While the common name for such an agreement is the “prenuptial agreement” or “prenup,” the Family Code uses the term “premarital agreement,” which must be distinguished from the other domestic agreements (e.g., the cohabitation agreement (for couples intending to live together but who are not anticipating marriage), the marital agreement (between spouses not intending an end to the marriage), and the marital settlement agreement (between spouses contemplating the dissolution of their marriage)).
Under California’s version of the Uniform Premarital Agreement Act (Fam. Code sec. 1600, et seq.), parties anticipating marriage may enter into an agreement pertaining to any matter, including their personal rights and obligations, so long as the agreement is not in violation of public policy or a statute imposing a criminal penalty. (Fam. Code sec. 1610). The premarital agreement memorializes the parties’ intentions toward property they’ll bring into the marriage and their respective property rights during the marriage. The premarital agreement is unenforceable before marriage, and to be enforceable upon marriage, the mechanics and timing of its execution are as important as its content.
Creating an Enforceable Premarital Agreement
Setting aside for the moment the content (property rights, support, etc.) of a premarital agreement, let’s say a couple anticipating marriage enters into a premarital agreement, they marry, and, then after several years of marriage one of them figures it’s dead and wants out of the relationship. He or she files a petition for dissolution of marriage or for legal separation. If one of the spouses would get a better deal were California law to apply rather than the premarital agreement which modified each party’s rights under the law, the enforceability of the premarital agreement may be tested in litigation or at the very least used by one of the spouses as a bargaining chip to a better outcome. This scenario happens frequently with a potentially long separate trial just on the issue of the premarital agreement’s enforceability. One of the parties thanks his or her lucky stars that the agreement was created in compliance with the law. For this reason, as mentioned above, the mechanics and timing of the premarital agreement are crucial to enforcing its terms.
The premarital agreement must be:
- In a writing signed by the parties. A premarital agreement shall be in writing and signed by the parties. (Fam. Code sec. 1611.)
- Voluntarily executed. A premarital agreement is not enforceable if the party against whom enforcement is sought proves he or she did not execute the agreement voluntarily. (Fam. Code sec. 1615(a).) To prove execution of the premarital agreement was not voluntary, the party against whom enforcement is sought (normally the party who will be disadvantaged if the premarital agreement is enforced) must prove any of the following six (6) factors under Family Code section 1615(c): (i) he or she was not represented by independent legal counsel at the time he or she signed the premarital agreement or, after being advised to seek independent legal counsel, he or she did not expressly waive representation by independent counsel in a separate writing; (ii) he or she had less than seven (7) calendar days between the time he or she was first presented with the premarital agreement and advised to seek independent legal counsel and the time the agreement was signed (the “seven-day waiting period”); (iii) if unrepresented by legal counsel, he or she was not fully informed of the terms and basic effect of the premarital agreement as well as the rights and obligations he or she was giving up by signing it, and he or she was not proficient in the language in which the explanation of the party’s rights was conducted and the premarital agreement was written; (iv) he or she was not given a written explanation of the rights and obligations relinquished prior to signing the agreement; (v) the agreement, any separate written waiver, and any declaration regarding receipt of a written explanation of rights and obligations relinquished were executed under duress, fraud, or undue influence; (vi) he or she lacked capacity to enter into the agreement; or, (vii) any other factors the judicial officer determining the enforceability of the premarital agreement deems relevant. (Fam. Code sec. 1615(c).) (Note: The seven-day waiting period is inapplicable when the party against whom enforcement is sought has been represented by an attorney from the beginning of negotiations pertaining to the premarital agreement. (Marriage of Cadwell-Faso and Faso (2011).) The appellate court in Marriage of Cadwell-Faso and Faso determined the seven-day rule was ambiguous on the basis that the court could not tell whether the rule applied if the party against whom enforcement is sought was represented by counsel during the seven-day period. It is the only exception to the seven-day requirement to my knowledge, although relying on such an exception to what seems to me crystal-clear statutory language is ill-advised.)
- Not unconscionable when executed. As a general working definition for purposes of this post, an agreement or any provision within an agreement is “unconscionable” when it is so one-sided that no reasonable person would have signed it (i.e., accepted or agreed to be bound by it). The premarital agreement that is found to have been unconscionable when it was executed triggers Family Code section 1615(a)(2), providing that it is not enforceable if, before its execution, the party against whom enforcement is sought was not provided a fair, reasonable, and full disclosure of the property or financial obligations of the other party; he or she 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; and, he or she did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.
Subject Matter of Premarital Agreements
Many people do not find out until divorce or legal separation that California community property law is based on the economic partnership of the parties and their fiduciary relationship with one another and to the community estate. When the marriage is dissolved, the judicial officer who has been assigned the divorce case is generally mandated by statute to divide the community property (assets and obligations) equally. This can be a rude awakening on top of any child and/or spousal support that must be paid.
By contrast, Mexico (EUM) which also operates under community property law brought to the Americas from Spain, requires at the time of marriage that the parties choose under which law their marriage will operate: either separate-property law or community-property law. In my opinion, because divorce is so prevalent, California should take a hint from its southern neighbor and adopt a more facilitating system with which to modify the rights and obligations of the parties during marriage.
The premarital agreement normally identifies specific property (both assets and obligations) that each party will bring into the marriage, and the ownership and value of that property. In this manner, each party acknowledges his or her interest, if any, in the other’s property, so that any future dispute may be resolved by referring to the premarital agreement as persuasive if not conclusive evidence. The premarital agreement also allows the parties to mutually opt out of the California community-property system in part or entirely.
Family Code section 1612(a) provides a nonexclusive list of subjects that may be covered in a premarital agreement:
- 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.
- 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.
- The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event.
- The making of a will, trust, or other arrangement to carry out the provisions of the agreement.
- The ownership rights in and disposition of the death benefit from a life insurance policy.
- The choice of law governing the construction of the agreement (meaning which state’s law will apply or be superseded by the premarital agreement).
- Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
Regarding the last bullet point about agreements in violation of public policy, any provision in a premarital agreement which modifies the right of a child to child support is unenforceable. (Fam. Code sec. 1612(b).)
Under Family code section 1612(a), every premarital agreement that I have ever negotiated has transmuted one or more property rights and/or obligations which otherwise would be determined differently under California law if the parties divorce, legally separate, or either dies. Under Family Code section 850, a transmutation is the spouses’ agreement to modify property rights such that community property becomes the separate property of either spouse, separate property of either spouse becomes community property, or the separate property of one spouse becomes the separate property of the other.
In addition to the mechanics and timing requirements for enforcement of the overall premarital agreement, under Family Code section 852, specific requirements must be satisfied for a transmutation to be enforceable:
- Must be in writing and include an “express declaration.” A transmutation of real or personal property is not valid unless made in writing by an “express declaration” that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected. To satisfy the express-declaration requirement, “a writing signed by the adversely affected spouse must expressly state that the character or ownership of the property at issue is being changed.” (Estate of McDonald (1990).) A deed of real property, for instance, from one spouse to the other is not a transmutation unless it is fulfills the express-declaration requirement. (Marriage of Bonvino (2015).) Another example is a life-insurance policy purchased with community funds by the spouse and insuring his own life and naming the other spouse as the beneficiary and owner of the policy, fails to transmute the policy from community property to separate property because the express declaration requirement was not satified. (Marriage of Valli (2014).)
- Unenforceable against third parties without notice. A transmutation of real property is not effective as to third parties without notice thereof unless recorded.
(Note: A gift between the spouses of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature that is used solely or principally by the spouse to whom the gift is made and that is not substantial in value taking into account the circumstances of the marriage does not require a writing expressly declaring the transmutation. (Fam. Code sec. 852(c); see Marriage of Steinberger (2001).) A transmutation does not affect the law governing characterization of property in which separate property and community property are commingled or otherwise combined. (Fam. Code sec. 852(d).) And, the above requires does not apply to or affect a transmutation of property made before January 1, 1985, and the law that would otherwise be applicable to that transmutation shall continue to apply. (Fam. Code sec. 852(e).))
In the short, the specific requirements must be satisfied to create a transmutation. “Section 852 imposes formalities on interspousal transmutations for the purpose of increasing certainty in the determination whether a transmutation in fact occurred. . . .” (Fam. Code sec. 852, Law Rev. Comm. Com..) In other words, the transmutation statute “blocks efforts to transmute marital property based on evidence — oral, behavioral, or documentary — that is easily manipulated and unreliable.” (Marriage of Benson (2005).)
Modifying or Waiving Spousal Support in a Premarital Agreement
As with the general requirements for creating a premarital agreement and the specific requirements for transmuting property, for a provision limiting or waiving spousal support to be enforceable, additional formalities must be complied with:
- A party against whom enforcement of the premarital agreement is sought must have been represented by counsel at the time the premarital agreement is signed. Any provision in a premarital agreement regarding spousal support, including, but not limited to, a waiver of it, is not enforceable if the party against whom enforcement of the spousal support provision is sought was not represented by independent counsel at the time the agreement containing the provision was signed, or if the provision regarding spousal support is unconscionable at the time of enforcement. (Fam. Code sec. 1612(c).) There is no wiggle room here: for a spousal support provision in a premarital agreement to be enforceable, each party must be represented by counsel at the time of signing.
- The spousal support provision cannot be unconscionable at the time of enforcement. Any provision in a premarital agreement regarding spousal support, including, but not limited to, a waiver of it, is not enforceable if the party against whom enforcement of the spousal support provision if the provision regarding spousal support is unconscionable at the time of enforcement. (Fam. Code sec. 1612(c).) Traditionally, in the law of contract, the issue of unconscionability is limited to its presence at the time of execution, not enforcement. This is true of premarital agreements, too: the entire premarital agreement and all of its specific provisions are analyzed for unconscionability at the time of execution. However, spousal support provisions in a premarital agreement are also analyzed for unconscionability at the time a party seeks to enforce the premarital agreement. This adds a layer of protection against gamesmanship in avoiding duty the support of a spouse.
A spousal support waiver was not enforceable prior to 1994 when the Uniform Premarital Agreement Act took effect. (Marriage of Melissa (2013).) Now, a spousal support waiver in a premarital agreement is not unenforceable per se. On of the few recent case, if not the only case, in which there was a finding of an unconscionable spousal support waiver in a premarital agreement was Marriage of Facter (2013). This finding was based on:
- Great disparity in the parties’ respective incomes at the time of execution of the premarital agreement; and,
- Inability of the party against whom enforcement of the premarital agreement was sought to achieve the marital standard of living after the marriage.
Because of the finding of unconscionability, the judicial officer in Facter severed the spousal-support provision at issue and enforced the remainder of the premarital agreement.
Amendment and Revocation of a Premarital Agreement
After marriage, a premarital agreement may be amended or revoked only by a written agreement signed by the parties.