We may handle divorce and family law issues, but we still believe that it’s exciting to get married. Our advice to couples: While it can be overwhelming to decide on the venue, the invitations, the rings, the flowers, the menu, the wine list, the food and the flowers all at the same time, it’s important not to forget the financial effects of getting married, especially if you or your fiancé are financially well-off.
Some married couples prefer to keep their finances as separate as possible, while others are comfortable combining all of their financial accounts and property. Regardless of the path you and your spouse decide to take, it’s important to contemplate what would happen to your marital assets should your marriage end in divorce. Even if you don’t have a prenuptial agreement before you walk down the aisle, it doesn’t mean it’s too late. You can still draw up a postnuptial agreement at any time after the marriage takes place.
The Postnuptial Agreement
A postnuptial agreement is basically the same as a prenuptial agreement, only it’s executed after the marriage ceremony instead of beforehand. Postnuptial agreements are legally-enforceable contracts signed by couples any time after the marriage. Like a prenup, postnuptial agreements outline how a couple’s income and assets are to be addressed (and divided) in the event of a legal separation or a divorce. In a postnuptial agreement, you can spell out how all separate and community property acquired before and during the marriage is to be divided.
Why Have a Postnup?
There are several reasons to have a postnup; for example, suppose your startup took off and you became extremely successful. Or, perhaps you decided to invest in a business or franchise and you didn’t want your spouse to have an interest in your business dealings. Or, perhaps you’re in your second or third marriage and you have children from a previous marriage. In that case, you may want to ensure that your children receive certain assets, such as the family business or the vacation home you bought in Hawaii when your kids were little.
Sometimes, the less-wealthy spouse has an affair. In effect, the wealthier spouse says they’ll work on the marriage as long as the cheating spouse signs a postnuptial agreement. Or, if one spouse is bad with money and can’t control their spending habits, the other spouse may be prompted to execute a postnup. The possibilities for a postnup are endless.
General Postnup Criteria
While state laws vary, the general criteria for postnuptial agreements are rather consistent. Generally, postnups must meet the following criteria to be legally-binding:
- They must be written agreements (oral agreements are not enforceable).
- The document must be signed by both spouses and notarized.
- The document must have been signed voluntarily. If one spouse signed because he or she was threatened, coerced, deceived, or physically forced, the contract is unenforceable.
- The postnuptial agreement must be fair. It cannot leave a spouse penniless.
- Each spouse must fully disclose their financial information about their income, assets, debts and property.
What a Postnuptial Agreement Can’t Do
A postnup can do a lot, but spouses do not have cart blanche. For example, California does not enforce postnuptial agreements that waive or set limits on child support. Not only that, but parents cannot use postnups or prenups to determine child custody. Only the courts can issue decisions regarding child custody; the parents do not have control in this area. If a postnup tries to set any terms on child custody or support, those provisions can be thrown out or the entire document can be rendered unenforceable by the family court.
Is a postnup in your best interests? It depends. If you’re the lower-earning spouse, a postnup may ensure that you receive less than if your case went to trial. Because, under California’s community property laws, each spouse is entitled to half of the marital assets (community property) acquired during the course of the marriage. Marital assets subject to a 50/50 split include all income, assets and real estate obtain after the marriage took place, regardless of who earned it or whose name was on the title. Inheritances, gifts, and personal injury awards in one spouse’s name are not subject to division in a divorce; they are considered “separate property.”
Suppose “Anna” had earned $50 million in assets during her marriage and her husband “John” had earned $15 million in assets. The couple drafted a postnuptial agreement that said their assets would remain separate should they divorce. So, when Anna and John pulled the plug on their marriage, John walked away with $15 million when he would have been entitled to more than twice that in the absence of a postnup. While the postnup kept the couple out of divorce court, it prevented John from getting what he would have been entitled to under California’s property division laws.
When You Want a Postnup
Regardless of the reasons not to get a postnup, there are still plenty of valid reasons why someone should get one, especially if they’re in a high-net-worth marriage. It’s very individual. If you’re both independently wealthy, a postnup can give you peace of mind because you’ll know what to expect if your relationship doesn’t last. For some couples, the peace of mind knowing they will avoid divorce litigation is priceless.
If your spouse has had their attorney draw up a postnuptial agreement for you to sign, be sure to be represented by your own council. You do not want to sign an agreement without having your own legal representation. You do not want your spouse’s attorney to represent you because doing so would be a conflict of interest. Besides, California courts are not likely to enforce a postnuptial agreement where one of the spouses didn’t have their own family law attorney.
To learn more about postnuptial agreements in Los Angeles, contact our firm to meet with a member of our legal team.
