Daily Archives: October 14, 2013

Prenuptial Agreements (“Prenups”) are becoming increasingly common for couples who want to provide certainty to their financial and legal issues, not just high net worth couples. A Prenup identifies what assets are separate and community property, how retirement and business ownership is handled, and whether and how much alimony is appropriate, in the event of divorce or death.

While California law specifically allows for a Prenup and outlines what needs to be followed to ensure the Prenup is voluntarily entered into and enforceable, there remain grounds for challenging the validity of the agreement of which we need to be mindful. Here are five conditions we need to avoid:

1. The Prenup is rushed and not voluntary

California has a “7-day waiting period” before the Prenup can be signed – a cooling off period. After presenting the Prenup to your fiancée, 7 FULL days must pass (excluding the day it is presented and the day you both sign) before you both can sign the Prenup. Additionally and when possible, the Prenup should be signed/notarized 30 days before the wedding, or even better, before wedding invitations are sent. The further in advance of the wedding the Prenup is drafted, negotiated and signed, the better.

2. Fraudulent

Obviously, if you tricked your fiancée into signing the Prenup, where she or he did not know what they were signing, or forged their signature,if will not be enforceable. APrenup requires each spouse to make full and open financial disclosure of their net worth. If there is a material misrepresentation of income, or assets if would provide a basis for challenging the agreement. So be certain your financial disclosures are comprehensive.

3. The agreement was coerced, signed under duress or signed without mental capacity

Coercion, duress, or lacking mental capacity can be extremely difficult to prove and are dependent on all the facts. But if it can be demonstrated that your fiancée lacked mental capacity to understand the Prenup when you signed it – for example, if you were ill or under the influence of drugs — this may be a sound reason to invalidate it. Also, if you were told to “sign the Prenup or else…”, or “I am going to take the kids and leave the state,”these actions would definitely be a basis for challenging the Prenup.

4. One party signed without proper legal representation

Both parties to a Prenup should have separate and independent counsel. You never want to be in a position trying to enforce the Prenup and hear the words, “I signed the Prenup but I did not understand it.” With regard to limiting or restricting alimony or spousal support, that section will be thrown out if an attorney did not represent the party seeking to obtain the alimony. Therefore, each party should have separate counsel – a California Bar-certified attorney.

5. The agreement contains offensive or questionable provisions. . . or is simply too one sided

Even though divorce court judges are typically disinterested in most peculiarities of individual contracts, there can be factors that raise eyebrows. For instance, if your Prenup states no child support whatsoever will be paid in the event of a divorce or determines who gets custody of the child, it is likely to be thrown out. The courts always look out for the best interest of the child and will make that determination at the appropriate time; not allowing the couple to make the determination years in advance. Additionally, sections in the Prenup about weight gain, hair color, frequency of sexual relations, visits by in-laws are likely not to hold up in court, either.

In Summary in order for a Prenup to be effective, be conservative, ensure the agreement is balanced, and both couples must have their own separate attorney. Additionally, the Prenup should be:

• Written – Oral Prenups are not valid.
• Full Fair and Open Disclosure –if you hide assets and/or liabilities, you run the risk of invalidating the Prenup.
• Executed voluntarily and without coercion – a Prenup that’s signed the day before the wedding can be invalidated.
• Conscionable – a Prenup cannot be unconscionable. In other words, the Prenup could be invalidated if the agreement is unbalanced, with one party awarded almost everything and the other receiving only a pittance, or with terms that would “shock the average persons’ conscience.”
• Properly executed – executed by both parties, in front of a notary.

In drafting a Prenup keep these reasons in mind –it’s critically important to consult with California attorneys who have the expertise to help you navigate these sometimes choppy waters and plan for a secure financial future.Address the items you want to protect, but be balanced and fair.