What is a prenuptial agreement?
The Uniform Premarital Agreement Act (1986) in section 1610 provides the following definition: “an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage”. Such agreements are used to pre-determine what will happen to the parties’ marital and pre-marital assets in the event of divorce. Prenuptial agreements become effective upon marriage (section 1613 Uniform Premarital Agreement Act).
What’s the law?
The 1976 case of Re Marriage of Dawley saw the Californian Supreme Court hold that prenuptial agreements were not invalid per se or against public policy simply because they contemplated divorce. Since Dawley California has adopted the Uniform Premarital Agreement Act (1986) (the “Act”), which is contained in sections 1600 to1617 of the California Family Law Code. The Act was amended in 2002. This is the law that governs prenuptial agreements in California.
Are prenuptial agreements enforceable under Californian law?
Prenuptial agreements are only enforceable if they conform to the legal requirements set out in the Uniform Premarital Agreement Act. The following are important points to consider when drafting a prenuptial agreement in order to ensure its enforceability.
Writing
Section 1611 of the Act requires a valid agreement to be in writing and signed by both parties. There is however no requirement for consideration, in this way prenuptial agreements differ from other contracts.
Full Disclosure
The Act requires a prenuptial agreement to be voluntary in order to be enforceable. A key element to determining whether or not an agreement was voluntary is the question of unconscionability. According to section 1615 of the Act an agreement will be taken by a court to be unconscionable and thus unenforceable if there was not full disclosure of a party’s property and financial responsibilities to the other party, and there was no waiver of the right to full disclosure by that other party. It is therefore important to honestly disclose all assets, liabilities, and financial responsibilities in a prenuptial agreement. If these are included in a schedule attached to the agreement reference to the schedule should be made in the body of the agreement.
Independent Legal Advice
A prenuptial agreement may also be held to have not been enacted voluntarily, and is therefore unenforceable, if one of the parties did not have independent legal counsel. It is important that both parties be represented by different lawyers, and that you each pay independent legal fees. If one party is intending to pay the legal fees of the other party it is advisable to make such payment a loan as opposed to a gift so as not to give any impression of exercising power over the other party and their representative.
Timing
Another aspect of voluntariness is that both parties have had seven calendar days between first being presented with the prenuptial agreement and its signing (section 1615). This is to give parties an opportunity to obtain independent legal advice, and to take time to fully understand the terms of the agreement. Therefore it is not a good idea to be signing the prenuptial agreement on the day of the wedding. Rushing into agreement may also raise questions about coercion in the mind of the court.
Coercion
The vitiating factors which invalidate a regular contract can affect the enforceability of a prenuptial agreement; these include coercion, duress, fraud and undue influence. The previous issues of full disclosure, independent legal advice, and timing are all important requirements to show that a prenuptial agreement is not affected by coercion or the like.
Section 1615 also requires that any party to an agreement was fully informed about the terms and basic effect of the agreement and the rights they were relinquishing by signing the agreement. Any explanation of the agreement should be evidenced in writing, and the party who received it is required to execute a document declaring that they received the written evidence of an explanation (section 1615). It is also important that a party is proficient in the language of the prenuptial agreement and the explanation (most likely English in California). If English is not a party’s first language a translation may need to be arranged.
Children
Section 1612 of the Act states that ‘the right of a child to support must not be adversely affected by a prenuptial agreement’. Provisions regarding children can be included in a prenuptial agreement provided they do not lead to any disadvantage.
Spousal Support
Section 1612 of the Act also limits the validity clauses relating to spousal support. If a prenuptial agreement contains a provision waiving a party’s right to spousal support, or presumably any other provision relating to spousal support, then it cannot be held to be enforceable if the party against whom the provision is being enforced did not have independent legal counsel at the time the agreement was made. Provisions regarding spousal support will also be invalid if they are unconscionable. Californian courts have not defined unconscionability in this context; however the case of Re Marriage of Rosendale shows that a spousal support waiver will not be enforced if it leaves an ill or disabled party unable to adequately support themselves.
Public Policy
While the case of Dawley established the fact that prenuptial agreements are not contrary to public policy per se, certain terms have still been held to be invalid as an offence to public policy. The most likely way a prenuptial will offend public policy is if it includes terms which impose certain standards of conduct, for example religious, moral or sexual conduct, on either party during the marriage. Such terms however may not make the entire prenuptial agreement unenforceable if they are severable.
Another area which can offend public policy is the inclusion of penalty clauses, for example a clause punishing a spouse who has been unfaithful during the marriage (Diosdad v Diosdad). Such clauses are out of line with California’s no-fault divorce.
Finally prenuptial agreements which would result in large lump sum payouts for an ex-spouse may be seen as encouraging divorce. In the case of the Marriage of Noughrey an agreement that gave a house and a payment of $500,000 or one half of the husbands assets, whichever was higher, to the wife in the event of a divorce was seen as “threatening the destruction of a marriage which might otherwise endure”, and was held to be invalid. It is therefore important to structure any payment after divorce as ongoing support, rather than a lump sum payment.
What can be included in a prenuptial agreement?
Section 1612 of the Uniform Premarital Agreement Act sets out the following areas as those which parties to a prenuptial agreement may contract with respect to:
(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 non-occurrence 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.
Can a prenuptial agreement be varied revoked after marriage?
Yes. A prenuptial agreement can be amended or revoked provided this is done via a written agreement signed by the parties (section 1614).
Why should you have a prenuptial agreement?
Prenuptial agreements offer certainty and protection in the event of a divorce. They allow the parties to have their wishes and interests understood during the legal process of a divorce.
When considering drafting a prenuptial agreement t is important that both parties seek independent legal advice, don’t rush into an agreement, fully disclose their assets, and an agreement is not unconscionable and doesn’t leave one party without any means of support in the event of divorce.
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