Marital Agreements – Prenuptial, Postnuptial, and Settlement

Prenuptial Agreements

No two marriages are alike, so special attention is paid to the specifics of your situation so that a prenuptial agreement can be drafted in a way that will serve you and your future spouse’s best interests for years to come.

Many people have the opinion that a prenuptial agreement is an indication that the person who is proposing it has the intention of divorcing eventually. But this may be the wrong way to view prenuptial agreements. A prenuptial agreement is only enforceable when a marriage ends, so if the marriage never ends, then it may never be used. I say it may never be used, because even if it’s not used in court, a married couple can put things in their prenuptial agreement that they can use during their marriage to show that they were in agreement on certain things prior to getting married. For example, if a couple puts in their prenuptial agreement that one party will support the other while that person is in college, this will not be enforceable in court during the marriage, but it can be used to show that there was an understanding – even before the marriage, that one spouse would be going to school fulltime and the other would be working fulltime and supporting the family. And so having such an agreement documented in a prenuptial agreement could quickly resolve an argument during the marriage regarding the subject of who was supposed to be the breadwinner and for how long were they expected to be the breadwinner.

It can also govern how the parties will do certain things during the marriage, such as whether the parties will keep certain income streams separate during the marriage, can identify specific property brought into the marriage by one person and whether it will remain separate property, and specify debts belonging to each spouse.

Business partnerships have partnership agreements, corporations have bylaws, and limited liability companies have operating agreements. A marriage is much like a business in the sense that the parties to the marriage bring in money / income, acquire assets, take on debts, and hope to be profitable enough to live a good life. Just like a business, a marriage should have the details spelled out and agreed to before the parties enter into what is expected to be a life-long commitment to each other. It just makes good sense and could save the parties a significant amount of money if they should get a divorce.
In my experience, once a marriage is over, and it’s time to get a divorce, many people wish they would have had a prenuptial agreement in place. Neither spouse knows what the future holds for them, but after 10 years of being married, CA law provides for ongoing spousal support that can only be reduced or ended under certain circumstances. Most people are not aware of this and do not know that they don’t have to be subject to this law; they can have their own agreement regarding the duration of spousal support.

Although the composition of a prenuptial agreement varies, some of the standard components include:
1. Designating income as separate or community
2. Assets prior to and during the marriage
3. Business interests / ownership
4. Debts prior to and during the marriage
5. Prior wealth / assets
6. Inheritance
7. Potential increase in income based on talent or intelligence
8. Pursuing higher education to start a lucrative career

Postnuptial Agreements

Postnuptial agreements serve a similar purpose as a prenuptial agreement; however, the fact that this agreement is made during the marriage can have some impact on what will be considered separate property, community property, and how the couple will view the future support obligation if a divorce should occur. Like a prenuptial agreement, a postnuptial agreement will lay out who gets what in the event of a divorce.

There are certain requirements for a postnuptial agreement, such as, it must be in writing, both spouses must have their own attorney, the agreement must be notarized, and the agreement must be fair. Neither spouse should sign the agreement under involuntary circumstances like coercion, threats, physical force, or deception. Also, the agreement cannot leave one spouse with less than what they came with to the marriage. The parties to the agreement must also be transparent and honest with each other. This means all assets, debts, and income must be disclosed.
Reasons to get a postnuptial agreement:

1. You were considering getting a prenuptial agreement, but for whatever reason the prenuptial agreement was drafted or was not fully executed;
2. If there are signs your marriage isn’t working or is likely to end in the near future;
3. There is a significant change in finances, such as one spouse has a career change / large increase in salary;
4. Your spouse has been caught cheating and you both want to continue the marriage, but you want to have a safety / exit plan in case they cheat again;
5. If your spouse is addicted to gambling or has a habit of running up debts, you can specify that your spouse is solely responsible for specific debts.

Marital Settlement Agreements

Many divorce cases in Orange County are resolved by a marital settlement agreement (“MSA”). Instead of submitting their case to a judge to decide at trial, parties have the option of creating their own agreement. An MSA is a written agreement of the parties, which becomes a court order. The MSA often includes provisions for child custody and visitation, child support, spousal support, and property division. In addition to these standard provisions, an MSA may also contain any other agreement of the parties. The parties can create their own provisions, which may resolve issues of support or custody in a way that a judge is unable to do.
Each divorce case is different and should be treated as such. An MSA is an important document and should be drafted with care by an experienced family law attorney. After an MSA is signed by both parties and filed with the court, it governs spousal support, child custody and visitation or child support issues.
Having an MSA, versus preparing for trial, can save both parties a significant amount of time and money. An additional benefit to an MSA is that when a case is resolved with an MSA, research shows that both parties are more likely to comply with the terms of the agreement.

Everyone considering getting married, and everyone that is married, should educate themselves about the benefits of having one or more of these three types of agreements. You work hard to purchase assets and save money for retirement, but if a marriage ends, all that hard work can literally go down the drain in the form of attorney’s fees, litigation costs, losing assets we thought were our separate property, and paying spousal support for longer than we ever expected.