A Guide to Prenuptial Agreements for High-Net-Worth Families in California
Getting married is a time of celebration as those from two separate families come together. However, the legal union of marriage can also have significant financial implications, particularly for those from high-net-worth families. Whether you’re going into the marriage with significant assets or expect to receive a large inheritance later on, a prenuptial agreement can ensure that everyone understands what will happen to those assets in the event of a divorce. Understanding how a prenuptial agreement works, what it can include, and its benefits can help you get started.
What Is a Prenuptial Agreement?
A prenuptial agreement — referred to as a premarital agreement in the California Family Code — is a contract that both parties enter into voluntarily before the marriage that outlines what will happen with the finances and matters like spousal support in the event of a divorce. Both parties have their own legal representation during the drafting and negotiating process to ensure that they understand their rights and can make decisions in their best interests. A prenuptial agreement can be amended after it has been signed, as long as both parties agree and the changes aren’t made under duress.
If the couple later decides to divorce, they can expedite the process by requesting that the judge enforce the prenuptial agreement instead of going through the normal property division process. This can also start the divorce on a more cooperative basis, which can be helpful when other terms, such as child custody and child support, must be decided.
Is a Prenup Legally Enforceable in California?
A judge always has the final decision when determining whether to enforce a prenuptial agreement. However, they generally do as long as the agreement was entered into voluntarily without coercion or duress, and it included a full disclosure of the assets and liabilities. A judge may be more likely to decide not to enforce a prenuptial agreement if one party didn’t have their own legal counsel before signing to ensure that they understand what their rights were and what they were agreeing to.
What Can a Prenuptial Agreement Include?
In general, a prenuptial agreement focuses on financial matters. This mainly includes property division and spousal support. A prenuptial agreement can designate what is separate or marital property and how assets and debts should be divided during the divorce. This is especially important for high-net-worth families who want to preserve wealth for future generations. For example, suppose someone is entering a second marriage. In that case, a well-executed prenuptial agreement can ensure that specific assets are categorized as separate property so they can be passed on to the person’s children from the first marriage.
Spousal support is another common term added to prenuptial agreements. You and your future spouse can determine whether either of you will receive spousal support in the event of a divorce, who will pay whom, how much the payments will be, and how long the payments will continue. You can also add specific terms, such as not paying spousal support unless the marriage lasts for a certain number of years.
Some people believe that they can put unique terms in the prenuptial agreement, such as agreeing to cook their spouse breakfast every day. However, these agreements are outside the legal scope of a prenup and won’t be enforced by a judge. Other things that cannot be decided in a prenuptial agreement include child custody and child support, as these are based on the best interests of the children instead of what the parents agree to.
What Are the Benefits of a Prenup?
The main benefit of a prenuptial agreement is that it clarifies the financial expectations and responsibilities if the couple divorces at some point later on. This can be especially helpful when there are blended families, a large disparity in wealth between the two parties, or special circumstances, such as inheritances or business interests. A well-crafted prenuptial agreement can protect family wealth and support broader estate planning goals, such as ensuring assets are preserved for children from previous relationships.
However, the benefits of a prenuptial agreement extend beyond the financial realm. Having a prenuptial agreement already in place can expedite the divorce process and reduce the chances of a drawn-out legal battle. While there may still be some issues that need to be decided, the prenuptial agreement greatly simplifies the process for both parties.
How Far in Advance Should You Start Drafting a Prenuptial Agreement?
A prenuptial agreement can take time to negotiate, so it’s generally a good idea to start the prenup process at least 6 months before the wedding. However, if you have a lot of complex assets or you anticipate the negotiation process being more extensive, allotting even more time can be beneficial.
California also has a special rule that says that the parties must have at least seven days to review the prenuptial agreement before signing. This rule is in place to ensure that there is enough time for a thorough review and negotiations and to prevent one party from trying to pressure the other into signing.
In most cases, the earlier you start the prenuptial process, the better. If you aren’t able to come to an agreement before the wedding and don’t want to push the date back, a postnuptial agreement signed after the marriage may also be an option.
If your situation involves high-value assets, the team at Baron Family Law, PC, can help you determine how a prenuptial agreement can protect your wealth and how to get started. Call 916-694-1164 to speak to a member of our team today.
