Why Does Each Party Need an Attorney in Pre-marital Agreements?

By Joseph L. Urbanski

Clients who request our services for a pre-marital or post-marital agreement often do not fully understand the importance of attorney involvement.  They acknowledge that an attorney may present issues not yet considered, but they often discover that there are myriad issues that can be negotiated and others which cannot.  What many clients do not understand is the importance of independent counsel for each other.  The role of independent counsel for each party, beyond educating and advocating for the client, is to ensure that undue influence was not a factor in executing the agreement and that the agreement will hold if ever necessary.

A premarital (or prenuptial or pre-registration) agreement is a contract executed between prospective spouses or partners in contemplation of marriage, and the agreement becomes effective as of the date of marriage.  A marital, or post-nuptial, agreement is a contract executed by couples who are currently married or partnered, which affects marital rights and obligations incident to their marriage.  Of course, most people who enter into these agreements have no intention of “unduly influencing” their spouse or partner.  However, even the slightest bit of pressure on the party who is being asked to sign can draw inferences of undue influence.  While there are provisions that can be added to the agreement to protect against claims of undue influence, the guidance of independent counsel for each party also helps to ensure that both parties executed the agreement of their own free will and without duress; and is one of the most effective ways to have the agreement enforced if ever needed.

The fact that a party executed an agreement without the benefit of an attorney’s guidance is not in itself conclusive of undue influence nor is it grounds to automatically set the agreement aside under normal contract law.  However, under the California Family Code, a premarital agreement is deemed to be involuntary and unenforceable against someone who did not have an attorney unless that person waived representation in writing and was fully informed in writing, of the terms and effect of the agreement upon that party. When it comes to spousal support limitations in a premarital agreement, they are per se unenforceable against a party that was not represented by independent counsel.

The same California Family Code provisions do not apply to marital agreements to invalidate the agreements based on lack of independent counsel.  However, if one spouse or partner gains an advantage over the other, the opportunity to obtain independent legal advice or having had independent counsel may be persuasive to overcome the presumption of undue influence.

The importance of independent counsel cannot be overstated in the context of premarital and marital agreements.  Counsel may help distill your rights, obligations, and avoid any inference of undue influence, so that you can enter into an agreement that is fair to the both parties and tailored to shared goals as a couple.

Calculating Spousal Support on Divorce

When our clients come to us with questions about spousal support (or “alimony”) whether in contemplation of a prenuptial agreement, a post-nuptial agreement, or divorce, they are often fearful of its uncertainty.  Common concerns run from “will my spouse/partner take everything I have?” to “what if I can’t support myself after our marriage?”  While there are no simple answers to these questions, and determination of spousal support varies greatly between couples, California has a set of guiding principles that help parties, and the court, determine spousal support in the event that couples cannot reach an agreement.

For temporary spousal or partner support, many courts use a formula to calculate payments, and those formulas vary from county to county.  To determine ongoing spousal support after a divorce is finalized, there is no concrete formula.  The court must consider factors set forth in California Family Code Section 4320.  These factors include, among others, the length of marriage, each person’s earning capacity, the age and health of the parties, whether there are children, the assets of each party upon divorce, and even the tax impact of an award of support.

Each factor under Section 4320 requires further analysis by the court based on the evidence brought by each spouse or partner.  For example, a determination of earning capacity includes examination of each person’s marketable skills, the amount of time and cost for a person to acquire education or training necessary to develop skills, and whether the ability to earn income was impaired during the marriage due to periods of unemployment and devotion to domestic duties (e.g. spending time away from the workforce to care for children).  Similarly, in looking at the length of a marriage, the court has the discretion to award spousal support to allow a person a “reasonable period of time” to be able to support himself or herself.  While this typically means a determination of spousal support lasting for at least half the length of the marriage, it is within the court’s power to adjust the length of time someone receives spousal support.  We have the ability to run numbers for you taking into account all of the above considerations.

If the couple agrees on the terms of spousal support, even if it is waived by mutual agreement, the court will uphold the agreement as long as it meets certain legal requirements.  Working out the terms with your spouse or partner can be difficult, especially during the emotional period of divorce.  We can help clients understand their options and guide them through the process to alleviate their uncertainty.

Automatic Temporary Restraining Orders: Prohibitions on Estate Planning Actions during a Divorce Proceeding

When a spouse or domestic partner commences a proceeding in court to dissolve a marriage or domestic partnership, four temporary restraining orders (or “TROs”) automatically take effect, which prohibit either party, upon service of summons, from certain actions until a final judgment of dissolution is granted by the court.

These TROs include (1) a prohibition on both parties from removing a minor child from the state without prior written consent or a court order; (2) restraint from transferring or disposing of any property, whether separate or community, without written consent or a court order, subject to some exceptions; (3) prohibiting either party from canceling, altering, or cashing any insurance coverage held for the benefit of the other party or their children; and (4) a restraint on creating or modifying a “nonprobate transfer,” such as a revocable trust or pay on death beneficiary account.

What a spouse or partner may and may not do with respect to their estate planning can be confusing for clients. We hope to simplify the process for our clients so that they can make informed decisions about altering their estate plans without violating any orders from the court during their divorce proceeding.

After a spouse or partner has filed a petition for dissolution or legal separation, the restraining order on “nonprobate transfers” takes effect, yet the parties may be anxious to alter their estate plans to exclude their spouse or partner. In California, the courts will not grant a judgment of dissolution or legal separation prior to six months after commencing the proceedings, and some parties view this as a long time to wait before they can change their estate plans. Below is a list of actions that the parties may take while their dissolution is pending with regard to their estate planning:

(1) During a divorce proceeding, without notice to their spouse or partner, a party may create certain estate planning documents that do not affect the disposition of any property. A party may unilaterally create, modify, or revoke a Will; exercise a power of appointment in a revocable trust; or create a new revocable trust, although funding of any such trust must wait until a final judgment of dissolution.

(2) Some actions are allowable only after a party has given notice to their spouse or partner. A party may revoke a revocable trust; revoke a disposition to a beneficiary of nonprobate transfers, such as pension and employee benefit plans; and even eliminate their spouse’s right of survivorship in a certain asset. These actions, however, must be preceded by notice to the party’s spouse or partner.

(3) While revoking a transfer only requires notice to a spouse or partner, a party must obtain the written consent of a spouse or partner, or a court order, to create or modify a nonprobate transfer or to fund a trust.

(4) Absent your spouse or partner’s written consent, you may not fund or create a nonprobate transfer without a court order. Similarly, a court order is required if either party wants to cash in a life insurance policy when spousal or child support is at issue.

After judgment of dissolution is received, each spouse or partner’s right to distributions and/or assets terminates automatically, except as to designations under federal ERISA governed benefits (such as a 401k or certain pension plans) and life insurance policies.

Changes in your estate plan prior to or during dissolution proceedings may not be necessary or advisable for all parties contemplating divorce or waiting for a final judgment of dissolution. However, if you are considering making any changes, we can work with you to determine what steps to take to avoid violating either party’s duties under the TROs imposed during the dissolution proceedings.