Marriage related agreements give spouses some certainly concerning the division of property if the two divorce later on. They are similar to a will and could impact your estate planning. While state law provides how your property will be divided if you die without a will, state law will also spell out how your property will be divided if you divorce without some kind of agreement.
Prenuptial agreements are created before marriage, postnuptial agreements are created after a couple marries. The postnuptial agreement allows couples to structure a future divorsettlement and divide property, income, etc., on their own terms, not on the terms of the California Family Code.
Tips for Postnuptial Agreements
Here are four issues you need to consider prior to creating a postnuptial agreement.
- The spouses owe each other a fiduciary duty.
The California Family Code states that “either husband or wife may enter into any transaction with the other, or with any other person, respecting property, which either might if unmarried.” However, the code also states the couple has a “fiduciary” relationship to each other similar to a business partnership. Both spouses owe each other “a duty of the highest good faith and fair dealing.”
That means you must always act in your spouse’s highest and best interests, there must be full disclosure of debts and assets and no dishonesty. If you’re planning any financial games when putting together such an agreement, don’t plan on your marriage lasting very long or that agreement withstanding a legal challenge.
- The agreement should be written.
Most legal agreements, even amongst spouses, should be in writing and properly executed to be enforceable. Trying to enforce an unwritten, “he said she said” contract can be very expensive, time and emotion consuming and in all likelihood, futile. Getting it in written could save an untold amount of grief and money.
If you’re newly married, still in the proverbial honeymoon phase and it seems the two of you are on the same page on most issues, strike now while the iron is hot and get it done in writing.
- Use your own attorneys.
It’s not a requirement that either, or both, spouses have legal representation when creating a postnuptial agreement. It just makes sense and can prevent serious problems down the road. These agreements can be extremely difficult to enforce, with both sides represented there’s a much greater chance each spouse will fully understand them and that the agreement will be deemed enforceable by a judge. If you have substantial assets you want to protect (while treating your spouse fairly), you don’t want to play financial Russian roulette with a cut and paste postnuptial agreement. Do yourselves a favor, get your own lawyers.
- You must understand and consent to the agreement.
Postnuptial Agreements in California
All valid contracts must be understood and agreed to, whether they’re related to marriage or not. A postnuptial agreement could eliminate all of your community property rights acquired during the marriage so you’ll need to understand what’s going on before signing on. A seven day “cooling off” period is only required for prenuptial agreements, but a time for reflection may be a good idea for postnuptial agreements too. While you don’t want any unnecessary delays, you also don’t want to rush into important decisions.
Planning ahead, whether it concerns your assets and a marriage or estate planning, makes sense because you can create some certainty in your financial life, allowing you to focus on what should really be important, your relationships. If you have any questions about postnuptial agreements, fill out the form on the right to contact my office so we can discuss your situation.