”This becomes a problem if you are the spouse that has the substantially higher income or the one who accumulates the majority of the assets during the marriage.”
IN the absence of a premarital agreement, the general community property presumption under California family code section 760 controls which provides “ ….all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” Family Code §760. This becomes a problem if you are the spouse that has the substantially higher income or the one who accumulates the majority of the assets during the marriage. You are called in family law lingo “the in spouse.” The other spouse (or in our lingo also called the “out spouse” gets a half interest on everything accumulated during the marriage even if the asset is under your name alone or it was accumulated solely due to your sweat and hard work. The out spouse, who stayed at home most of the marriage, gets a one half interest on all the accumulations during the marriage under California community property law. For example, if you opened a savings account during the marriage under your name alone for which you religiously and diligently stash away 25% of your earnings during the marriage while your spouse blows away his/her salary during the marriage, your spouse still gets a half interest in the money you saved in your savings account. Another example would be if you purchase a piece of real property during the marriage under “your name alone” and have your spouse sign a “quit claim” deed, your spouse may still have a claim for a half interest in your real property. Another example would be if you owned a business prior to marriage, but due to your hard work, long hours of labor, and efforts, the business grew exponentially during the marriage, your spouse may still have a claim for an interest in the business.
Signing a premarital agreement may serve as added protection to the future “in spouse” and a hurdle for the future “out spouse” by avoiding or altering the applicability of California community property law to assets 1) already owned by each and 2) to property and income to be acquired or earned during their marriage. Marriage of Grinius (1985) 166 CA3d 1179, 1186, 212 CR 803, 807 Premarital agreements may validly provide that the earnings and accumulations of each party during marriage will remain that party’s separate property, free of any claims, community property or otherwise, of the other party. Marriage of Dawley, supra, 17 C3d at 350, 131 CR at 8; Cheney v. City & County of San Francisco Employees Retirement System (1936) 7 C2d 565, 569, 61 P2d 754, 756. Premarital agreements may also serve to preserve a person’s estate for his or her heirs, free of the other party’s inheriance claims. Estate of Wamack (1955) 137 CA2d 112, 115, 289 P2d 871, 872.
Pursuant to Family Code §1612(c ),“ Parties to a premarital agreement may contract with respect to all of the following:(1) The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located. (2) The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property.(3) The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event.(4) The making of a will, trust, or other arrangement to carry out the provisions of the agreement.(5) The ownership rights in and disposition of the death benefit from a life insurance policy.(6) The choice of law governing the construction of the agreement.(7) Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty. However, the right of a child to support may not be adversely affected. Family Code §1612(b).
Premarital agreements that are entered into voluntarily by parties who are each represented by independent counsel and aware of the effect of the agreement, a post 1985 premarital waiver of post dissolution support does not offend contemporary public policy and is not per se unenforceable. Fam.C. § 1612(c); Marriage of Pendleton & Fireman (2000) 24 C4th 39, 53–54, 99 CR2d 278, 288–289; Marriage of Facter (2013) 212 CA4th 967, 981, 152 CR3d 79, 90.
Under both the Uniform Premarital Agreement Act and prior law, the spouse claiming the agreement is invalid or not enforceable bears the burden of proof on that allegation. Family Code. § 1615(a); Marriage of Bonds, supra, 24 C4th at 27, 99 CR2d at 269; Marriage of Iverson (1992) 11 CA4th 1495, 1502, 15 CR2d 70, 74–75; However, the UPAA (as amended effective 1/1/02) deems that a premarital agreement was not executed voluntarily unless the court makes five prescribed findings provided for under Family Code. § 1615(c) (1) 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. (2) 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. (3) 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.(4) 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.(5) Any other factors the court deems relevant. In addition, the parties are required to provide each other with full disclosure of all material financial information.
A premarital agreement may be unenforceable if found to be unconscionable when it was executed and the requisite disclosures were lacking and not waived Additionally, a spousal support provision in a premarital agreement executed under the UPAA, whether before or after January 1, 2002, is not enforceable if found to be unconscionable at the time of enforcement. Family Code § 1612(c). If you are the higher earning spouse and have assets to protect, it is important to seek the representation of experienced counsel in drafting a premarital agreement to make sure that all statutory requirement are met which increases the likelihood that your premarital agreement will be deemed enforceable when attacked in court in case of a divorce.
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Please note that this article is not legal advice and is not intended as legal advice. The article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. This article does create any attorney client relationship between you and the Law Offices of Kenneth U. Reyes, P.C. This article is not a solicitation.
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Attorney Kenneth Ursua Reyes is a Certified Family Law Specialist. He was President of the Philippine American Bar Association. He is a member of both the Family law section and Immigration law section of the Los Angeles County Bar Association. He has extensive CPA experience prior to law practice. LAW OFFICES OF KENNETH REYES, P.C. is located at 3699 Wilshire Blvd., Suite 747, Los Angeles, CA, 90010. Tel. (213) 388-1611 or e-mail [email protected] or visit our website at Kenreyeslaw.com.
