Prenup Q&A

A prenuptial agreement allows both spouses to separate their property and protect it in the event that they choose to end their relationship. They also allow both parties to distinguish what is agreed upon as being marital property and what is community property. There are several benefits resulting from this process:

1. You will avoid major conflicts during a possible divorce (and spare pain to all the parties involved, including children who won’t have to assist to infinite and fierce fights among the parents).
2. Being able to avoid lengthy court proceedings (which reduces the expense of the divorce).
3. Assigning debt to the appropriate spouse (this can help you avoid debt liability and a destroyed credit report with the concurrent inability to make major purchases or borrow money at a reasonable rate).
4. Discussions surrounding the prenuptial agreement and its provisions often help couples get on the same page before they walk down the aisle and commit their lives to one another. Even if you do not agree on a prenuptial agreement, discussing the issues involved in a prenup can benefit your relationship.

Many couples do not have the answers to one or more of the issues which will be brought up in this type of agreement. If the timing is not right, a family law attorney may be able to help you with a “postnup” after you are married.

To speak with one of our Prenuptial Agreement attorneys today, please call (619) 793-4827.

San Diego Biz Law we can help you, offering complimentary initial consultations to those who are interested in a prenuptial agreement yet may not be sure if it is right for them. Some preliminary aspects that you may want to take into consideration are whether:

• You own real estate
• You have over $50,000 in assets
• You own part of a businesses
• You earn more than $100,000 annually
• You have employment benefits (i.e. profit sharing or stock options)

The expert attorneys at San Diego Biz Law will walk through the prenuptial agreement process with you and will provide you with the guidance and clarity you need to ensure that your rights are protected.

To speak with one of our Prenuptial Agreement attorneys today, please call (619) 793-4827.

Even though one in ten couples enter into a prenuptial agreement, many fiancés remain reluctant to consider a prenup because they believe it seems unromantic and indicates a lack of trust. There are several reasons why this reluctance is misplaced.

1. It allows you and your fiancée/ fiancé to gain control of finances, instead of letting them be governed by a complex set of laws that will cost you possibly hundreds of thousands of dollars to unravel. In California, these laws are the California Family Code and Probate Code. And remember, prenups can be drafted to protect both spouses, not just a wealthy spouse.
2. It will improve the communication amongst the partners. The process of drafting and negotiating a prenuptial agreement will, in fact, strengthen your relationship. The process requires full disclosure of your financial situation and involves an open and honest discussion about how you will handle your money and plan your future. Full disclosure (a great display of trust) on one hand, and open discussion to know each other better on the other hand. (‘What do you mean, you don’t do dishes?’)”. Also, prenups prepare you for marriage. Money is an argument that you will definitely, and often, face with your partner. Why not do it now and save potential arguments and trouble later on? One of the biggest challenges that couples face is those that are based on assumptions, like the one about dishes above. There are no less than 50 assumptions that people bring to relationships, and yet, as important as they are, when is the last time you heard of a couple discussing them before tying the knot?
3. Prenups provide peace of mind. No one plans on their house burning down, ending up in a nursing home, or suffering a disability, but they still take out insurance. As Dr. Ruth stated: “We live in such a litigious society. Nobody knows what life brings. Hopefully, we will never need it. What’s the big deal? Let’s do it …”

California prenups cannot regulate child custody or child support – these are areas that are left to the court’s authority based on what is in the child’s best interests and, at least in part on the California Child Support Guidelines. Child support is a child’s right, not a parent’s, so parents cannot contract away a child’s right to support.

Yes, as long as the court will not deem it unconscionable, California law allows to waive or limit spousal support. It is not always easy to foresee what a court may deem unconscionable. Anyway, an example of an unconscionable agreement is a complete prohibition on spousal support when one spouse to the contract has substantially more assets and income. If that spouse tries to enforce the spousal support waiver after a long-term marriage, and the provision would leave the other spouse destitute, a judge may think twice before upholding that agreement. On the other hand, if there is a significant disparity in the amount of wealth between the parties, instead of completely waiving spousal support, one alternative is to place limits on the amount and duration of support. The amount and duration can be based on a formula that takes into account the income of the parties and the duration of the marriage.

In California, combining marriage with business ownership may create complex legal issues that may give rise to heinous fights between spouses. Prenuptial agreements can provide clear and concise instructions on how each spouse walks away from the marriage, leaving the business unharmed in the process. A prenuptial agreement allows the business to be designated as separate property. This means that the other spouse has no claim to the business interests should a divorce occur. For example, there may be no agreement of any kind in place and your spouse may end up with the business. If she or he does, then your ‘previous’ partner may now have the ‘partner from hell’ who can destroy your relationship with that person and even destroy the company as well as your x business partner’s livelihood. A Prenuptial agreement will please and reinforce the relationship with your partners. Although none of their financial interests in the company would be compromised by a partner’s divorce, they are assured that they will maintain the knowledge and expertise of the original partner and that the spouse could not become a decision-maker by staking claim to his or her shares in the event of a divorce. The most obvious benefit and one that is a common refrain to prenuptial agreement attorneys in California is that when someone builds a company from the ground up and marries after its success has been stabilized, that person simply does not want to relinquish their life’s work should they divorce.

No (if designed properly). Our prenuptial agreement attorneys understand that everyone’s marital plan, financial standing, and overall agreement objectives are different. We work with several clients in several settings (Business law, Contract law) and we understand the specific needs of each of our clients. The purpose of creating a prenuptial agreement is to ensure it meets your exact needs, so it serves a genuine legal purpose, and that language will be accurately calibrated to ensure you and your spouse’s needs.

Postnuptial agreements are very similar to prenuptial agreements, but as the title reflects, are created and signed after the marriage is official.

Much like the prenuptial agreement, postnuptial agreements require the following components to be true in order to be enforced, including that the contract is:

• In writing
• Executed voluntarily
• Created with full and/or fair disclosure at the time of execution
• Signed by both parties

Much like its premarital counterpart, spouses may not include child custody or child support matters within the document, as neither is enforceable through a postnuptial agreement.

California community property law provides that all community property (any property acquired during the marriage that is not a gift or an inheritance) is divided equally upon divorce. Whether the property is in the name of one of the spouses usually doesn’t matter, if it is acquired during the marriage it is community property, with very few exceptions. Separate property is owned before marriage (or acquired by gift or inheritance) and it belongs exclusively to the spouse that acquired it and doesn’t fall under the 50/50 community property rule. However, efforts to improve, enhance, or contribute to separate property can bring to a commingling of separate property and create a community property interest in that separate property. This is where a prenup can come into play. A prenup can provide maintain separate property separate, no matter what. This is one of the best aspects of prenuptial agreements; you can share your wealth, so to speak, without losing it. Without a prenuptial agreement, if you share your separate property (ie comingle) you will make it into community property and will most likely lose half of all of what was your separate property at one time (ie the part that was comingled).

If you don’t have a prenup, the determination of what is separate and what is community property often requires investigations involving use of forensic accountants that can trace dates of purchase, purchase prices, contributions, and increases or decreases in value over time. In high-asset cases, the accounting and legal fees over these matters can run into the hundreds of thousands, in addition to the time required to complete the investigations. Moreover, earnings are community property. If you married without a prenup and earned $50,000,000 during your marriage, that entire sum would be community property, and so would be anything purchased with that property.

A prenup can regulate all aspects of how to separate and community property assets and liabilities are treated. In the case of a financially independent couple with their own resources, a prenup can provide that all income, assets, and debts acquired or incurred remain separate property. On the other hand, a couple might agree that all property accumulated during the marriage remains community property, but that certain property brought into the marriage, such as family businesses or funds, always remains separate. Since each situation is different, a prenup should be carefully tailored to meet the circumstances of each couple.

When Steven Spielberg and actress Amy Irving divorced after four years, she argued that their prenup, which was written on the back of a napkin, was not enforceable because she was not represented by an attorney. The judge agreed and she received a $100 million settlement. When Spielberg married Kate Capshaw, both were represented by attorneys. A prenuptial agreement is a legally binding contract, complex and sophisticated document, that can significantly affect your financial future should your marriage end in death or divorce. A lawyer is strongly recommended in order to obtain a legally binding document that will be upheld in court. Moreover, if challenged, the opportunity for both parties to obtain legal counsel will be one of the factors which will determine the outcome.