Premarital Agreements: What to Know

California is a Community Property state. This means that there is a presumption that all assets- with few exceptions- acquired during marriage are Community Property. This means that the "Community" owns these assets 50/50. Absent a showing of an agreement between the parties (via a prenup or during marriage), or if title to the asset/property is taken in a form that overcomes the Community Property presumption, the burden of proof that a particular asset is Separate Property is on the party so contending.

Nevertheless, California allows the parties to opt out of the Community Property and Separate Property characterizations by agreement either as to particular assets or all acquisitions. Therefore, if the parties intend that assets acquired during marriage are to be Separate Property of the acquiring spouse, it must be clearly stated in the Premarital Agreement.

Generally, with few exceptions, the Premarital Agreement must be in writing and 'voluntarily' signed by both parties. In response to a 2000 California case, Marriage of Bonds, California enacted a statute stating that a Premarital Agreement is not signed "voluntarily" and thus is unenforceable unless the party against whom the enforcement is sought was 1) represented by independent legal counsel at the time the agreement was signed OR 2) waived representation in a separate writing AND was given at least 7 days to sign between being presented with the agreement & advised to seek legal counsel and the signing AND 3) if not represented by independant counsel, was fully informed in writing of terms and the basic effect of the agreement and what rights and obligations were being given up. This writing must also include the name and information of the person providing and explaining the rights and obligations.

Even if the agreement is signed voluntarily there may still be a defense to enforcement if the agreement is found to be "Unconscionable." Unconsionablilty is to be decided by the judge and not the jury. For all provisions (other then waiver of spousal support), the agreement is unenforceable if it was "unconsionable when made" AND there was no fair and full disclosure of the other party's property or financial obligations and the right to disclosure was not waived in writing, and the party seeking to avoid enforcement had no adequate knowledge of the other party's property or financial obligations.

What can the parties agree to in a Premarital Agreement? The agreement can govern the disposition of property on separation, divorce or death. The parties can also agree that after the marriage, each party's salary and wages shall be that party's separate property. They may also stipulate as to the disposition of life insurance or any other insurance proceeds, and can deal with any other matter including their personal rights and obligations. However, the parties may not limit child support through such an agreement. There are also limits on waiving spousal support. Waiving spousal support in a Premarital Agreement is unenforceable unless the party against whom enforcement is sought was represented by independent legal counsel at the time the agreement was signed OR if the provision regarding spousal support is unconscionable at time of enforcement even if the party was represented by independent legal counsel.

There are other ways to alter the character of an asset from Community Property to Separate Property and vice versa. If you plan on doing so, you should seek legal advice to make sure it is done correctly.