Addressing Misconceptions: The Role of Prenups in Trust
There is a social stigma surrounding prenups that suggests such agreements indicate a lack of trust and belief by future spouses as to whether their marriage will succeed. The reality is that people do not get married with the intention of getting divorced. Unfortunately, circumstances can change throughout the course of a marriage that may lead to divorce. Prenups give peace of mind to both parties.
Protecting Assets Beyond Divorce
A prenup may determine the disposition of any trusts, wills, or inheritances in the event of a death. By doing so, the prenup can determine how much of the marital property will pass to the surviving spouse and their heirs. Prenups are also beneficial for second marriages or for marriages that occur later in life in that they can significantly minimize the cost of legal fees during probate or divorce battles.
Clarifying Spousal Support Agreements
A couple may agree to waive or limit spousal support in the event of divorce, but there are limitations that the waiver cannot be unconscionable.[2] Where one spouse’s income and assets greatly exceed the other’s at the time of the agreement, and if at divorce, the lack of spousal support after a long-term marriage would leave that spouse destitute, a judge may reconsider enforcing the prenup.[3] However, if both parties had comparable income at the time of the agreement, a judge will likely enforce the agreement because it will be presumed that the agreement was not created with the intention of leaving one spouse with nothing if divorce occurs.[4]
Child Support & Custody: What Prenups Can't Do
California prohibits any agreements that limit or waive child support or custody in the event of divorce.[5] Such agreements are against the public policy of determining the best interests of the child. Child support is the right of the child, not the parents, which means the parents cannot remove the child’s right to receive support.
Ensuring Your Prenup Aligns with Public Policy
Just as premarital contract may not seek to impose moral or religious conduct restrictions on the couple during the marriage, agreements to raise children according to the tenets of a particular religion are not enforceable.[6] This is not to discourage religious upbringing, but rather because courts do not want to become entangled in the debate as to which activities would constitute acceptable exposure to one spouse’s religion and which activities would constitute unacceptable indoctrination.[7]
Key Factors in Prenup Enforceability
Independent Counsel
California requires that both spouses who wish to enter into a prenuptial agreement seek independent counsel prior to entering into the agreement. If a party does not wish to seek independent counsel, they must expressly waive that right in writing after being fully informed of that right. This requirement is important in order to ensure that the agreement was entered into voluntarily by both parties.[8]
You may recall the famous baseball player, Barry Bonds. What you may not know is that, in addition to setting major league records, his prenuptial agreement with Susann “Sun” Bonds was the subject of a California Supreme Court case.
Shortly after meeting Sun in 1988, the couple entered into a prenuptial agreement that waived any interest in Bonds’ income during the marriage, flew to Las Vegas, and were married the following day.[9] At the time, Bonds’ salary was only approximately $100,000 and he had observed teammates who had experienced bitter divorces after their salaries greatly increased.
Bonds was represented by his attorney during the drafting of the agreement; however, Sun was not.[10] The couple divorced six years and two children later. At that time, Bonds’ salary had dramatically increased due to his success and Sun demanded that the prenup was not enforceable because she did not have a lawyer present at the time of the execution of the agreement.
Prior to this case, California presumed that prenups signed by both spouses were deemed valid even in the absence of independent counsel. The court disagreed with Sun, holding that prenups are not subject to strict scrutiny where the less sophisticated party does not have independent counsel and entered into the agreement (1) voluntarily, or (2) the contract was not unconscionable.[11]
As a result of this case, the California Legislature amended the law, creating an “anti-Bonds” provision. A premarital agreement is now deemed to have been entered involuntarily unless (1) the non-enforcing party was represented by independent counsel at the time of signing; OR (2) after being advised to seek counsel, that party expressly waived, in separate writing, representation by counsel.[12]
The party not seeking counsel must also be fully informed as to:
- The effect of the agreement
- The rights and obligations being waived by the agreement, in clear and proficient language.[13]
This explanation must be in writing and signed prior to the signing of the prenup.
Seven-Day Waiting Period
Another outcome of the Bonds case was the inclusion of a seven-day waiting period from the time the agreement is first presented and advised to seek independent counsel and the time of signing the agreement.[14] Recall that in Bonds, the couple immediately entered into the agreement and were married the following day. The Legislature decided that by requiring a seven-day waiting period, both parties are afforded extra time to contemplate the aspects of the prenup and seek independent counsel and advice as to what rights and obligations are waived by the agreement. This rule creates greater peace of mind and ensures a complete understanding by both parties as to the provisions of the agreement.
Duress, Fraud, and Undue Influence
Prenuptial agreements are not valid if fraud, duress, misrepresentation, or undue influence was involved. Prenuptial agreement follow the traditional principles of contract law, and as such, there are adequate remedies for agreements made under duress, fraud, and undue influence.[15] A party may not coerce or use undue influence to convince the other to enter into the agreement. Furthermore, both parties must fully disclose all aspects of their finances and obligations prior to entering into the agreement. Failure to do so would be considered a material misrepresentation. Material misrepresentations will render an agreement voidable, but not void.[16] Errors in the agreement that are made in good-faith do not void a prenuptial agreement if there is no evidence of duress, fraud, or duress.[17]
