What is a Premarital Agreement?
A prenuptial agreement, often referred to as a premarital agreement, or prenup, is a contract entered into by a couple before they are married that defines certain rights and obligations of the parties in the event of divorce. Unfortunately, not many people want to talk about divorce when they are in love, however, prenuptial agreements are becoming more common in California and across the United States as people get married later in life and acquire more wealth due to a long career. In the past, the courts in California have been reluctant to enforce a prenuptial agreement, unless it could be shown that it contained the basic legal requirements for an enforceable contract, plus disclosure and the absence of unconscionability. Today, however, the courts have become much more comfortable enforcing prenuptial agreements as the number of divorces has continued to rise and the State Legislature gave them greater authority in enforcing them.
To Overview these legal requirements for prenup enforcement and validity:
Requirement Explanation
Written and signed Must be in writing and signed by both parties.
Be voluntary Must be voluntarily executed and provides evidence the agreement was based on full and/or fair disclosure.
Filing of the agreement If the agreement states that it is to be filed at the time of death in case of divorce, the agreement must be filed with the appropriate court.
Probate Code 149 "Fair and reasonable" Basic probate code language.
Parties were represented Each party must have been represented by independent counsel or the opportunity to be represented or waived representation. If waived , must have executed express acknowledgment as to the waiver.
*Unconscionability – refers to the agreement being unfair or one-sided, and can be determined based on a variety of factors, including the following:
In California, there are at least two basic requirements for the enforcement of a prenuptial agreement:
1) The agreement is written and signed by both parties.
2) The agreement is not unfair or one-sided (i.e. it does not leave the financially dependent party without support).
The primary purpose of a prenuptial agreement is to allow the parties to agree how their assets are to be divided in the event that they do end up divorcing, as well as other issues that may not be covered by California divorce law. These agreements allow you to avoid litigation, particularly over issues that might not occur. For example, at the time you draft your prenuptial agreement, you may agree on all issues and not envision children. However, when you have children, that agreement no longer serves you well and your attorney can draft those new issues into a post-nuptial agreement, based on what you can now agree upon post-children. It does not mean your agreement is no longer enforceable in the court, it means your agreement was written based on the truth known at the time presented. Almost every marital agreement, in fact, recommends that after children come along, a new marital agreement be drafted based on the children in your life. And there are issues that are not covered well by a prenuptial agreement (or not covered at all) that can easily be added into a post-nuptial agreement.
Factors that Affect the Cost of a Prenup in California
The most obvious factor is the attorney fees. The attorney’s fees are typically charged as an hourly rate and the cost will depend on the attorney’s typical hourly rates multiplied by the number of hours necessary to complete the agreement. As two individuals are getting married they will typically be working with the same attorney, one person may even be utilizing their family law attorneys existing retainer funds that have been set aside. When the parties are both equally relied upon, typically there is a 50/50 split of the required legal fees for the prenuptial agreement.
When a party chooses to bring their own attorney into the process this can complicate the overall cost of the prenuptial agreement. When bringing in there own attorney, the costs are not typically split evenly among the parties and more expenses are incurred. When an independently wealthy person is bringing in their own attorney to ensure the prenuptial agreement beneficial to their interests, the attorney may also require separate representation for the wealthier spouse and the independent spouse. In California, both parties to a prenuptial agreement must have independent counsel, so even in the less complicated agreements both spouses should have independent counsel.
If the parties to the prenuptial agreement are not on friendly terms this will increase the costs. The more contention that develops between the parties, the more likely the duration of the proceedings will double or triple, which means the attorney fees will increase.
The next factor to consider is the complexity of the prenuptial agreement. If the parties come to the table with a near finalized, complete template prenuptial agreement, the cost will decrease substantially. If there are already provisions that the parties want included in the agreement, and they know the outcome of their agreement, the parties can save significantly on the drafting of the prenuptial agreement. When the parties have no idea what they are looking for, the longer it will take to draft the prenuptial agreement, cost more time for the California attorney.
Expected Cost of a California Premarital Agreement
The cost of a prenuptial agreement in California can vary considerably depending on a number of factors, but in general, it is substantially more expensive than many other states across the country. In California, the average cost of a prenuptial agreement tends to range between $5,000 and $10,000, with the most likely price point being around $7,500. This is significantly higher than the national average, which tends to hover around the $2,500 to $3,000 range.
Several factors can drive the cost of a prenuptial agreement up. The more complex the agreement is and the more detail it covers, the more time it is likely to take for one to draft the document — and as a direct result, the more expensive it will be. Some of the most comprehensive prenuptial agreements provide not just asset protection in regards to marital property, but spousal support, child custody arrangements, and even pet custody. If elaborate estate planning is needed — for example, if one spouse is marrying for a second time and hopes to protect his or her children from the first marriage in the event of death — this can also drive up the cost.
Even so, many California residents have expressed consents regarding the high cost of prenuptial agreements in comparison to the rest of the country. While the fact that individual rates do vary widely, at the end of the day, they are just as prohibitive as they have ever been.
Thanks to certain exceptions in California state law that provide exceptions for non-attorney affiliates, certain organizations provide legal services to low-income individuals who can prove they lack the resources to otherwise afford representation. Those who would like to explore this option should consider contacting the Legal Aid Society or the Legal Service Corporation (LSC) for more information on qualification requirements.
Unfortunately, statewide programs that offer affordable or low-cost prenuptial agreements are not as widespread as one might think. Notably, attorneys may be willing to negotiate on pricing if doing so could lead to an easy resolution. This may provide you with a short-term solution, but it is typically not an effective long-term solution as a prenuptial agreement is a valuable document meant to provide you with protection. Still, you have complete control over how you proceed with your case and you should be certain to do what’s best for yourself and your legal needs.
Potential clients should be prepared to provide their attorneys with all pertinent financial information.
How to Save Money on a California Prenup
Making a prenuptial agreement affordable can seem daunting, however, there are ways to minimize costs while still ensuring that the agreement is comprehensive and thoroughly addresses the unique needs of each party.
Be Transparent: The key to spending less on a prenup is clear and open communication between partners. Commit to honest dialogue about assets, finances, and future plans – even though these may be sensitive discussions, they are necessary for developing a plan that is fair for both parties and avoid unnecessarily expanding the scope of the agreement.
Prioritize Issues: List any issues you fully intend to address in the prenup. Items you do not discuss could be left open to interpretation, and the court may decide to take your silence as acquiescence.
Control Scope: A great way to cut the cost of a prenup is to make it limited in scope, covering only the most pertinent issues without unnecessary clauses. While this may require additional conversations , it can streamline the drafting process and avoid expensive back-and-forth negotiations.
Engage an Experienced Attorney: As with all legal matters, hiring an experienced attorney will significantly reduce the amount of time (and therefore money) spent on creating an enforceable contract. Choose someone adept in negotiation, litigation, mediation and all points in between to help identify potential issues and settle any disputes with ease.
Do It Yourself: Although it might be tempting to forgo hiring an attorney and draft your own prenup, the risk is that, without legal training, you may overlook important provisions, put your agreement in a format that a judge could misunderstand, or base its terms on information that is factually incorrect. If you do choose to create your own prenup, make sure you consult with an experienced attorney not only once the agreement is completed, but throughout the drafting process to limit any problems you might encounter down the road.
Legal and Other Considerations that Matter
When dealing with a prenuptial agreement, the risk lies in the possibility that the agreement will not be enforced as intended if it is not properly drafted and executed – hence, the importance of hiring an experienced family law attorney to assist you in the process of executing a prenuptial agreement.
In California, certain legal requirements must be met in order for a prenuptial agreement to be enforceable. For example, the agreement needs to be in writing and signed by both parties (California Family Code § 1610). To ensure that both parties have entered into the agreement voluntarily, it is also recommended that each spouse receive independent legal advice from their own counsel regarding the agreement and its terms (California Family Code § 1615(a)(1)). Likewise, parties are advised to exchange information about their income and liabilities so they know what they are giving up in the agreement (California Family Code § 1615(a)(2)). Where one party does not, or cannot, make such disclosures, a waiver thereof should be included in the agreement. This all helps to ensure that the agreement was entered into voluntarily and with sufficient information to protect the rights of each spouse. A waiver of spousal support must also be clearly express in the agreement (California Family Code § 1612). A prenuptial agreement that is executed under circumstances that do not meet the above requirements may be deemed unenforceable by the Court. If such happens, the agreement would not be binding on the parties and the Court would likely divide the parties’ community property and debts pursuant to the Family Code provisions that apply in the absence of such an agreement. This is something a family law attorney can help to avoid. In addition to ensuring enforceability, a Family Law attorney can help determine if a prenuptial agreement is fair to both parties. It is important to note that the definition of "unconscionable" (California Family Code § 1615(c)) is not whether the terms offend a party’s sense o fair play, but rather the extent to which the agreement has been achieved at the expense of one party’s property rights (see Marriage of Pendleton & Sawyer (2002) 36 C3d 146 (Marriage of Pendleton)). If the agreement is unconscionable, the Court may refuse to enforce even some valid provisions (Marriage of Pendleton, supra.) In fact, the Court is obligated to refuse enforcement if it finds that a prenuptial agreement is unconscionable (California Family Code § 1615(c)(2)). Determining whether an agreement is conscionable will generally depend on the facts and circumstances over a period of time that includes when the agreement was signed and when the dissolution of marriage is filed.
Is a Prenuptial Agreement Worth the Expense?
In conclusion, while the cost of hiring a family law attorney to draft a prenuptial agreement in California can be significant, it is also the best way for engaged couples to learn about the law and how it will affect their marriages. Whereas the cost for a prenuptial agreement in California can range from several hundred to several thousand dollars depending on the complexity of the project, the cost of divorce without a prenuptial agreement can be exponentially higher. In addition to the attorney’s fees that will be incurred in the divorce action, a couple may also incur costs related to litigation, asset appraisal and analysis, property division, child custody and support determination, and a possible spousal support award. Without a prenuptial agreement specifying their rights, each spouse may have to pay an attorney’s fee to determine what those rights really are, whether spousal support is to be paid or received, who will have primary custody of the children, etc. When considered in this light, a prenuptial agreement can actually serve to save a couple money during the marriage as well as upon divorce. The seemingly high upfront investment with a prenuptial agreement makes sense when it avoids a litigated court battle and the resulting damages that it would cause. Moreover , prenuptial agreements provide a critical layer of protection to couples where one spouse is significantly wealthier than the other prior to the marriage. They are also beneficial when a couple has children from a previous marriage, or where one of the spouses has a potential interest in a business or professional practice. Although it may seem uncomfortable to discuss prenuptial agreements during the initial excitement of planning a wedding, all couples should be aware that in California, the law removes the "romantic" element of marriage and imposes the harsh realities of property division and support obligations. For this reason, it is a good idea to get started on the discussion of a prenuptial agreement as early as possible, before literally "tying the knot." Whether the couple decides to move forward with a prenuptial agreement, or simply use the opportunity to learn more about the parameters of their state’s community property laws, an experienced family law attorney can help ensure the couple will enter into their marriage with a better understanding of how the marriage contract will affect them.
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