Prenuptial Agreements – A boon or a curse?
February 27, 2018|
By: Alliah Bader and Brinda Gandhi
It is a lawyer's responsibility to give thoughtful, conservative advice that protects clients from potential legal consequences, in all areas of life. Family law attorneys are reminded every day that most people never consider that their relationship might one day fall apart and, if it does, what the outcomes might be. When writing wedding vows and planning for the future, most people do not consider what might happen in terms of their property, debts, or even support obligations, if the marriage fails.t
As family law attorneys, we see that many issues that arise when a couple is seeking a divorce could have been dealt with before the marriage even began, with a pre-marital agreement (or prenup). Unfortunately, between what people see on the news, social media, television shows, and within their own families, there are some negative stereotypical ideas about pre-marital agreements. A pre-marital agreement is definitely not a very romantic subject: two people working together to draft a document for the eventuality that they are no longer one unit. However, crafting such an agreement can actually strengthen your relationship. Marriage is at its core a partnership and learning how to deal respectfully and constructively with each other about finances is a foundation that most couples do not have. Nor do they try to establish any stepping stones prior to the special bonds of matrimony.
In California, the Uniform Premarital Act (UPAA) was codified as Family Code Sections 1600-1617 - it governs the construction and enforceability of pre-marital agreements. In general, this law states that written prenuptial agreements signed by both parties will automatically become effective once the couple marries. Prior to its adoption, the courts looked upon pre-marital agreements with suspicion. As a matter of public policy, it was believed that pre-marital agreements promoted divorce. That view has shifted significantly, and today they are viewed as supportive of the marriage institution, especially in cases of second marriages. Note, the UPAA also applies to registered domestic partnerships.
One of the more important issuing surrounding pre-marital agreements is the ability to enforce it. The amendments to the UPAA that apply to all California pre-marital agreements made after 2002 state that agreements will be enforceable only if the spouse: (1) received complete information about the other spouse’s property and finances prior to signing the agreement; (2) had at least 7 days between first receiving the agreement and signing it; and (3) was represented by a separate attorney when signing the agreement, unless the spouse: received full information in writing about the terms and basic effect of the agreement, including any rights and obligations the agreement would nullify, and signed a separate document acknowledging receipt of such information, identifying the person who provided the information, and expressly waiving the right to an attorney.
The California Courts often take the opportunity to clarify statutory requirements affecting the enforceability of pre-marital agreements. Most recently, the California Court of Appeals reiterated that under Family Code Section 1615(c)(2), a premarital agreement is involuntary, and thus invalid if an unrepresented party had fewer than seven days to review the agreement before it was executed.
In In re Marriage of Clark and Akel, Matthew Clarke and Claudia Akel were engaged to be married on March 7, 2008. Matthew retained attorney Clifford Chernick to represent Claudia in the negotiation and execution of a premarital agreement. Matthew did not believe he needed an attorney himself and never sought the advice of an attorney regarding the agreement. Matthew downloaded a form premarital agreement online on February 26, 2008 and sent drafts to Claudia’s attorney to review. Among other things, the draft agreement provided that Matthew owned real property, that the property would continue to be Matthew's separate property after the marriage, that the property would become community property “after 7 years of marriage,” that Claudia would own a two-percent interest in the property for every year they were married if the couple divorced before seven years of marriage, and that “Claudia and any children will have lifetime tenancy in the house.”
On March 3, 2008, Matthew emailed a revised draft of the agreement to Chernick's office, which contained the same provisions regarding the real property as the original draft. Attorney Chernick met with Claudia and Matthew in person on March 4, 2008. Chernick advised Matthew he should seek independent legal counsel, but Matthew told Chernick he was able to represent himself. Claudia’s attorney sent a final agreement to both parties on March 5, 2008. The agreement contained language stating each party had seven days to review before signing. On March 6, 2008 the parties signed the agreement, and Matthew signed a waiver of legal counsel. After the couple divorced years later, Claudia sought to enforce the agreement.
The trial court concluded that under In re Marriage of Caldwell-Faso & Faso (2011), the Family Code does not permit enforcement of a premarital agreement against a party not represented by counsel during negotiations unless the party had seven calendar days between being advised to seek counsel and receiving the agreement, and signing the agreement. Further, Family Code Section 1615 requires that an unrepresented party must execute a written waiver of rights they relinquish under the agreement. Here, the final draft of the premarital agreement was sent to Matthew by attorney Chernick on March 5, 2007 and included significant provisions that were not a part of the initial draft prepared by Matthew himself. Less than seven days passed between Matthew’s receipt of the final agreement with advice to seek legal counsel, and the time the agreement was signed. Matthew was also not provided with, nor did he sign, a written waiver acknowledging the rights he relinquished under the contract. In re Marriage of Clarke & Akel, No. A149052, 2018 WL 524777, at *2 (Cal. Ct. App. Jan. 24, 2018)
This is a shining example of how for a pre-marital agreement to be enforceable in California, the Courts look to be sure that a number of important conditions are satisfied. If you and your partner decide it is in your best interest to create a pre-marital agreement, you can include as many issues or as little issues as you want. If the only thing you want your agreement to achieve is to protect your pre-marital property, you can limit your pre-marital agreement to that issue. Or if the main thing you want your agreement to achieve is to detail what would happen after your death (in addition to a will or trust), you can limit your pre-marital agreement to that issue as well. Barring a few issues like waiver of child support, unconscionability and matters barred by public policy, you can have the agreement cover everything that could possibly arise in a divorce. The most important aspect of drafting this agreement, is the surety that it will be upheld and enforced should unfortunate time come that it needs to be pulled out of the archive files.
The importance of having independent counsel in these matters is evident from the language of Family Code Section 1615. See the full text of the statute here:
- A premarital agreement is not enforceable if the party against whom enforcement is sought proves either of the following:
- That party did not execute the agreement voluntarily.
- The agreement was unconscionable when it was executed and, before execution of the agreement, all of the following applied to that party:
- That party was not provided a fair, reasonable, and full disclosure of the property or financial obligations of the other party.
- That party did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided.
- That party did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.
- An issue of unconscionability of a premarital agreement shall be decided by the court as a matter of law.
- For the purposes of subdivision (a), it shall be deemed that a premarital agreement was not executed voluntarily unless the court finds in writing or on the record all of the following:
- The party against whom enforcement is sought was represented by independent legal counsel at the time of signing the agreement or, after being advised to seek independent legal counsel, expressly waived, in a separate writing, representation by independent legal counsel.
- The party against whom enforcement is sought had not less than seven calendar days between the time that party was first presented with the agreement and advised to seek independent legal counsel and the time the agreement was signed.
- The party against whom enforcement is sought, if unrepresented by legal counsel, was fully informed of the terms and basic effect of the agreement as well as the rights and obligations he or she was giving up by signing the agreement, and was proficient in the language in which the explanation of the party's rights was conducted and in which the agreement was written. The explanation of the rights and obligations relinquished shall be memorialized in writing and delivered to the party prior to signing the agreement. The unrepresented party shall, on or before the signing of the premarital agreement, execute a document declaring that he or she received the information required by this paragraph and indicating who provided that information.
- The agreement and the writings executed pursuant to paragraphs (1) and (3) were not executed under duress, fraud, or undue influence, and the parties did not lack capacity to enter into the agreement.
- Any other factors the court deems relevant.
Any couple considering long term commitments should give a second thought to preparing a pre-marital agreement. If nothing else, addressing such an important issue like finances could be the first step in laying a solid foundation for marriage.
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