CALIFORNIA PRENUPTIAL AGREEMENT SURVIVAL GUIDE

Everything You Need to Know about California Prenuptial Agreements

CA PRENUP – Prenuptial Experts
www.caprenup.com

Table of Contents

Simply put, a Prenuptial Agreement (also known as a Premarital Agreement) is a contract entered into by you and your future spouse; “an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage”.

Normally, the contract deals with straightforward financial and legal issues in the event of a divorce or a death — what will be done with the house, investments, 401K, alimony and spousal support, or other such marital assets.

It might also include some extras like maintaining life insurance policies, funding of separate accounts, sunset provision terminating the prenuptial agreement, or even what happens to the family pet.

Why a Prenuptial Agreement?

Reason 1 – In California, it is assumed by law that when you are married, half of all earnings, property accumulated from those earnings during marriage including your retirement, as well as appreciation of assets, belong to your spouse upon divorce or death.

Reason 2 – Some laws regarding rights to marital property or the marital home are dependent on many factors. This causes considerable uncertainty as to who will own what if a divorce occurs. The amount of alimony and duration is also dependent on many factors – generally, alimony would last for ½ the marriage term, or possibly longer, if married for over 10 years.

Reason 3 – You can designate your assets as separate or joint property, specifying ownership percentages, according to your intentions. You can also assign alimony terms to restrict or even waive spousal support.

Myth 1: I don’t need a Prenup. I’m going to put my income into a separate account and it will be my separate property. Not true. Without a Prenuptial Agreement, each person’s income, even if put into a separate checking/savings account is considered community property (shared 50/50)

Myth 2: Prenuptial agreements are expensive. Not true. When compared to the monetary cost and emotional toll of a divorce process, a prenuptial agreement is far less expensive and well worth the money. A good way of thinking about a prenuptial agreement is it’s a small one-time cost for something you never hope to use, but if you ever need it, you’ll be glad you have it and it could save you a lot of money.

Myth 3: Prenuptial agreements won’t be upheld by the courts. Not true. California law specifically states that prenuptial agreements are allowed in California. Although care must be taken and specific rules must be followed, when done so the agreements will be upheld. Although courts occasionally do invalidate prenuptial agreements, these are normally ones that were prepared without the help of attorneys or where only one side was represented by counsel, where financial disclosures were not obtained or were fraudulent, orwhere there was coercion in one partner’s signing. If you have a properly drafted prenuptial agreement, attorney representation on both sides, and there is no duress, it is likely that your prenuptial agreement will stand up in court.

Myth 4: Prenuptial agreements are only for the wealthy. Not true. Prenuptial agreements are for everyone. Given the divorce rate and the high legal fees and stress involved in a divorce, a prenuptial agreement can benefit just about everyone. Often times prenuptial agreements call out one or two items to keep separate – retirement, a home brought into the marriage, debt – and leave everything else based on California law.

Myth 5: Prenuptial agreements will cause problems in our relationship. Not true. Being able to sit down and discuss with your partner your future financial plans and expectations for the relationship will lead to a more solid foundation of trust for your relationship.

When approached correctly, a Prenuptial Agreement can be introduced and discussed rationally,revealing its benefits and practicality. Following the outlined roadmap will help you put your actions in the most favorable light.

Point 1: Everyone married in California, in a sense, already has a “Prenuptial Agreement”

California state law – referred to generally as California Community Law- will decide what is each person’s separate property, community property, alimony, and certain inheritance rights. So the bottom line is – everyone really has a Prenuptial Agreement. Unfortunately, the laws are convoluted and complex that often result in unknown and unintended consequences. What you are looking to do in a Prenuptial Agreement is to provide certainty in each person’s entitlements, which may be shared for most things.

Point 2: Start early

Start early! Too often, one party drops the idea of a prenuptial agreement on the other party’s lap unexpectedly and at the last minute. Many people react differently and often need time to process the idea, get educated about what it means, talk with others, etc. Discuss your desire for a Prenuptial Agreement early in your relationship.

Explain what is important to you and the reasons you would like to have a Prenuptial Agreement. Perhaps it’s to protect a business, business partners, family real estate, retirement you have worked so hard to build up, or you experienced a distressing divorce. So whatever the reasons, discuss the idea of a Prenuptial Agreement early in the relationship or talk of marriage.

Point 3: Put yourself in your Fiancée’s shoes

If you had no idea a discussion or idea of a Prenuptial Agreement was coming, put yourself in your fiancé’s shoes. Start small and be receptive to your spouse’s responses. Everyone reacts differently, many are practical thinkers, many emotional feelers. Some people may associate a stigma to a Prenuptial Agreement, thinking their partner has little trust that the marriage will succeed.

These feelings need to be addressed and topics need to be discussed. Actually the discussion and drafting of the Prenuptial Agreement resolves some initial negative, concerning feelings in several ways:

• Fair and Open financial disclosure and discussion of each persons’ rights – This provides a tremendous peace of mind for both parties in a marriage. With decisions about marital assets, support, etc. made in advance, you’ll both feel more secure knowing that your rights (and assets) are protected.
• Security in case of death of a spouse – Prenuptial Agreements can include what happens to martial assets in the event of death, as well as, divorce.
• When issues are resolved and recorded as in the Prenuptial Agreement, there are no surprises as to what each is entitled to.

Point 4: Choose your timing and level of discussion

Friday night after a long, hectic week when everyone is tired is probably not a good time to discuss the terms of your Prenuptial Agreement. Set a date and time in advance so each of you can prepare. Outline what each wished to discuss so expectations are managed. Put a time limit on a discussion, and avoid the pitfall of tryingto discuss every detail at once.

If things get heated, empower each person to use a 5-minute time out flag, if need be.

When you begin discussing the Prenuptial Agreement remember Guide 5!

Point 5: It is NOT ‘all-or-nothing,’ and DOES NOT have to be ‘all-or-nothing’ – Seek balance

Tailor the Prenuptial Agreement to meet your needs, BOTH OF YOUR needs. It does not have to be ‘all-or-nothing.’ Maybe you want to keep each of your retirements separate property during the marriage and let California community property law apply to everything else, except capping the maximum length of alimony payments at a certain time for both parties.

What are the top 2 or 3 of your must-haves? What are you really concerned about protecting? Focus on those points. Also, remember there are always several ways to accomplish your objectives. So if one objective seems offensive, talk through another solution or note the impasse with your attorney; the two of you can come up with a balanced solution.

Point 6: Remain flexible and keep your eye on the big picture

What is it that you wish to protect?There is no need to battle every point…there needs to be give and take. If you get a major concession, ask what is important to your fiancée. Perhaps your fiancée is concerned about being taken care of in the case of your death. One concession may be to include a term life insurance policy in the Prenuptial Agreement during the marriage with your spouse as the beneficiary. Your Attorney should provide sound options for the two of you to achieve your goals.

Point 7: Consider Mediation to resolve tough issues

If you start the discussions about a prenuptial agreement early and the communication lines areopen, you should be able to resolve most issues. If there are one or two points that you cannot agree upon, consider mediation. A neutral third party mediator can help facilitate discussion and assist with options to help you work to an agreeable solution.

Point 8: Discuss the Prenup and work on the terms jointly throughout the process

Involve your fiancée in each step of the process to come up with the terms of the agreement. From discussing your goals, objectives, and reasons…to completing the Questionnaire to provide to the draft attorney. Your fiancé is your partner and should be treated as such. Use the conversation to strengthen your marriage.

Approach the Prenuptial Agreement conversation from the perspective that you to want to make your upcoming marriage stronger by discussing difficult subjects in advance. The more you discuss finances in advance, the less strain you may experience later. Documenting financial resolutions via a prenuptial agreement provides certainty and ensures that there will be no surprises or unintended consequences if things do not work out.

Point 9: You are Not locked in – you can change the Prenuptial Agreement

Remember! You are not locked into the terms of the Prenuptial Agreement, nor should the Prenuptial Agreement be put away and forgotten. If your life circumstances change significantly, or you both have a change of heart on a term in the agreement; you can and should amend the Prenuptial Agreement.

An amendment to your Prenuptial Agreement needs to be in writing and should be completed by an attorney to make sure your intentions are accurately reflected and to make sure the changes do not impact any other sections of the Prenuptial Agreement you did not consider.

• Keep finances separate. California, a community property state, designates certain kinds of assets accumulated during marriage as marital property or community property, even if these assets are held in the name of just one spouse. You can avoid having some or all of your individual accumulations during marriage divided up by a court through the use of a premarital agreement.
• Protect your business. You can include terms regarding management, ownership, and debt of your business. Otherwise you may inadvertently have an additional business partner, your spouse!
• Protect each other from debts. Some of us bring debts, as well as assets, to a marriage. If there’s no Prenup, creditors can sometimes turn to marital or community property to satisfy the debts of just one spouse. You can use a Prenup to limit liability for each other’s debts.
• Give up the right to alimony or restrict alimony. California allows for you to limit or have the parties waive their right to alimony — also called spousal support — if there is a divorce. However, for the Prenup to be effective, both parties must be represented by separate attorneys, and at the time of divorce the Premarital Agreementcannot be viewed as “unconscionable” (shocking or outrageous) to a judge.
• Provide for children from prior marriages. A Prenup is helpful (perhaps essential) if either of you has children from another relationship and you want to make sure that your children inherit their share of your property.
• Keep assets in the family. If your property includes something you want to keep in your family, whether it is an heirloom or a share in a family business, you can specify that item in your Prenup. This can even include assets that you expect to receive in a future inheritance.

There are some things you just can’t — or shouldn’t — do with a Prenup. As a general rule, any agreement to do something that is illegal or against state-defined public policy will be considered unenforceable — and may even jeopardize other valid aspects of the premarital agreement. Here are some things that you can’t do, at least in some states:

• Restrict child support, custody, or visitation rights. No state will honor agreements limiting or giving up future child support. The same holds true of agreements limiting future custody and visitation rights. This is because state lawmakers consider the welfare of children to be a matter of public policy and do not enforce any private agreements that would impair a child’s right to be supported or to have a relationship with a parent in the future.
• “Encourage” divorce. At one time, many courts viewed any Prenup specifying how things would be divided up in case the couple splits as void and unenforceable because it was thought to promote divorce. The modern approach allows such agreements, but judges in some states still take a hard look at them. If the agreement appears to offer a financial incentive for divorce to one party, it may be unenforceable.
• Sanction People for Infidelity, Drug Use or Religious Upbringing. In California, courts have not allowed penalties in Prenuptial Agreements that sanction people for infidelity or using recreational drugs. Court will not enforce requirements that one person will do the dishes or that the children will be raised in a certain religion.

Good news. Prenuptial Agreements are allowed in California and there is a roadmap of rules that need to be followed to make sure the Prenuptial Agreement is valid and enforceable. Prenuptial agreements in California are governed by California’s Uniform Premarital Agreement Act. Probably the most important part of the California Uniform Premarital Agreement Act is found in section 1615, which sets out when a prenuptial agreement California is enforceable, and when it isn’t. Section 1615 can be found here.

Be conservative and make sure to comply with the Rules under the Uniform Premarital Act

• 7-Full Day Waiting Period – Seven full calendar days must pass between the date the prenup is presented to your fiancée, and the date the prenup is signed/notarized. Also, to be conservative, if the Prenuptial Agreement is materially updated during the review process, the 7 day waiting period should be restarted.
• Fair & Open Financial Disclosure of both parties. It does not matter if one party makes more or has more assets. It is important that both parties fully understand what they may be giving up by separating property during the marriage.
• Start discussing the idea of Prenup early. Discussthe terms, as well as, present the Prenuptial Agreement early in the process. THE EARLIER THE BETTER. Before wedding invitations go out. if possible. Have the Prenuptial Agreement finalized and signed at least 30 days in advance of the wedding, if possible.
• Both parties must be represented by separate attorneys. This is based on the Uniform Premarital Act and developing case law. It is the only way to provide peace of mind and eliminates the risk of unenforceability. Both attorneys must be licensed to practice law in the state of California.
• Ensure the drafting attorney specializes in prenuptial agreements. This will allow you to capitalize on their extensive experience.
• Avoid simple “do-it-yourself” kits or manuals, which are often generic for all states and do not comply state rules and laws and will not be enforceable.
• Avoid Prenuptial Agreement Services where you don’t speak to an attorney throughout the process – from beginning to end. Some services ask you to fill out a Questionnaire and they send you a Prenup. They often don’t want to talk with you and will not provide options to fulfill you objectives.

No. You can still enter into a Postnuptial Agreement (also known as a Marital Agreement). A Postnuptial Agreement is a voluntary marriage contract between spouses that is created after their legal wedding.

A Postnuptial Agreement can protect similar items as in a Prenuptial Agreement, and can be used to help resolve issues in marriage by removing a source of disagreement over finances, assets, inheritances, children, etc.

Often people intended to enter into a Prenuptial Agreement but ran out of time before the wedding and want to address financial and legal issues in the event of a divorce or a death — what will be done with the house, investments, 401K, or other such marital assets.

The Postnuptial Agreement can be used to protect one or two specific areas, such spousal support, how the marital home will be split, debt, guaranteed beneficiary of a life insurance policy during the marriage, or even what happens to the family pet.

There is little difference between a Prenuptial and Postnuptial Agreement in terms of what can be protected – both agreements address finances, alimony, retirement and other matters.

However, there is a big difference in that is there is a fiduciary or confidential relationship the spouses have to one another, created by the marriage. (You can read about this in Family Code §§721(b)and1100(c)). During marriage, each spouse becomes a fiduciary to the other. As such, imposed on each spouse is the duty of highest good faith and fair dealing with the other spouse, and neither spouse can take any unfair advantage of the other. So when spouses make an agreement during marriage, each spouse must provide the other with full disclosure of any and all information pertaining to issues contained in the agreement. By contrast, there is no fiduciary relationship presumed between prospective spouses (i.e., engaged individuals), and accordingly, there is no presumption of undue influence created by a fiduciary relationship if a Prenuptial Agreement is later challenged. Because of this duty of loyalty to one another and to deal with them in good faith and fairly, the courts will apply more scrutiny to Postnuptial Agreements. It is extremely important to work with a lawyer who has the appropriate experience in Postnuptial Agreements.

• Save Your Marriage – help resolve issues in marriage by removing a source of disagreement over finances, assets, inheritances, children, etc.
• Peace of Mind – California law is complex and may have unintended and surprising consequences. add certainty to what your assets and obligations are
• Protect Your Assets – secure what is important to you
• Sound Decisions – make rational financial decisions at a time whenyour judgment is clear and uncompromised
• Flexible – personalize the postnuptial agreement to meet your needs
• Emotional and Money Savings – save time, emotions, and costly legal battles and attorneys’ fees
• Amendable – you are not locked into the terms of the Postnuptial Agreement, but rather can modify it with life changing events

A Cohabitation Agreement is a voluntary contract between two individuals that are or will be living together for a long period of time, but not in a marriage arrangement. A Cohabitation Agreement is a written contract that sets forth your mutual rights and obligations with respect to joint and separate property, as well as stating any other financial or general obligations or expectations you wish to agree upon in advance of (or even after) moving in together.

Both individuals will need to hire separate lawyers to review and sign the Cohabitation Agreement.

Reason1: Intend to Provide your Partner with Certain Rights

Even though you may regard your partner as a family member, the law usually does not.

By choosing cohabitation without marriage, couples are foregoing certain rights and protections provided for them in a marital union. Unmarried couples can generally acquire similar rights of married couples by expressly securing their benefits in a Cohabitation Agreement. Examples of rights that can be included are:

• Right to receive a property settlement and/or support in the event of death or break-up;
• File joint tax returns;
• Receive distributions from estates free of estate tax;
• Receive survivor’s benefits from retirement plans and Social Security;
• Obtain “family” health insurance, dental insurance, and other employment benefits; and
• Share in his/her partner’s property in the event he/she dies without a will.

Reason2: Avoid being Surprised and Obligated to Provide your Partner with Certain Rights

Unmarried couples may create “implied” nonmarital agreements, without ever writing it down or expressly speaking about it. Rather, a court can evaluate the couple’s actions to determine if such an agreement has been implied in their relationship. If no implied agreement is found, a judge can presume that the parties intended to “deal fairly with each other,” and grant one party rights and obligations consistent with equity and fairness.

You should be proactive and define your own partnership through a legal contract.

Increasingly, law firms are putting customers first and RETHINKING the way their legal services. We recommend finding an attorney or firm that provides the following value proposition:

Flat Rate

With a flat rate and not “per hour” charge, you will know exactly what the total price will be upfront. You can save thousands off the rates some law firms charge for the same service. In addition, you avoid the uncertainty of extra fees that other services add based on additional time with the attorney, multiple revisions, or rush delivery.

Convenience – No Need to Leave Your Home

These Firms will create your prenuptial or other marital agreement without you ever having to leave your home or office. Your attorney will use the information you provide initially to draft the agreement. In addition, an appointment will be held between you and your attorney in order to fully understand your intentions, advise you based on CA law and your circumstances, and finalize details of the agreement.

24/7

With the demand of work and your personal life, time is often a rare commodity. Find a Firm that will work around your schedule, whether it is after hours, first thing in the morning or even on the weekend.

Choosing the right attorney is critical. Here are some attributes the attorney should have and comfort you should have:

A1 California licensed attorney who SPECIALIZES in Prenuptial Agreements. New attorneys may try to get into this area but the law is complex and providing key options based on experience to achieve your goals is critical.

A2 You feel comfortable talking and working with the attorney. You will work closely from the start to the finish of the process. You must get a good feeling when talking with the attorney, in terms of their knowledge base and commitment to achieving your goals.

A3 Attorney with insight and ability to provide sound guidance. Be sure your prenuptial agreement attorney really listens to and understands your personal objectives. Be sure your attorney includes only what you want to include in your agreement, and knows how to guide you to think of clauses you might not have otherwise considered.

A4 Balanced and Objective. Premarital agreements are not one-size-fits-all—they can be as creative as you want. Overly aggressive attorneys sometimes create overly aggressive agreements, and that can result in an angry fiancé. Other times certain terms in the Prenuptial Agreement may introduce increased risk that should be mitigated.

A6 From Start to Finish. Make sure your attorney is working with you from the very start to the finish. Many services now may use a questionnaire yet never talk with the client until the very end, if at all. Make sure the attorney you choose will work with you during the entire process and fully inform you of your options.

A7 Responsive and Dependable. Your attorney should agree to and communicate delivery times and how responsive document revisions and return phone calls will be. The Prenuptial Agreement is a very important agreement at a very important stage in your life and attention to detail and responsiveness is imperative.

• Exclusive: We specialize exclusively in California Prenups and Postnups.
• 1 Low Flat Fee: No hourly fees and hidden costs.
• True Flat Rate Pricing: No added costs for waivers or income level.
• Specialized Prenup Attorney: You work directly with our California licensed attorney throughout the process.
• Convenience: Phone appointments with the attorney are conducted around your schedule.
• Experience: CA PRENUP services the entire state of California.
• Attorney Commitment: Dedicated attorney from initial consult, through draft and revisions.
• Responsive: Quick turnaround time.
• Guarantee: 100% Customer Satisfaction Guarantee.

For more information or to get answers to other frequently asked questions go to www.caprenup.com, or call CA PRENUP at 949.709.3950.

Published by CA PRENUP 22431 Antonio Pkwy, B-160, Ste. 205, Rancho Santa Margarita, CA 92688. Tel: 949.709.3950

California Prenuptial Agreement Survival Guide, Copyright © 2013