Do you need a premarital agreement?

A premarital agreement, also known as a prenuptial agreement or "prenup," is a legally binding contract that is entered into by two people prior to getting married. It outlines how certain financial and property matters will be handled in the event of a divorce or the death of one spouse.

There are several factors to consider when deciding whether or not you need a premarital agreement. Some common reasons that people choose to have a prenup include:

1. To protect pre-existing assets: If you or your future spouse have significant assets, such as a business or real estate, a premarital agreement can help to protect these assets in the event of a divorce.

2. To define financial responsibilities: A premarital agreement can specify how financial matters, such as bills and debts, will be handled during the marriage.

3. To address potential inheritance issues: If you or your future spouse has children from a previous relationship, a premarital agreement can clarify how inheritance will be handled in the event of your death.

4. To address future financial goals: If you and your future spouse have different financial goals or expectations, a premarital agreement can help to clarify these expectations and ensure that both parties are on the same page.

Ultimately, the decision to have a premarital agreement is a personal one that depends on your individual circumstances. It is a good idea to discuss the idea with your future spouse and consider seeking legal advice to determine if a prenup is right for you.

Do you own rental property? Are you getting married?

It is important to get a premarital agreement in California if you own a real estate development business before marriage.

If you manage your properties during marriage, the profits may become in part community property entitling your spouse to some of the rental income or alternatively you could be imputed with a reasonable wage that the community should be entitled to based on the use of your time energy and effort towards the rental properties. If you previously worked in a business and now are only a passive investor, then your assets are protected but if you actively manage any properties then under Van Camp v Van Camp (1921) 53 CA 17 the court allocates to the community reasonable compensation for the efforts of providing spouse or RDP (if they had not already received such compensation). The balance of profits or increased values attributable to normal earnings on separate property investment will go towards separate property.

A prenuptial agreement can protect both parties from any potential disputes regarding division of assets after divorce and also help both parties understand their rights regarding ownership before entering into marriage. This helps avoid costly litigation down the road by providing clarity about who owns what prior to getting married. It also sets out how financial decisions should be made when it comes to investments done together during marriage which can save considerable time and money later down the line.

Getting an enforceable prenuptial agreement in California is essential for couples who intend on starting businesses together or have existing ones prior to entering into marital union since it provides legal protection for all involved parties regardless what happens afterwards!

What is a Postmarital Agreement?

A Postmarital Agreement, sometimes called a Postnuptial Agreement, is an agreement created by a couple during their marriage for many of the same reasons that an engaged couple creates a Premarital Agreement: to govern their financial lives during the marriage and to determine what will happen in terms of property division and spousal support if they should divorce.   

Requirements

There is an additional enforceability hurdle for couples wishing to enter into a Postmarital Agreement: as spouses, they are subject to a set of fiduciary duties that do not exist for fiancés.   This includes the duty not to take financial advantage of the other spouse.  Because a Postmarital Agreement usually includes some circumventing of community property law, the Agreement is going to be subject to a presumption that one spouse is taking advantage of the other.

So while Postmarital Agreements do not appear to be expressly governed by California Family Law section 1600, case law has confirmed that the same rationale applies when enforcing them:  each party must sign “freely, voluntarily and intelligently.”  

In order to avoid the presumption of unfair advantage, most professionals believe that it is imperative that both spouses be represented by attorneys and that all steps be taken to show that both spouses signed the agreement freely, voluntarily and with full knowledge of rights he or she could be giving up. 

If you are interested in a pre or post nuptial agreement, you can contact me at Amanda@gordonfamilylaw.com for more information.

What can't I include in my prenup?

You can protect your property, define your marital rights, limit litigation upon dissolution, and limit litigation on death.  For example, you can waive pension rights, waive property rights, and may even waive probate rights. You can also prevent your spouse from taking a stake in your business or equity. 
Here are some examples of provisions that you cannot do and that have been found unenforceable by California courts:

(1)   Provision for liquidated damages if Husband had a sexual affair during the marriage.

(2)   Clause that made Wife pay a financial penalty if Husband’s drug addiction reoccurred

(3)   Prenup that gave Wife more money if she refrained from placing Husband in a nursing facility when he lost the ability to make decisions.

If you are drafting a premarital agreement and have questions,  you can contact me at Amanda@gordonfamilylaw.com for more information.

Prenups are smart. Here are some reasons why:

• You can opt out of the default California law and prevent your spouse from getting credit for the time, skill, and effort that you put into managing your money during the marriage. A prenup can ensure that any increase in value of property acquired before marriage stays with that person.  For example, let’s say you have stock worth $100,000 but after you get married you buy a bunch of Facebook or Uber stock. Now, five years into marriage, your stock portfolio is worth $600,000.  A prenup can ensure that the increase in value stays with you. Without a prenup, you would have to split the increase in value with your spouse.
• You won’t be stuck with your fiancés debt. A prenup can protect your assets from creditors - which is something the default rules do not protect for. If your fiancé has significant credit card debt, a prenup can ensure that creditors stay away from your property.
• You won’t have to worry about creating a partnership interest for your spouse in your business. The default in California law is that your spouse accrues an interest in your business over the course of marriage. A prenup can prevent your prospective spouse from becoming an unwanted business partner at divorce.
• You can ensure that choices like relocation, raising a family, and supporting your spouse during grad school are recognized and compensated appropriately in the event of divorce.

If you are drafting a premarital agreement and have questions,  you can contact me at Amanda@gordonfamilylaw.com for more information.