you have at the time of marriage while in a Post Nuptial Agreement you must disclose any potential interest you might have in upcoming transactions.
The idea is that you are already married and the presumption is that you have a fiduciary duty to your wife to disclose what assets you have at that time and any future assets you might attain. Since you are married at the time you enter this Agreement, what you have is probably community and what you are going to attain is going to be community property as well, so full disclosure of current and future financial interests have to be made. This is to avoid one spouse who knows they are about to come into a lot of money to divest the community estate of any benefits they would otherwise have if the Agreement was not signed.
Berenji & Associates
9595 Wilshire Blvd Ste 959
Beverly Hills, CA 90212
(310) 271-6290