Premarital Agreements (Prenups) in Financial Discovery

[Source: California Marital Settlement and Other Family Law Agreements]

Peter M. Walzer, one of California’s most acclaimed and best family law attorneys, authored the chapter on Premarital Agreements (prenups).

Correctly drafting your MSAs will be easy and efficient with this comprehensive guide that also covers premarital, marital (“postnuptial”), and nonmarital cohabitation agreements.

Provides over 400 total forms, including child custody/visitation, child/spousal support, division of community assets/debts, and allocating attorney fees/costs
Enables division of such key assets as the family residence, retirement benefits, and closely held businesses
Guides you in treatment of income tax matters
Covers negotiating and implementing the agreement
Explains use of mediation and collaborative practice
Includes both individual clauses and complete sample agreements

You can purchase the book on CEB.

Ch. 17 Premarital Agreements

By Peter M. Walzer

OVERVIEW 17.1
PURPOSES
Preclude Creation of Community Property 17.2
Maintain Character of Separate Property 17.3
Waive or Limit Spousal Support 17.4
Other Purposes 17.5

III. PRELIMINARY CONSIDERATIONS

Appropriateness of Agreement 17.6
Inability to Obtain Agreement 17.7
Attorney’s Potential Malpractice Liability 17.8
Fee Agreements 17.9
Family Law Attorney or Estate Planner? 17.10
LEGAL REQUIREMENTS AND LIMITATIONS
Requirements 17.11
Defenses 17.12
Standard Contractual Defenses 17.12A
Lack of “Voluntariness” 17.12B
Unconscionability at Time of Execution; Disclosures 17.12C
Lack of Independent Counsel 17.12D
Agreement Cannot Promote Dissolution 17.13
Agreement Should Not Include Provisions on Religion or Other Personal Issues 17.14
Court Not Bound by Custody or Child Support Provisions 17.15
Waiver of Joint and Survivor Annuity or Survivor Benefits Under Private Retirement Plan Probably Unenforceable 17.16
No Automatic Invalidation of Agreement for Clerical Errors 17.16A
DRAFTING THE AGREEMENT
Structure, Format, Style 17.17
Introductory Provisions
Form: Identification of Parties 17.18
Form: Parties’ Circumstances 17.19
Form: Purpose of Agreement 17.20
Form: Disclosures of Property and Financial Obligations 17.21
Form: Waiver of Disclosure of Property and Financial Obligations 17.21A
Form: Disclosures Regarding Income 17.22
Substantive Provisions
Form: All Property to Be Separate Property 17.23
Form: All Separate Property to Remain Separate Property 17.24
Form: Joint Accounts and Other Community Property 17.25
Form: Gifts Made to Parties Jointly 17.26
Form: Gifts and Other Transfers Between Parties 17.27
Form: Debts 17.28
Form: Income Tax Returns 17.29
Form: Waiver of Rights Under Equitable Distribution Laws 17.30
Form: No Restrictions on Transfers at Death or Nomination of Executor 17.31
Form: Gifts at Death 17.32
Form: Waiver or Limitation of Spousal Support 17.33
Form: Treatment of Borrowed Funds and Assets Acquired With Those Funds 17.34
Form: Certain Events Are Not Evidence of Transmutation 17.35
Form: Property Settlement with Incremental Increase in Community Ownership and No-Contest Provision 17.36
General Provisions
Form: Release of Premarital Liabilities and Claims 17.37
Form: Execution and Delivery of Documents 17.38
Form: Waiver of Rights on Death of Other Party 17.39
Form: Entire Agreement 17.40
Form: Confidentiality 17.41
Form: Binding Effect of Agreement 17.42
Form: Waiver of Breach 17.43
Form: Amendment or Revocation by Subsequent Agreement 17.44
Form: Governing Law 17.45
Form: Headings Not Part of Agreement 17.46
Form: Interpreting Agreement 17.47
Form: Severability in Event of Partial Invalidity 17.48
Form: No-Contest Clause 17.49
Form: Arbitration of Disputes Regarding Validity of Agreement 17.50
Form: Future Attorney Fees and Costs Related to Agreement 17.51
Legal Representation
Form: Each Party Independently Represented 17.52
Form: One Party Unrepresented by Counsel 17.53
Form: Signatures and Dates 17.54
FORM: COMPLETE SAMPLE AGREEMENT 17.55

17.1 I. OVERVIEW
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Premarital agreement (prenup) defined. A premarital agreement is an agreement between prospective spouses that is made in contemplation of marriage and is intended to be effective on marriage. Fam C §1610(a). Although such agreements are sometimes referred to as “antenuptial” or “prenuptial” agreements, this chapter uses the term “premarital” agreement to be consistent with the terminology of the Uniform Premarital Agreement Act (UPA) (Fam C §§1600–1617).

NOTE► The principles and statutes applicable to premarital agreements also are generally applicable with respect to “preregistration” agreements by couples who register as domestic partners with the Secretary of State. See Estate of Wilson (2012) 211 CA4th 1284, 1295.

Governing statutes. California statutes that govern the making and enforcement of premarital agreements are set forth in the UPA. In addition, Fam C §§1500–1503 address both premarital and other agreements affecting marital property rights.

California’s UPA, first adopted in 1986, was modeled on a Uniform Premarital Agreement Act that was promulgated in 1983 by the National Conference of Commissioners on Uniform State Laws. To date, some 27 states besides California have adopted a version of that uniform act. On amendments made to California’s UPA in response to landmark California Supreme Court cases, see §§17.4 and 17.12. See Marriage of Pendleton & Fireman (2000) 24 C4th 39; Marriage of Bonds (2000) 24 C4th 1.

NOTE► Under Fam C §3, a provision of the Family Code, insofar as it is the same in substance as a provision of a uniform act, must be construed to effectuate the general purpose to make uniform the law in those states that enact that provision.

Types of agreements. Parties typically create premarital agreements of two basic types: (1) separate property agreements having a default of no community property, with such property being added in (see §17.2), and (2) confirmation agreements having a default of community property, with the parties confirming certain assets as separate property (see §17.3).

Subject matter. Parties may contract in a premarital agreement with respect to “any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.” Fam C §1612(a)(7). Most frequently, however, a premarital agreement is used to alter property rights that would otherwise accrue under California community property laws once the parties marry. “Property” is defined as “an interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.” Fam C §1610(b).

Chapter coverage. This chapter addresses the purposes of a premarital agreement (see §§17.2–17.5), preliminary considerations (see §§17.6–17.10), legal requirements and limitations (see §§17.11–17.16), and drafting the agreement (see §§17.17–17.54). The chapter concludes with a complete sample agreement. See §17.55.

PURPOSES

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17.2 A. Preclude Creation of Community Property
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A premarital agreement may be used to preclude the creation of community property interests, either entirely or with specified exceptions. Such agreements thereby typically override California community property law. They are distinguishable from agreements designed to maintain the character of separate property (see §17.3), which may preclude the creation of community property interests in separate property owned before marriage but do not preclude characterization of earnings and other property acquired during marriage and before separation as community property. Under an agreement designed to preclude the creation of community property, each party’s earnings during marriage and before separation, and any items acquired by the party with those earnings, will be his or her separate property.

Assume, for example, that a spouse obtains a loan during marriage and before separation to fund a separate property business. Under applicable California community property law, the loan proceeds might be deemed community property, resulting in the existence of both separate and community interests in the business. See Fam C §760; Marriage of Grinius (1985) 166 CA3d 1179; Practice Under the California Family Code: Dissolution, Legal Separation, Nullity §5.18 (Cal CEB). See also Gudelj v Gudelj (1953) 41 C2d 202, 210; Marriage of Bonvino (2015) 241 CA4th 1411, 1424 (loan proceeds used for real property; citing Marriage of Grinius, supra). The loan cannot result in a community interest in the business, however, if, under a premarital agreement, there can be no community property. Thus, the parties can create their own system for characterizing marital property and thereby avoid complex apportionment problems that might otherwise arise under the community property system.

17.3 B. Maintain Character of Separate Property
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A premarital agreement may be used to ensure that a spouse’s separate property owned before marriage remains separate after marriage, regardless of any developments (e.g., any increase in value attributable to community payments or effort) that might otherwise result in a community interest in the property. One major benefit of such an agreement may be to itemize each party’s separate property. See Marriage of Dawley (1976) 17 C3d 342, 349. Apart from precluding the development of community interests in separate property, such agreements typically restate and conform to California community property law. In so doing, they differ from agreements designed to preclude the creation of community property (see §17.2).

A premarital agreement may modify rules by which a community interest might otherwise be created in a spouse’s separate property. If, for example, a prospective spouse owns a home before marriage and chooses to keep the property in his or her name alone, a community interest may nonetheless develop during the marriage under California community property law. A community interest may arise in separate property if community funds are used (see Practice Under the California Family Code: Dissolution, Legal Separation, Nullity §5.25 (Cal CEB)):

To pay mortgage principal (Marriage of Moore (1980) 28 C3d 366; Marriage of Marsden (1982) 130 CA3d 426);
As a consequence of commingling the parties’ separate property interests with community property used to pay the mortgage and home improvements during the marriage (Marriage of Weaver (2005) 127 CA4th 858, 871); or
To pay for improvements to the property (Bono v Clark (2002) 103 CA4th 1409; Marriage of Allen (2002) 96 CA4th 497; Marriage of Wolfe (2001) 91 CA4th 962).

A premarital agreement can eliminate the community property interest that would otherwise result from such payments.

Similarly, many prospective spouses have already divorced and are eager to avoid the accounting and legal expenses of apportioning an existing business between separate and community property interests in the event of another dissolution, as might normally be required under California law (see Pereira v Pereira (1909) 156 C 1; Van Camp v Van Camp (1921) 53 CA 17; Marriage of Brandes (2015) 239 CA4th 1461; Practice Under Fam Code §5.16). Such parties might seek an agreement under which the business will remain entirely the separate property of the owning spouse, regardless of any increase in value attributable to community payments or efforts between marriage and separation. This goal can be achieved through a properly drafted premarital agreement.

17.4 C. Waive or Limit Spousal Support
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Under legislation that first became operative January 1, 2002, any provision in a premarital agreement regarding spousal support (Fam C §1612(c)):

is not enforceable if the party against whom enforcement of the spousal support provision is sought was not represented by independent counsel at the time the agreement containing the provision was signed, or if the provision regarding spousal support is unconscionable at the time of enforcement.

This limitation applies not only to a waiver of spousal support, but to any provision about spousal support in a premarital agreement. An agreement that is unconscionable at the time it is sought to be enforced does not become enforceable solely because the party against whom enforcement is sought had independent counsel when it was signed. Fam C §1612(c). Family Code §1612(c) is not retroactive, however, to agreements entered into before its 2002 operative date. Marriage of Howell (2011) 195 CA4th 1062, 1077. See Marriage of Hill & Dittmer (2011) 202 CA4th 1046 (citing Howell, with approval, that Fam C §1612(c) is not retroactive).

Subsection (c) was added to Fam C §1612 in reaction to Marriage of Pendleton & Fireman (2000) 24 C4th 39, in which the court held that

no public policy is violated by permitting enforcement of a waiver of spousal support executed by intelligent, well-educated persons, each of whom appears to be self-sufficient in property and earning ability, and both of whom have the advice of counsel … at the time they execute the waiver.

Before Pendleton & Fireman, premarital spousal support waivers had been held unenforceable on the grounds that they promoted divorce and thus violated the public policy in favor of preserving marriages. See, e.g., Marriage of Higgason (1973) 10 C3d 476, disapproved on other grounds in Marriage of Dawley (1976) 17 C3d 342, 352. And because the law applicable to the validity and enforcement of premarital agreements turns on the date of the agreement’s execution, an appellate court has held that a provision purporting to waive spousal support in an agreement executed in 1985 when the former law was in effect is invalid. Marriage of Melissa (2012) 212 CA4th 598, 611. But see Marriage of Facter (2013) 212 CA4th 967 (under Pendleton & Fireman, spousal support waivers not per se invalid, but the waiver in Facter’s 1994 agreement was unconscionable; remainder of agreement severable).

NOTE► The Facter court stated that Pendleton & Fireman “did not set a precise standard for when a spousal waiver is deemed unconscionable.” 212 CA4th at 982. The Facter court examined the wife’s education and assets, as well as her earning capacity when she entered into the agreement and compared them to the husband’s education, assets, and earning capacity, and determined there was “a great disparity in the parties’ respective incomes and assets at the time they entered into the Agreement,” resulting in a “significant inequality of bargaining power.” 212 CA4th at 983. The court also cited Pendleton & Fireman in examining the circumstances existing at the time of enforcement that might make enforcement unjust. Facter relied on the fact that the wife devoted her efforts to child-rearing and maintaining the family home, while the husband continued to successfully pursue a financially rewarding career. The evidence supported the conclusion that without reasonable spousal support, the wife would never come close to replicating the marital standard of living. Accordingly, under Facter, in determining whether a spousal support limitation entered into between 1985 and 2002 is permissible, a court should evaluate whether the limitation was unconscionable at both the time of execution of the agreement and at the time of enforcement.

The Pendleton & Fireman decision left open “whether circumstances existing at the time enforcement … is sought might make enforcement unjust” (24 C4th at 53) and noted that the legislature could, if it chose, limit the right to premarital waiver of support or specify the circumstances in which enforcement should be denied, or both (24 C4th at 54 n12). The legislature did so in Fam C §1612(c) by making it clear that parties must be represented by independent counsel for a spousal support limitation to be valid, but that having independent counsel does not automatically make that limitation valid.

Spousal support was awarded in accordance with the parties’ premarital agreement in Marriage of Carpenter (2002) 100 CA4th 424 (5 years of support after 2-year marriage). The court declined to rule on whether support was modifiable or whether it would terminate sooner on the death of either party or on the wife’s remarriage on the ground that those issues were not ripe for decision.

17.5 D. Other Purposes
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Estate planning. A premarital agreement allows parties to plan for death as well as dissolution. Fam C §1612(a)(3). Usually parties feel differently about economic provisions for the other spouse in the event of a death than they do about such provisions in the event of dissolution. Parties may have no objection to planning their estates and leaving assets or funds to the other spouse. They may choose less generous provisions, however, in the event of dissolution. Counsel also should keep in mind that provisions in a premarital agreement concerning waivers of inheritance rights may be subject to interpretation under the Probate Code, as well as under Family Code provisions on premarital agreements. See Estate of Will (2009) 170 CA4th 902, 908 (Prob C §§140–147 continue to govern independently of Fam Code §1615). See also Estate of Wilson (2012) 211 CA4th 1284, 1296 (domestic partners’ “preregistration agreement” waiving rights in each other’s estate remained valid despite partners’ later marriage).

Couples who have children from previous marriages are usually concerned with estate planning and ensuring that, while each spouse is provided for in the event of the other’s death, certain property is set aside for the children from the prior relationship. A premarital agreement can accomplish this goal.

Protection from creditors. A premarital agreement may also protect the property of one spouse from the creditors of the other on debts incurred by the other during marriage. See Fam C §1612(a)(2). A spouse might be wary, for example, of the other spouse’s starting up or engaging in a potentially risky business if a potential consequence is the loss of community assets. The California Supreme Court has suggested that, as long as creditors are given proper notice, a premarital agreement that provides that each spouse’s earnings and acquisitions during marriage will be his or her separate property may preclude creditors of one spouse from taking the earnings and acquisitions of the other, because those earnings and acquisitions would not be community property. See Marriage of Dawley (1976) 17 C3d 342, 357. Proper notice probably requires that the creditor be informed about the agreement at or before the time a debt is incurred. On special rules governing anti-alienation provisions in retirement benefits, see chap 20.

NOTE► It seems clear that spouses cannot divest the right of a creditor to look to both of them for satisfaction of a community debt simply by attempting to allocate responsibility for paying the debt as between themselves after the debt has been incurred. See Marriage of Nassimi (2016) 3 CA5th 667, 690 (court noted that spouse or former spouse cannot transform debt incurred by community into separate debt by refusing to participate and forcing other spouse to bear entire burden of protecting community’s interest). This appears to reinforce the need for parties to a premarital agreement to both specify each party’s rights to property following marriage and give notice of those rights to a creditor in advance of obtaining credit.

The Uniform Voidable Transactions Act (California Civil Code §§ 3439 et. seq. applies to a premarital agreement in which the prospective spouses agree that during marriage each spouse’s earnings, income, and other property acquired during marriage will be each spouses separate property. The Agreement included a sunset provision which stated in the event the judgments and liens against husband listed in Exhibit A to the agreement, and any money judgment entered against him during marriage, lapse or otherwise become unenforceable for any reason, the parties’ earnings and income, and any assets purchased with those earnings and income, from the date of the marriage will be treated as community property, with certain exceptions. See Sturm v. Moyer (2019) 32 Cal.App.5th 299.

NOTE: On occasion premarital and postmarital agreements a client will want to use a marital agreement to protect assets from creditors. This case should be a warning not to promise a client that an agreement drafted for the purpose of asset protection will be effective. The attorney may have exposure for malpractice for counseling a client that an agreement between spouses might protect them from creditors.

Transmuting character of property. By means of a premarital agreement, parties also may contract to transmute the character of property from (see Fam C §§850, 1612(a)(1); Marriage of Garrity & Bishton (1986) 181 CA3d 675, 685)

Community property to separate property (for related discussion, see 17.3);
Separate property of one or both parties to community property; or
Separate property of one party to the separate property of the other party.

For a related form and discussion, see §17.27.

III. PRELIMINARY CONSIDERATIONS

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17.6 A. Appropriateness of Agreement
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Before drafting a premarital agreement, the attorney should help the client determine whether an agreement is appropriate. If the parties have no assets to protect and want to accumulate community property, no agreement is necessary. Careful estate planning may also be an alternative to a premarital agreement in some cases.

In some instances, a party who wants only to keep his or her separate property separate after marriage can do so without an agreement. He or she may, for example, place assets in a revocable living trust or simply make a list of the separate property. Then, through careful management and record-keeping, separate property can be kept separate. If during marriage a spouse inherits property or acquires it by gift, that property can be kept separate in the same manner. Although a detailed discussion of keeping separate property separate without an agreement is beyond the scope of this chapter, this alternative should be discussed with the client when appropriate.

When an individual has significant assets or income and wants to avoid community property laws, a premarital agreement may be advisable. The attorney has an ethical duty, however, to advise the client about the potential negative consequences of requesting an agreement. In extreme cases, merely raising the matter may result in a breakdown of the relationship. On the other hand, addressing difficult money-related issues before the marriage may eliminate later misunderstandings about the parties’ intentions. If the couple has not thought through the economics of their relationship and the emotional consequences of a premarital agreement, it may be a good idea to refer them to a counselor to sort these issues out before undertaking preparation of an agreement.

On using a mediated or collaborative law model to negotiate a prenuptial agreement, see Garfield, Mediating Prenuptial Agreements, 32 Cal Fam Law News 3 (2010); Hanson & Steeg, The Practical Pre–Nup: Why Clients Should Choose Mediation or Collaborative Law to Create a Premarital (or Postmarital) Agreement, 27 Cal Fam Law News 11 (2005).

17.7 B. Inability to Obtain Agreement
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In some cases it will be impossible to persuade the other party to consent to a premarital agreement. In that event, the attorney should provide the client with a written record of efforts to obtain an agreement and advise the client in writing of the potential consequences of not obtaining one.

17.8 C. Attorney’s Potential Malpractice Liability
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Some attorneys will not draft premarital agreements, because the malpractice exposure continues until the time of a breakdown of the relationship and dissolution of the marriage. Any error or omission will be addressed after the dissolution judgment is entered. If the agreement is set aside or in some way proves to be problematic, the attorney who drafted the agreement can be sued, perhaps long after the attorney has retired from practice.

Before an attorney agrees to prepare a premarital agreement, he or she should screen the prospective client carefully. A client who demands an unfair agreement may eventually cost more than the fee is worth. Sometimes, the client’s family, accountant, or business attorney insists on the agreement. Here again, the potential for liability is great. Careful consideration before undertaking representation of these clients is necessary, as is careful documentation once representation begins.

Some attorneys would advise against agreeing to prepare a premarital agreement if the wedding is less than 6 months away or if any substantial preparations for the wedding are underway (e.g., invitations have been sent) because of the potential emotional pressure this puts on the “weaker” party, notwithstanding the 7-day requirement discussed in §17.12.

17.9 D. Fee Agreements
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When it is reasonably foreseeable that the total expense to a client, including attorney fees, will exceed $1000, the agreement for services must be in writing. Bus & P C §6148. In addition, under that section, the agreement must include the following:

The hourly rate and other standard rates, fees, and charges applicable to the case, and the attorney’s or firm’s billing procedures;
A description of the legal services to be provided; and
The respective responsibilities of the client and attorney regarding the performance of the contract.

The agreement also may include a provision for binding arbitration of any malpractice claims arising from the representation. Counsel should remember that in the case of a fee dispute (as opposed to a malpractice lawsuit), the Mandatory Fee Arbitration Act (MFAA) (Bus & P C §§6200–6206) requires the attorney to provide the client an opportunity to utilize the fee arbitration scheme set up by the State Bar. See Powers v Dickson, Carlson & Campillo (1997) 54 CA4th 1102. See also Schatz v Allen Matkins Leck Gamble & Mallory, LLP (2009) 45 C4th 557, 562 (MFAA does not, as such, limit ability of attorneys and clients to agree to binding contractual arbitration; thus, client dissatisfied with outcome of MFAA proceeding may be compelled under preexisting fee agreement to participate in binding contractual arbitration); Glaser, Weil, Fink, Jacobs & Shapiro, LLP v Goff (2011) 194 CA4th 423, 433 (arbitrators’ ruling that an arbitration is binding is judicially reviewable). In spite of the holding in Schatz, it is still recommended that counsel obtain approval from his or her malpractice insurance carrier before using arbitration clauses for malpractice actions. The consent for using arbitration should advise the client to seek separate counsel to review the client’s waiver of a jury trial and should be set forth in a separate letter. For a sample provision and commentary, see Fee Agreement Forms Manual §1.48 (2d ed Cal CEB). On including mandatory arbitration provisions in a retainer agreement, see Carroll, Binding Arbitration Provisions in Retainer Agreements: Friend or Foe?, 24 Los Angeles County Bar Update, No. 2 (Feb. 2004). It is rarely a good idea to use a fixed fee for negotiating, reviewing, or drafting a premarital agreement because it is difficult to determine how much time will be required. The better practice is to obtain a deposit against which costs and attorney fees at a set hourly rate are billed. If charges exceed the deposit, the client is responsible for the balance.

The amounts of deposits and fees vary. At the low end, some attorneys charge under $1000 to simply review an agreement and advise the client about it. Others charge as much as $30,000 for negotiating and drafting complex agreements. Negotiating and drafting the average premarital agreement costs about $3500 to $15,000.

When setting the fees, an amount to compensate for the malpractice exposure, which is significant, may be included, although this should be disclosed to the client. Even if an attorney simply reviews an agreement prepared by another attorney, he or she may still be found responsible for errors or omissions. It is recommended that counsel make sure he or she receives payment before signing the agreement. It is much more difficult to get paid after signing the agreement.

It is also good practice to make clear in the fee agreement that, should the validity or interpretation of the agreement be litigated in the future, counsel will charge his or her then standard hourly rate to appear as a witness and will no longer be able to represent the party for whom the agreement was drafted.

17.10 E. Family Law Attorney or Estate Planner?
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Ideally, a premarital agreement will be drafted by a family law attorney. Attorneys who do not work daily with California community property law may not be aware of all the nuances involved in a particular couple’s situation. Sometimes the client will ask for review of a premarital agreement that has been drafted by a non-family-law attorney. Usually such an agreement may not be properly drafted.

If, however, a premarital agreement is being drafted by a family law attorney primarily for estate planning purposes (e.g., to protect children from prior relationships), it is wise to involve an attorney who specializes in estate planning. In any case, the client should be advised in writing to design his or her estate plan to be consistent with the new premarital agreement.

Most premarital agreements will have clauses that take into account both the possibility of a marital dissolution and death of a spouse. It is best to have the input of both family law and estate planning experts. See generally Crossover Issues in Estate Planning and Family Law (Cal CEB).

LEGAL REQUIREMENTS AND LIMITATIONS

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17.11 A. Requirements
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Agreements executed on or after January 1, 1986, are subject to the Uniform Premarital Agreement Act (Fam C §§1600–1617). A premarital agreement must be in writing and signed by both parties. Fam C §1611. It is enforceable without consideration. Fam C §1611. The agreement becomes effective on marriage (Fam C §1613) and may be amended or revoked after marriage only by a written agreement signed by both parties (Fam C §1614).

General contract rules apply to premarital agreements. The parties must have the capacity to contract. CC §1550(1). Even a minor, for example, may make a valid premarital agreement if he or she is emancipated, is otherwise capable of contracting marriage, or has entered or is entering a marriage that is valid in the jurisdiction where the marriage is solemnized. Fam C §1501. To be enforceable against a party, the premarital agreement must have been voluntarily entered into by that party. Fam C §1615(a)(1). On conditions under which a premarital agreement is not voluntary, see §17.12. The agreement must set forth the substantive terms to which the parties agree; it is not sufficient to have the terms themselves supplied by parol evidence. Marriage of Shaban (2001) 88 CA4th 398 (Egyptian marriage document stating the marriage was made in accordance with Islamic law does not qualify as a premarital agreement because the substantive terms are not in writing). Shaban may be used to defend against the enforcement of a foreign election to a marital regime because of its application of the parol evidence rule. Compare Shaban with Fernandez v Fernandez (1961) 194 CA2d 782, which held that a foreign premarital agreement electing a separate property regime was valid under California law.

Although Fam C §1611 specifically states that premarital agreements must be in writing, a court of appeal affirmed enforcement of an oral premarital agreement to provide the wife with a life estate in the husband’s residence, finding that the wife had partially performed in detrimental reliance on the husband’s promise by taking early retirement and paying the husband more than $10,000. Hall v Hall (1990) 222 CA3d 578 (applying former CC §5311, predecessor of Fam C §1611).

NOTE► While the Hall decision appears to apply general contract rules to an oral agreement entered into before marriage, the California Supreme Court refused to recognize a partial-performance defense to the Statute of Frauds with respect to a purported oral transmutation of property between parties after their marriage. In doing so, the court saw “no evidence the Legislature intended to incorporate traditional exceptions to the statute of frauds into [Fam C §] 852 [statute requiring transmutations of property be made in writing].” Marriage of Benson (2005) 36 C4th 1096, 1160.

There is no requirement that a premarital agreement be notarized or recorded to be effective. If, however, it is executed and acknowledged or proved in the manner that a grant of real property is required to be executed and acknowledged or proved, the agreement may be recorded, with the same effect as the recording of a grant of real property. Fam C §1502. Instead of recording the agreement (which may invite unwanted public exposure), the attorney may record a memorandum of the agreement that contains the provisions relating to the transfer of real property, certain executory provisions, and a notice to creditors. For the purposes of recording the agreement, the memorandum of agreement must stand on its own as a separate agreement and the text of the agreement must have the parties’ full names. The agreement then becomes a public record. The parties may decide they do not want their matters to be public; on the other hand, there will be a record of the agreement should it be lost. The attorney should redact any information that would identify bank accounts, children, or other private data. Because the recorded memorandum may be the only record available to the parties, it should include the terms that are to be enforced by a court in a dissolution or in the event of a party’s death. A recorded memorandum may serve as a notice to third party creditors that the parties to the premarital agreement do not intend to create any community property (if that is what the agreement provides for and the memorandum makes this clear).

17.12 B. Defenses
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A premarital agreement is subject to both standard contractual defenses and to defenses under the Family Code that are specific to such agreements.

17.12A 1. Standard Contractual Defenses
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With limited exception, premarital agreements are subject to the same defenses to enforcement as other contracts. Thus, for example, if a premarital agreement lacks an essential contractual element, such as a lawful object (see §17.11), the defect may be raised as a defense. See generally CC §1550; Fam C §1615(c)(4). Other general contractual defenses that apply include:

Duress, fraud, undue influence, or lack of capacity to contract. These standard defenses (see CC §§1550(1), 1567) apply to both premarital agreements and an agreement to waive counsel, as set forth in Fam C §1615(c)(1)–(3) (Fam C §1615(c)(4));
As discussed further below, a defense to enforcement is that the agreement was unconscionable when executed, if certain conditions applied (or, in the case of a spousal support waiver, that it is unconscionable at the time of enforcement) (Fam C §§1612(c), 1615(a)(2));
No mutuality of assent or meeting of the minds (because, g., the agreement was the product of mutual mistake (see CC §3399));
Failure to perform a material condition (see generally Estate of Warner (1907) 6 CA 361, 366);
Failure by both parties to follow the agreement, e., nonperformance amounting to abandonment of the agreement (see Busch v Globe Indus. (1962) 200 CA2d 315, 320; but see Fam C §1614, requiring writing to revoke premarital agreement); and
Lack of voluntariness. As discussed in detail below, like other contracts (see CC §1565), a premarital agreement must be found to have been voluntarily entered into by the parties (Fam C §1615(a)(1)).

Effect of lack of consideration. Unlike a standard contract, however (see CC §1550(4)), it is not a defense to enforcement that a premarital agreement lacked consideration. See Fam C §1611.

17.12B 2. Lack of “Voluntariness”
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A premarital agreement is not enforceable against a party who did not enter into it voluntarily. Fam C §1615(a)(1). Unlike agreements between spouses, however—in which fiduciary standards apply (see Fam C §721; Marriage of Bonds (2000) 24 C4th 1) and the gaining of an advantage by one party raises a presumption of undue influence (Marriage of Haines (1995) 33 CA4th 277, 293)—a party who claims that a premarital agreement clearly advantaged the other party bears the burden of proof that it was not voluntarily entered into. Bonds, 24 C4th at 27. Note that the supreme court in Bonds indicated that there are circumstances in which unmarried parties may be in a confidential relationship and that coupled with “great age, weakness of mind, sickness or other incapacity” the fiduciary standard would apply. Bonds, 24 C4th at 28.

Lack of independent counsel and related factors in determining voluntariness of agreement and validity of support waivers. As a result of revisions to the Family Code in 2002, independent counsel is required when there is a limitation of spousal support in the agreement (discussed further below). Fam C §1612. Furthermore, in response to Bonds, the legislature amended §1615 to now provide that a premarital agreement will be deemed not voluntarily executed for purposes of §1615(a) unless the court finds in writing or on the record all of the following (Fam C §1615(c)):

The party against whom enforcement is sought was represented by independent legal counsel at the time of signing the agreement or, after being advised to seek independent legal counsel, expressly waived, in a separate writing, representation by independent legal counsel (Fam C §1615(c)(1)).
The party against whom enforcement is sought had not less than 7 calendar days between the time that party was first presented with the agreement and advised to seek independent legal counsel and the time the agreement was signed (Fam C §1615(c)(2); Marriage of Clarke & Akel (2018) 19 CA5th 914, 922) , but see Family Code 1615(2)(B) which says: For an agreement executed on or after January 1, 2020, the party against whom enforcement is sought had not less than seven calendar days between the time that party was first presented with the final agreement and the time the agreement was signed, regardless of whether the party is represented by legal counsel. This requirement does not apply to nonsubstantive amendments that do not change the terms of the agreement.The party against whom enforcement is sought, if unrepresented by legal counsel, was fully informed of the terms and basic effect of the agreement as well as the rights and obligations he or she was giving up by signing the agreement, and was proficient in the language in which the explanation was conducted and in which the agreement was written. The explanation of the rights and obligations relinquished must have been memorialized in writing and delivered to the party before the premarital agreement was signed, and before signing, the party must have executed a document declaring that he or she received the required information and indicating who provided it (Fam C §1615(c)(3)).
The agreement and the writings executed under 1615(c)(1) and (3) were not executed under duress, fraud, or undue influence, and the parties did not lack capacity to enter into the agreement (Fam C §1615(c)(4)).
Any other factors the court deems relevant. A judicial officer has wide discretion to consider any factors it deems relevant in determining whether to enforce or set aside the agreement.

WARNING► With respect to the provisions of Fam C §1615(c)(3) described above, it is not clear how a practitioner may simultaneously fully inform the unrepresented party of the terms and basic effect of the agreement as well as the rights and obligations he or she is giving up by signing the agreement without giving legal advice to a person with interests potentially adverse to the client. In an action to set aside an agreement an advisory memorandum to the unrepresented party is likely to be attacked for not “fully informing” that party.

PRACTICE TIP► The attorney The final version of the premarital agreement must be delivered to the reviewing party at least 7 days before it is signed. There must be no alterations to the agreement after it is served. This requirement does not apply to nonsubstantive amendments that do not change the terms of the agreement. Prepare a proof of service of the agreement and attach it to the agreement or state as a recital when it was delivered.. The final version of the agreement must state when the disclosure documents were served because they generally are served with the first draft of the agreement to give the reviewing party adequate time to review them. Many attorneys still believe that the agreement must be signed 7 days before the wedding, but that is not what the code says. See Fam C §1615(c)(2). Further, attorneys have questioned whether the parties can sign the agreement after a ceremonial wedding but before the “legal wedding.” No case or code has addressed the issue, but signing in that manner is not a recommended practice. Although §1615(c)(2) requires a 7-day waiting period after the final agreement is “first presented,” it is better practice to wait 8 days before the agreement is actually signed. In addition, because the standard contractual defenses still apply, signing the agreement on the day of the wedding is a bad practice.

Thus, for a premarital agreement signed by party to be enforceable, the party must have received the final agreement and the advice to seek independent legal counsel at least 7 days before signing the agreement, and the party must sign not only the agreement but also two other documents—one waiving the right to counsel and the other acknowledging receipt of the information required by Fam C §1615(c)(3) and stating who provided the information. Note, however, that at least one appellate court has held that strict compliance with the 7-day requirement does not apply to a party who was represented by counsel from the outset of a premarital agreement transaction. Marriage of Cadwell-Faso & Faso (2011) 191 CA4th 945, 960 (7-day waiting period required by §1615(c) does not apply to parties represented by counsel at outset of agreement process). See also Marriage of Hill & Dittmer (2011) 202 CA4th 1046 (citing Cadwell-Faso & Faso with approval). Family Code §1615(2)(b) states: For an agreement executed on or after January 1, 2020, the party against whom enforcement is sought had not less than seven calendar days between the time that party was first presented with the final agreement and the time the agreement was signed, regardless of whether the party is represented by legal counsel. This requirement does not apply to nonsubstantive amendments that do not change the terms of the agreement. This amendment supercedes, on a prospective basis the holding in in re Marriage of Cadwell-Faso & Faso (2011) 191 Cal.App.4th 945.

A premarital agreement containing a provision limiting spousal support, including a waiver, is not enforceable if (1) the party against whom enforcement is sought was not represented by independent counsel at the time of entering into the agreement or (2) the provision is unconscionable at the time of enforcement. Fam C §1612(c). An agreement that is unconscionable at the time it is sought to be enforced does not become enforceable solely because the party against whom enforcement is sought had independent counsel when it was signed. Fam C §1612(c). The requirement of independent counsel for a spousal support limitation is a matter of public policy and is a requirement that cannot be waived.

Similarly, when the evidence indicates that an unrepresented party to a premarital agreement was not given the 7-day period for review under Fam C §1615(c), boilerplate language in the agreement indicating that the review period was provided is not binding and will not circumvent the statutory requirement. Marriage of Clarke & Akel (2018) 19 CA5th 914, 922 (Evid C §622 conclusive presumption that facts recited in a written instrument are true does not apply to situations not involving arm’s length negotiations or when a contract itself is invalid).

17.12C 3. Unconscionability at Time of Execution; Disclosures
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A premarital agreement is likewise not enforceable against a party who proves that it was unconscionable at the time of execution (Fam C §1615(a)(2)) and that, before execution of the agreement, he or she (Fam C §1615(a)(2)(A)–(C)):

Was not provided a fair, reasonable, and full disclosure of the other party’s property or financial obligations;
Did not voluntarily and expressly waive, in writing, any right to such disclosure beyond that provided; and
Did not have, and could not reasonably have had, an adequate knowledge of the other party’s property or financial obligations.

Thus, disclosure or a waiver of disclosure in the premarital agreement may be crucial to the agreement’s validity. Usually the parties exchange lists that disclose each party’s assets and obligations. These lists can be attached to the premarital agreement or exchanged separately.

One issue regarding the lists is whether the parties should include values for items such as real property, partnership interests, and businesses. If there is no disclosure of value, a later claim of incomplete disclosure may be sustained. If the value is disclosed but is inaccurate, the agreement might likewise be attacked for failure of proper disclosure. The parties might be able to avoid these issues by waiving disclosure or at least acknowledging that the values provided are only estimates. For sample provisions, see forms in §17.21. The better practice is to disclose income, assets, and liabilities. For intangible assets, provide a range of values or a minimum value.

PRACTICE TIP► The provision of Fam C §1615(a)(2)(A) concerning the lack of a “fair, reasonable, and full disclosure” as one element of unenforceability seems to conflict with another element stated in Fam C §1615(a)(2)(B)—that a party did not voluntarily and expressly waive, in writing, any right to such disclosure beyond that provided. Furthermore, the legislature expressly added the word “full” in §1615(a)(2)(A) when it amended the original version of that section. It is a bad practice to provide no disclosure. The disclosure should be fair, reasonable, and full. The attorney should always waive the disclosure beyond what is provided. Some attorneys provide both personal and business tax returns for several years to give a more complete picture of the financial situation. It may be advisable to have the client’s accountant prepare the disclosure.

17.12D 4. Lack of Independent Counsel
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Although the absence of independent counsel is not an insurmountable barrier to enforceability of a premarital agreement (except for provisions limiting or waiving spousal support), independent representation not only benefits both parties but provides some protection to the attorney as well. Clients seeking a premarital agreement must be advised of the requirements of Fam C §1615(c) and, if the other party is not already represented, the attorney must make sure that the unrepresented party is properly advised to seek independent representation. Generally, agreements involving unrepresented parties should be avoided because it is virtually impossible to provide an adequate written explanation of the agreement as described in Fam C §1615(c)(3), above.

PRACTICE TIP► If possible, the attorney should avoid meeting with the other party. It is also a good idea for both the attorney and his or her client to avoid recommending an attorney to the other party. If a recommended attorney is retained by the other party, that party may attempt to challenge the agreement in the future, based on a claim that he or she did not have truly independent legal assistance. Likewise, the parties to the agreement should not have one attorney draft the agreement for both of them. Also, if the parties retain a mediator, the mediator should not draft the agreement for both parties. If the mediator does draft the agreement, it can be argued that the mediator acted as an attorney and caused the parties to lose the protections under Evid C §§703.5 and 1119, and it could be found that the parties to the mediation did not have independent counsel.

17.13 C. Agreement Cannot Promote Dissolution
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A premarital agreement that promotes dissolution is unenforceable. An agreement promotes dissolution if it provides for transfer of substantial value only in the event of dissolution. Marriage of Higgason (1973) 10 C3d 476, 485, disapproved on other grounds in Marriage of Dawley (1976) 17 C3d 342, 352. See, e.g., Marriage of Dajani (1988) 204 CA3d 1387 (Jordanian dowry agreement that provided payment to wife in event of dissolution); Marriage of Noghrey (1985) 169 CA3d 326 (Jewish “kethuba” that provided that wife would receive house and minimum of $500,000 in event of dissolution). See Walzer & Garfield, Are Lump Sum Payments Promotive of Divorce? Family Law News (Winter 2008). See also Restatement (Second) of Contracts §190 (1981).

It is the promotion of dissolution that renders the agreement unenforceable. Public policy is not offended by the reordering of property rights to fit the parties’ needs and desires or by realistic planning that takes account of the possibility of dissolution. Marriage of Dawley (1976) 17 C3d 342, 358. See generally Restatement (Second) of Contracts §190 (1981).

This is a difficult issue that must be handled carefully. For example, provision for large, lump-sum payments at the time of dissolution might be deemed to promote dissolution. See generally Restatement (Second) of Contracts §190, illustration 5 (1981) (settlement of large sum in case of divorce may tend to unreasonably encourage divorce). The agreement might instead require that the payments accrue on a periodic basis during the marriage, but a court might still find that such a provision promotes dissolution. For a valid provision for a lump-sum payment in the event of dissolution of marriage, see Marriage of Bellio (2003) 105 CA4th 630 (provision for $100,000 payment to wife in event of dissolution of marriage or death of husband reasonably compensated wife for loss of spousal support from previous husband as a result of remarriage; provision did not promote divorce but rather made marriage possible).

For representative sister-state cases that may be instructive in deciding whether a premarital agreement is improperly promotive of divorce, and therefore violative of public policy, see:

Black v Powers (Va App 2006) 628 SE2d 546, 559 (mutual elimination of property rights in agreement does not affirmatively encourage parties to separate or divorce; agreement in this case not violative of public policy);
Neilson v Neilson (Utah App 1989) 780 P2d 1264, 1269 (adopting Restatement view and invalidating premarital agreement clause providing that, in event of divorce, wife would receive half of husband’s stock in corporation, reasoning that, “[b]ecause this is the result regardless of how long the marriage lasted, this term of the parties’ agreement provides [wife] a $400,000 profit incentive… to seek dissolution of the marriage at the earliest possible date”);
Gross v Gross (Ohio 1984) 464 NE2d 500, 506 (noting that premarital agreement violates public policy if it “provides a significant sum either by way of property settlement or alimony at the time of a divorce, and after the lapse of an undue short period of time one of the parties abandons the marriage or otherwise disregards the marriage vows”); and
Matthews v Matthews (NC App 1968) 162 SE2d 697, 699 (refusing to enforce premarital agreement providing that, if husband “ever left” wife, she would receive all of his property―both marital and separate―because if contract were valid, “it would induce the wife to goad the husband into separating from her in order that the agreement could be put into effect and she could strip him of all his property”).

For related research, see Restatement (Second) of Contracts §190.

In Marriage of Turfe (2018) 23 Cal.App.5th 1118, Husband attempted to obtain an annulment based on the fact that wife as him to sign a mahr agrrement prepared by an Islamic center. The mahr agreement required husband to give wife 5 gold coins and a copy of the Quran at the time of divorce. Husband believed it was binding. Wife thought it was symbolic. The trial court found that the religious aspect of the agreement were not binding based on Family Code §420 (c). In support of Huband’s argument that the marriage should be annulled, he claimed wife fraudulently promised to abide by the mahr agreement to induce him to marry her. The court held, “The fraud must be proven by clear and convincing evidence and must directly affect the marital relationship. Fraud sufficient to rescind an ordinary civil contract is not enough.”

17.14 D. Agreement Should Not Include Provisions on Religion or Other Personal Issues
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The attorney should avoid including in the agreement any provisions that relate to religious practices or instruction, particularly with respect to children, as well as provisions that attempt to regulate or punish personal behavior, or that purport to require or reward personal services between the parties. For representative cases that have discussed specific agreement provisions governing personal issues, see:

Marriage of Mehren & Dargan (2004) 118 CA4th 1167, 1171 (property forfeiture provision in postmarital agreement for use of illegal drugs was invalid);
Diosdado v Diosdado (2002) 97 CA4th 470, 474 (liquidated damages provision in postmarital agreement for sexual infidelity was invalid);
Marriage of Weiss (1996) 42 CA4th 106, 117 (parent will not be enjoined from involving child in religious activities unless clear showing of harm; premarital provision on religion was unenforceable); and
Borelli v Brusseau (1993) 12 CA4th 647, 654 (oral agreement in which husband promised to leave wife property, and in exchange appellant agreed not to send him to nursing home and to care for him at home for duration of his illness, was unenforceable).

For a related discussion of this issue, see Silbaugh, Marriage Contracts and the Family Economy, 93 NW U L Rev 65, 123 (1998) (most jurisdictions will not enforce agreements with respect to personal services rendered during marriage).

If the parties choose to dictate the terms of their lifestyle, they can have a separate nonbinding agreement that could cover such things as who does the household duties and the like.

17.15 E. Court Not Bound by Custody or Child Support Provisions
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To the extent that they purport to dictate child custody orders, premarital agreements are not binding on the courts. See Puckett v Puckett (1943) 21 C2d 833, superseded by statute as stated in Marriage of Alter (2009) 171 CA4th 718; Van der Vliet v Van der Vliet (1927) 200 C 721. The same is true for agreement provisions on child support. Fam C §1612(b). See Elkind v Byck (1968) 68 C2d 453; County of Shasta v Caruthers (1995) 31 CA4th 1838. See also Marriage of Cohen (2016) 3 CA5th 1014, 1026 (provision in stipulated dissolution judgment that modification of child support should be reviewed “de novo” did not eliminate need to show change of circumstances to reduce support).

17.16 F. Waiver of Joint and Survivor Annuity or Survivor Benefits Under Private Retirement Plan Probably Unenforceable
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It appears that the rights of a nonparticipant spouse to receive a joint and survivor annuity or survivor benefits under a private retirement plan following the participant spouse’s death, as distinguished from other retirement benefits, cannot be waived in a premarital agreement. IRC §§401(a)(11), 417; 29 USC §1055(c); Treas Reg §1.401(a)–20, Q&A 28; Hagwood v Newton (4th Cir 2002) 282 F3d 285 (premarital waiver of interest in retirement plans insufficient to waive spouse’s ERISA rights); Zinn v Donaldson Co. (D Minn 1992) 799 F Supp 69, 73. The waiver can be signed immediately after the marriage. Counsel or the parties should determine whether the plan administrator requires a specific form or procedure (such as notarizing the waiving spouse’s signature).

NOTE► One out-of-state court has upheld a waiver contained in a premarital agreement. See Estate of Hopkins (Ill Ct App 1991) 574 NE2d 230. But it seems unlikely that a California court would do so, and at least five other federal courts have rejected the reasoning of Hopkins.

17.16A G. No Automatic Invalidation of Agreement for Clerical Errors
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Clerical errors in a premarital agreement will not invalidate the agreement if the error was not a surprise to the party who seeks to invalidate the agreement. Thus, for example, in a case in which a party to a premarital agreement did not see the final draft until the day of the parties’ wedding and the agreement was missing a page, this defect was not sufficient to invalidate the agreement when the error was apparent from prior drafts of the agreement. See Marriage of Hill & Dittmer (2011) 202 CA4th 1046 (failure to include missing page was clerical error by party’s attorney and no surprise to party, and was included in prior drafts of premarital agreement provided to that party on basis of parties’ agreement).

Further factors cited in Hill & Dittmer in not invalidating a premarital agreement with a missing page were the business background of the complaining party, along with her awareness of earlier drafts, her access to counsel, and her failure to take reasonable steps to become aware of the contents of the agreement. Taken together, this precluded a finding that she entered into the agreement involuntarily. Marriage of Hill & Dittmer,supra.

DRAFTING THE AGREEMENT

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17.17 A. Structure, Format, Style
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The structure, format, and style of a premarital agreement are similar to those of a marital settlement agreement. See §§4.5–4.7. The premarital agreement should contain:

Introductory provisions. These include, g., identification of the parties, the purpose of the agreement, and disclosures. See §§17.18–17.22.
Substantive provisions. These form the main body of the agreement and address the particular issues it covers, typically property issues. See §17.23–17.36.
General provisions. These address such matters as release of premarital liabilities and claims, execution and delivery of documents, and waivers of rights on the death of the other party. See §17.37–17.54.

Introductory Provisions

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17.18 1. Form: Identification of Parties
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This agreement is made between _ _[full name]_ _, hereafter referred to as “_ _[e.g., first name]_ _,” and _ _[full name]_ _, hereafter referred to as “_ _[e.g., first name]_ _.”

17.19 2. Form: Parties’ Circumstances
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The parties plan to be married on _ _[date]_ _. _ _[E.g., They currently reside together at _ _[address]_ _ and plan to continue residing there after their marriage. Set forth additional circumstances, e.g., parties’ employment, ages, and health, and names and ages of any children of either party.]_ _

17.20 3. Form: Purpose of Agreement
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This agreement is made in contemplation of marriage and is intended to be effective on marriage. Its purpose is _ _[e.g., to define the parties’ respective property rights after marriage. Specifically, it _ _[precludes the creation of any community property/maintains the character of any separate property]_ _, except as it expressly provides]_ _.

Comment: The Uniform Premarital Agreement Act (Fam C §§1600–1617) defines a premarital agreement as an agreement between prospective spouses that is made in contemplation of marriage and is intended to be effective on marriage. Fam C §1610(a). On purposes of such agreements generally, see §§17.2–17.5.

17.21 4. Form: Disclosures of Property and Financial Obligations
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[Include one of the following alternatives]

[Alternative 1: If parties list property and obligations exceeding a certain amount]

Exhibit _ _[e.g., A]_ _ is a list of the property in which _ _[name of first party]_ _ has an interest with a value exceeding _ _[e.g., $500]_ _, along with the extent and value of each such interest, and of _ _[his/her]_ _ financial obligations that exceed _ _[e.g., $500]_ _, along with the amount of each such financial obligation.
Exhibit _ _[e.g., B]_ _ is a list of the property in which _ _[name of second party]_ _ has an interest with a value exceeding _ _[e.g., $500]_ _, along with the extent and value of each such interest, and of _ _[her/his]_ _ financial obligations that exceed _ _[e.g., $500]_ _, along with the amount of each such financial obligation.

[Alternative 2: If parties provide that values and amounts are only approximate]

The parties have attempted to provide reasonable, good faith disclosures of property and financial obligations in Exhibits _ _[e.g., A and B]_ _. The values presented there are only approximate, however, and may be considerably higher or lower than the actual values. They are provided only to indicate values generally and are not intended to be relied on as exact indications. The parties waive disclosure beyond that which is provided.

Comment: “Fair, reasonable, and full” disclosure of property and financial obligations will ensure that a premarital agreement is not deemed unenforceable under Fam C §1615(a)(2) (unconscionability). If the agreement will be recorded or provided to creditors, the disclosure might be provided outside the agreement in order to maintain privacy. Alternatively, a memorandum of agreement might be recorded or provided. It is important that the parties disclose obligations as well as assets. Obligations might include such items as business debts, student loans, and obligations to support parents, disabled adult children, minor children from prior relationships, or a former spouse. The optional addition is provided because in many cases it is impractical to establish a precise value for assets, e.g., business interests.

17.21A 5. Form: Waiver of Disclosure of Property and Financial Obligations
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Each party hereby waives any right to disclosure of the property and financial obligations of the other party beyond that provided in this agreement.

Comment: A premarital agreement may include each party’s express, voluntary waiver of any right to disclosure of the property or financial obligations of the other party beyond that provided in the agreement. Fam C §1615(a)(2)(B). Nevertheless, even with such a waiver, a premarital agreement without disclosure may be suspect. Counsel should take extra precautions to ensure that the waiver is truly voluntary. An attorney who wants to protect against the other party’s subsequently claiming that his or her waiver was not voluntary may choose, e.g., to question that party on videotape regarding the waiver.

For a case in which a court rejected a party’s contention that the premarital agreement was “tainted by fraudulent and inadequate disclosures,” see Marriage of Hill & Dittmer (2011) 202 CA4th 1046 (complaining party’s claim was refuted by evidence that she waived claim in both agreement itself and by her conduct during months’-long period of negotiation).

17.22 6. Form: Disclosures Regarding Income
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_ _[Name of first party]_ _ is currently _ _[employed by _ _[name of employer]_ _/self-employed/unemployed]_ _ and has a gross income from all sources of _ _[approximately dollar amount]_ _ per month. Exhibit _ _[e.g., C]_ _ contains copies of _ _[his/her]_ _ federal income tax returns for _ _[years]_ _.

_ _[Name of second party]_ _ is currently _ _[employed by _ _[name of employer]_ _/self-employed/unemployed]_ _ and has a gross income from all sources of _ _[approximately dollar amount]_ _ per month. Exhibit _ _[e.g., D]_ _ contains copies of _ _[her/his]_ _ federal income tax returns for _ _[years]_ _.

Comment: Although the Uniform Premarital Agreement Act (Fam C §§1600–1617) does not specifically require a disclosure of income, such disclosure is a sound practice. Attaching copies of income tax returns may result in a rather bulky agreement. The agreement itself may be, however, the only evidence of disclosure if the agreement is the subject of litigation years later. Attaching the documents to the agreement ensures that a court will have evidence of disclosure without having to look beyond the agreement itself.

Substantive Provisions

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17.23 1. Form: All Property to Be Separate Property
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All property of either party will be entirely his or her separate property _ _[, except as provided in paragraph(s) number(s)]_ _. The parties acknowledge that, as a result of this agreement, certain assets and interests that would otherwise have been the parties’ community property, belonging equally to each of them, will be one party’s separate property. These include, but are not limited to, _ _[e.g., earnings resulting from the efforts of either party during marriage and before separation; assets acquired with such earnings; increased values in separate property resulting from the application of such earnings, or from the efforts of either party, during marriage and before separation; certain assets or interests acquired by loan or extension of credit during marriage and before separation; and certain commingled funds]_ _.

Comment: This provision is the essence of any premarital agreement designed to preclude the creation of community property (see §17.2). Use of such a provision was approved by the California Supreme Court in Marriage of Dawley (1976) 17 C3d 342. Such a provision can change earnings during marriage and before separation, and assets acquired with such earnings, from community to separate property and eliminate the following problems:

The Moore/Marsden apportionment (Marriage of Moore (1980) 28 C3d 366; Marriage of Marsden (1982) 130 CA3d 426) of separate and community interests when community funds are used for loan payments or improvements on separate property assets. See Marriage of Weaver (2005) 127 CA4th 858, 871; Bono v Clark (2002) 103 CA4th 1409; Marriage of Allen (2002) 96 CA4th 497; Marriage of Wolfe (2001) 91 CA4th 962; Marriage of Branco (1996) 47 CA4th 1621; Practice Under the California Family Code: Dissolution, Legal Separation, Nullity §5.25 (Cal CEB).
The expensive Pereira/Van Camp analysis that an accountant would otherwise have to perform to determine whether, and to what extent, community efforts have increased the value of separate property. See Pereira v Pereira (1909) 156 C 1; Van Camp v Van Camp (1921) 53 CA 17; Marriage of Brandes (2015) 239 CA4th 1461; Practice Under Fam Code §5.16.
The creation of community property when funds are borrowed, even for separate property purposes, and the lender is deemed to have been relying for payment on community property. See Gudelj v Gudelj (1953) 41 C2d 202; Marriage of Bonvino (2015) 241 CA4th 1411, 1424; Marriage of Grinius (1985) 166 CA3d 1179; Practice Under Fam Code §5.18. A waiver of the intent of the lender rule is critical to any separate property agreement, because borrowed money is often commingled with separate property, which has the practical effect of nullifying an otherwise valid agreement to keep property separate. Note that in Dawley, the supreme court held that if the parties to a premarital agreement intended that there be no community property, it is likely that a purchase made on credit would be separate property. The Dawley court stated that had there been no premarital agreement, the wife’s community property claim to a vessel purchased on credit during marriage might have had merit. However, given the statutory authority of parties to alter marital property rights by a premarital or other agreement (see Fam C §1500), the general community presumption did not apply. Dawley, 17 C3d at 357.

If there are to be any exceptions to the preclusion of community property, they should be set out in separate provisions. This provision should include a cross-reference to those provisions. See, e.g., forms in §17.25 (joint accounts and other community property), §17.26 (gifts made to parties jointly).

For a provision designed to maintain the character of separate property, but not otherwise to preclude the creation of community property, see form in §17.24.

17.24 2. Form: All Separate Property to Remain Separate Property
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All property of either party _ _[, as set out in Exhibits _ _[e.g., A and B]_ _,]_ _ that was owned before their marriage, and all property acquired by either party by gift or inheritance during their marriage, will be entirely his or her separate property _ _[, except as provided in paragraph(s) number(s)]_ _. The parties acknowledge that, as a result of this agreement, certain interests that would otherwise have been the parties’ community property, belonging equally to each of them, will be one party’s separate property. These include, but are not limited to, _ _[e.g., increased values in separate property resulting from the application of community funds, or from the efforts of either party, during marriage and before separation; funds acquired by loan or extension of credit during marriage and before separation for application to separate property; and certain commingled funds]_ _. Except as set out here, this provision does not change the characterization of any property that would, under California law, be community property, including, but not limited to, earnings resulting from the efforts of either party during marriage and before separation, and assets acquired with such earnings.

Comment: This provision is the essence of any premarital agreement designed to maintain the character of separate property (see §17.3). Such a provision can eliminate the following problems:

The Moore/Marsden apportionment (Marriage of Moore (1980) 28 C3d 366; Marriage of Marsden (1982) 130 CA3d 426) of separate and community interests when community funds are used for loan payments or improvements on separate property assets. See Marriage of Weaver (2005) 127 CA4th 858, 871; Bono v Clark (2002) 103 CA4th 1409; Marriage of Allen (2002) 96 CA4th 497; Marriage of Wolfe (2001) 91 CA4th 962; Marriage of Branco (1996) 47 CA4th 1621; Practice Under the California Family Code: Dissolution, Legal Separation, Nullity §5.25 (Cal CEB).
The expensive Pereira/Van Camp analysis that an accountant would otherwise have to perform to determine whether, and to what extent, community efforts have increased the value of separate property. See Pereira v Pereira (1909) 156 C 1; Van Camp v Van Camp (1921) 53 CA 17; Marriage of Brandes (2015) 239 CA4th 1461; Practice Under Fam Code §5.16.
The creation of community property when funds are borrowed for separate property purposes but the lender is deemed to have been relying for payment on community property. See Gudelj v Gudelj (1953) 41 C2d 202; Marriage of Grinius (1985) 166 CA3d 1179; Practice Under Fam Code §5.18.

If there are to be any exceptions to the maintenance of the character of separate property, they should be set out in separate provisions. This provision should include a cross-reference to those provisions.

For a provision designed not only to maintain the character of separate property, but also to preclude the creation of community property, see form in §17.23.

17.25 3. Form: Joint Accounts and Other Community Property
ceb_381575972545ae_17_25
form_381575972545ae

The parties will maintain at least one joint account in both their names, from which joint living expenses will be paid. “Joint living expenses” _ _[e.g., include, but are not limited to, food at home, household supplies, utilities, telephone, laundry and cleaning, joint entertainment, and joint gifts to third parties]_ _. The parties will contribute to such accounts the amounts needed for their joint expenses. Contributions will be _ _[equal/in proportion to the parties’ respective gross incomes]_ _. _ _[The parties will fully disclose their incomes to each other to carry out the apportionment of contributions to joint expenses]_ _.

Despite any other provision of this agreement, the following will be the parties’ community property:

(a) All amounts deposited into the joint accounts, including any increases in those amounts; and

(b) Any property acquired with amounts withdrawn from the joint accounts, including, but not limited to, any income produced by the property, increases in its value, and proceeds from its sale.

[Add the following, if desired, to provide that party acquires community interest over time in specific asset]

_ _[Name of party]_ _ will accrue a _ _[specify amount of interest, e.g., 5percent]_ _ community interest per year in the _ _[specify asset, e.g., residence]_ _ at _ _[specify location, if appropriate, e.g., 123 Main Street, Los Angeles, CA]_ _ for the _ _[specify time, e.g., 10year]_ _ period following the marriage, commencing on the first anniversary of the marriage and continuing until _ _[name of party]_ _ owns a one-half interest in the _ _[specify asset, e.g., residence]_ _.

17.26 4. Form: Gifts Made to Parties Jointly
ceb_956553607669cn_17_26
form_956553607669cn

Despite any other provision of this agreement, gifts made to the parties jointly will be their community property.

17.27 5. Form: Gifts and Other Transfers Between Parties
ceb_254138134567mc_17_27
form_254138134567mc

Any gift between the parties of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature that is used solely or principally by the party to whom the gift is made and that has a value, at the time of the gift, of less than _ _[dollar amount]_ _ will be valid without the requirement of a writing and will be the separate property of the recipient. Other gifts and transfers between the parties will be valid only if accompanied by an express declaration in writing that is made, joined in, consented to, or accepted by the party whose interest in the property is adversely affected.

Comment: Under California law, spouses may transmute community property to separate property of either spouse, separate property of either spouse to community property, or separate property of one spouse to separate property of the other. Fam C §850. To be valid, such a transmutation generally requires a written express declaration. Fam C §852; Marriage of Valli (2014) 58 C4th 1396; Marriage of Benson (2005) 36 C4th 1096, 1107; Marriage of Bonvino (2015) 241 CA4th 1411 (real property––residence); Marriage of Lafkas (2015) 237 CA4th 921 (personal property––partnership agreement).

The writing requirement does not apply, however, to a gift between spouses of clothing, wearing apparel, jewelry, or another tangible article of a personal nature that is used solely or principally by the recipient and that is not substantial in value, taking into account the circumstances of the marriage. Fam C §852(c). For representative cases that have construed whether particular items were articles “of a personal nature” that were “not substantial” in value, see, e.g., Marriage of Buie & Neighbors (2009) 179 CA4th 1170, 1175 (automobile did not qualify) and Marriage of Steinberger (2001) 91 CA4th 1449, 1465 (diamond ring did not qualify).

Including a provision like this in the premarital agreement may clarify the law for the parties. Further, substituting a maximum dollar amount for the requirement that an item not be substantial in value, taking into account the circumstances of the marriage, may simplify understanding and implementation of the provision. Selecting a relatively low dollar amount may serve to avoid litigation over whether a gift was intended by requiring a writing in most instances.

17.28 6. Form: Debts
ceb_8988792439136ke_17_28
form_8988792439136ke

Each debt existing as of the date of the marriage will be the separate debt of the party who incurred it. Each debt incurred during marriage, including credit cards, charge accounts, and other loans or extensions of credit, will be the separate debt of the party who incurs it unless the parties acquire the debt in their joint names.

Comment: Under Fam C §910, the community estate is normally liable for debts incurred by either spouse, either before or during marriage, regardless of whether one or both spouses are parties to the debt. This provision is designed to ensure that the only debts for which the property of both parties might be liable will be those incurred jointly. If the parties wish to make any exceptions, they should specify them.

For this provision to be enforceable against a creditor probably requires that the creditor be provided notice of the provision at or before the time the debt is incurred. See Marriage of Dawley (1976) 17 C3d 342, 357, in which the California Supreme Court suggested that, as long as creditors are given proper notice, a premarital agreement that provides that each spouse’s earnings and acquisitions during marriage will be his or her separate property may preclude creditors of one spouse from taking the earnings and acquisitions of the other, because those earnings and acquisitions would not be community property.

17.29 7. Form: Income Tax Returns
ceb_0096813538935dw_17_29
form_0096813538935dw

The parties will file joint federal and state income tax returns for tax years for which _ _[the parties agree to do so/either party so elects]_ _. _ _[If one party elects to file joint returns and the other does not, the second party will pay the first party the additional amount of income tax obligation incurred by the first party as the result of filing separate returns.]_ _ For each tax return to be filed jointly, the proportion of the income tax obligation to be borne by each party will be the amount of income tax obligation that that party would have had if the parties had not filed jointly, divided by the sum of the amounts of income tax obligation that the two parties would have had in that event. Once each party’s respective share of the income tax obligation on any joint return is determined, adjustments will be made between the parties, in connection with distribution of any refund or payment of any amount owing and taking into account the parties’ respective shares under law of any credits for income taxes withheld and estimated taxes paid, so that each party bears his or her respective share of the income tax obligation. The expense of preparation of the parties’ joint federal and state income tax returns will be shared by the parties _ _[in the same proportions as the total income tax obligation for that year is borne by them under the terms of this provision/equally]_ _. “Income tax obligation” as used in this provision means the total income tax owed before any credits for taxes withheld or estimated taxes paid.

Comment: This provision divides the benefit of filing jointly in accordance with the parties’ respective shares of their total income tax obligation had they not filed jointly. Thus, for example, if one party would have paid 70 percent of the sum of the amounts payable by them had they filed individually, that party will receive 70 percent of the benefit gained by the joint filing and will bear 70 percent of the income tax obligation on the joint return.

17.30 8. Form: Waiver of Rights Under Equitable Distribution Laws
ceb_322899775146hd_17_30
form_322899775146hd

Under California law and this agreement, neither party has any rights in the separate property interests of the other. Both parties understand, however, that the laws of many other states, often referred to as “equitable distribution” laws, allow the courts in divorce actions to order the transfer of separate property interests of one party to the other party. To avoid such a result in the event of a divorce or dissolution action between the parties in another state, each party hereby waives any right that he or she might otherwise have on divorce to receive a share of the other’s separate property interests.

Comment: A majority of the states have some form of equitable distribution law. Because the jurisdiction where the parties might obtain a divorce cannot be predicted with certainty, it is advisable to include a provision such as this to avoid a result substantially unlike that envisioned by the parties’ agreement.

17.31 9. Form: No Restrictions on Transfers at Death or Nomination of Executor
ceb_895493710207re_17_31
form_895493710207re

Despite any other provision of this agreement, either party may transfer any property to the other at death or nominate the other as Executor of his or her estate, under a will or other written document executed after the date of the parties’ marriage, and the other party may receive such transfer and act as Executor if nominated.

Comment: Many older couples enter into premarital agreements to protect certain property for the benefit of children from previous relationships. This provision specifies that the agreement does not operate to preclude either party from leaving property to the other or appointing the other as executor.

17.32 10. Form: Gifts at Death
ceb_0959464261367dv_17_32
form_0959464261367dv

Despite any other provision of this agreement, if the parties are married and living together (disregarding temporary absences caused by, e.g., business or employment, vacation, illness, or emergency) at the time of _ _[name of first party’s]_ _ death and _ _[name of second party]_ _ survives _ _[name of first party]_ _ by at least 30 days, _ _[name of first party]_ _ will, on _ _[his/her]_ _ death, leave to _ _[name of second party]_ _, by will, other instrument, or both, _ _[e.g., assets having an aggregate net fair market value of at least the lesser of (a) _ _[dollar amount]_ _ or (b) one-third of _ _[name of first party’s]_ _ adjusted gross estate (as defined in Internal Revenue Code §6166(b)(6)) at the time of _ _[his/her]_ _ death. In determining _ _[name of first party’s]_ _ adjusted gross estate, retirement plan survivorship benefits will not be included]_ _. If _ _[name of first party’s]_ _ will, other instrument, or both does not leave to _ _[name of second party]_ _ sufficient assets to meet the requirements of this provision, _ _[name of second party]_ _ will receive the balance from _ _[name of first party’s]_ _ estate or other property.

Comment: For many parties, particularly older ones, the primary purpose of a premarital agreement is to constitute a contract to make a will. See Fam C §1612(a)(3)–(4). Older people who are marrying for a second time often want to provide for their children and, at the same time, for their spouses. It is not uncommon for a party’s children to be the motivating forces in obtaining the agreement. For many such children, the prospect of a battle with the parent’s new spouse is frightening.

Parties are more willing to be generous in providing for their spouses at death than at dissolution because such spouses have stayed with them to the end. Unfortunately, contracts to make wills can be problematic. If the premarital agreement conflicts with wills or similar documents, litigation is likely. If there are no estate planning documents other than the premarital agreement, there may be litigation over the validity of the agreement.

Drafting provisions like this one that are related to estate planning should be done with the assistance of an attorney experienced in estate planning. The client should be advised in writing to amend his or her estate plan to conform to the premarital agreement.

17.33 11. Form: Waiver or Limitation of Spousal Support
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form_462897635753bl

[Include one of the following alternatives]

[Alternative 1: If each party waives spousal support]

Each party waives any right, statutory or otherwise, that he or she may have to receive spousal support from the other party, and each party releases the other party from any obligation, statutory or otherwise, to provide spousal support to the releasing party.

[Alternative 2: If spousal support will be limited]

If our marriage is dissolved, then the right to, amount of, and duration of spousal support shall be determined by a court of competent jurisdiction, but we agree that the maximum amount and duration of spousal support either of us will be entitled to receive from the other under any circumstances shall be:

(a) If we separate within ____ years of the date of our marriage, the sum of $____ per year, for a period not greater than one-half of the term of the marriage (measured from the date of marriage to the date of separation), or until the recipient’s remarriage, or the death of either of us, whichever first occurs.

(b) If we separate more than ____ years but less than ____ years after the date of our marriage, the sum of $____ per year, for a period not greater than three-quarters of the term of the marriage (measured from the date of marriage to the date of separation), or until the recipient’s remarriage, or the death of either of us, whichever first occurs.

(c) If we separate more than ____ years after the date of our marriage, the sum of $____ per year, until the death of either of us, or until the recipient’s remarriage, whichever first occurs.

(d) The annual sum stated in (a), (b), or (c) shall be adjusted by the increase or decrease in the Consumer Price Index, _ _[specify area, e.g., San Francisco Bay Area for All Urban Consumers]_ _, with the base amount being the month preceding the month in which this Agreement is executed, the first adjustment determined at the time of our separation, and with annual adjustments thereafter.

(e) Our intention in this paragraph is, on the one hand, to define and limit our individual exposures and obligations for spousal support, and, on the other hand, to assure a reasonable standard of living for the supported party for a reasonable time.

(f) Any sums that either of us may pay the other for support following any separation between us shall be credited against amounts and durations payable under this Agreement, whether paid voluntarily, under further written agreement, or by court order.

(g) Except as otherwise provided in this Agreement, we each agree that we have and will make provision for our respective support and hereby waive, relinquish, and release the other from any and all further rights, claims or demands either of us might otherwise have to support by the other by reason of our marriage.

(h) We each understand that the foregoing limitations on the amount and duration of spousal support payable under this Agreement may create an unintended hardship or result in apparent unfairness at such time as we may separate, such as if one of us were unable to work because of physical incapacity, if one of us becomes far wealthier than the other, or if one of us has a greater earning capacity that the other. Nevertheless, we each agree to be bound by these limitations.

(i) The spousal support payable as set forth above shall be taxable to the recipient as income and deductible by the payer from income for all tax purposes. Each party agrees to report on his or her income tax returns all such payments of spousal support consistent with this subsection, and agrees to indemnify and hold the other party harmless from and against any and all liability and cost, including reasonable attorney fees and costs, and interest and penalties incurred by the other party by reason of any breach of this covenant by the indemnifying party. Notwithstanding the foregoing, if the deductibility of spousal support would subject the payer to “recapture” under Internal Revenue Code §71 or any successor statute or regulation, the spousal support payable during the applicable “recapture” period (currently the first 3 postseparation years) shall neither be taxable to the recipient nor deductible by the payer. In that event, the amount of any spousal support payable as nontaxable support shall be recalculated by deducting from the taxable amount of support otherwise payable the amount of income tax attributable to such spousal support based on the payer’s highest marginal tax rate (federal and state) in effect at the time of each payment. At such time as the spousal support may be deducted from income without recapture, the spousal support shall thereafter be deductible to the payer and taxable to the recipient, and the amount of taxable/deductible support shall be reinstated.

Comment: The California Supreme Court has held that premarital waivers of spousal support do not violate public policy and thus are not in themselves unenforceable. Marriage of Pendleton & Fireman (2000) 24 C4th 39. The court specified that it found no violation of public policy in the enforcement of a waiver made by “intelligent, well-educated persons, each of whom appears to be self-sufficient in property and earning ability, and both of whom have the advice of counsel… at the time they execute the waiver.” 24 C4th at 53. The legislature later amended Fam C §1612 by adding section (c), providing that

[a]ny provision in a premarital agreement regarding spousal support, including, but not limited to, a waiver of it, is not enforceable if the party against whom enforcement of the spousal support provision is sought was not represented by independent counsel at the time the agreement containing the provision was signed, or if the provision regarding spousal support is unconscionable at the time of enforcement.

Recitation in the agreement of the circumstances justifying the waiver of spousal support may be useful in establishing that its enforcement would not violate any public policy. On the requirement of independent counsel when a provision of the premarital agreement relates to spousal support, see §17.12.

It may be more prudent to have a limitation clause in the agreement instead of a full waiver of spousal support, because a court may be more willing to enforce a limitation. It would be more difficult for a court to find a moderate spousal support award unconscionable than it would if the agreement provided for absolutely no spousal support. A carefully written clause will include cost-of-living adjustments (COLA) and adjustments for duration of the marriage, with particular attention to long-term marriages.

Any limitation or waiver clause should be made severable from the entire agreement itself. Furthermore, for agreements executed prior to January 1, 2019, any limitation on the amount and duration of spousal support should take into account the alimony recapture provisions of former IRC §71(f) (see subsection (i) in the second alternative group of clauses, above). See §11051 of the Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054), repealing the alimony deduction in IRC §215 and the corresponding specific inclusion provision in IRC §71 for instruments executed after December 31, 2018.

For a more recent discussion on pre-2002 waivers of spousal support see Marriage of Miotke (2019) 35 Cal.App.5th 849.

17.34 12. Form: Treatment of Borrowed Funds and Assets Acquired With Those Funds
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form_633366957572wd

Should the parties, or either of them, borrow any funds or acquire any asset or assets with borrowed funds during the marriage, the presumption created by the time of acquisition under Family Code §§760 and 803 or any similar statute or holding shall not apply. Such loan proceeds and/or any property acquired with such loan proceeds shall belong to the party or parties in the manner that title is held to same. Therefore, if title to that property is held in one party’s name alone, it shall be and remain that party’s separate property, subject to change only as provided for in this Agreement. Such property can be community property or have any community property interest only if there exists an agreement, in writing, signed by both parties, expressly creating such community property. The manner in which the loan proceeds or credit was obtained shall not be a factor in determining the character, separate or community, of loan proceeds or property acquired with loan proceeds. This includes, but is not limited to:

(a) Whether the loan was applied for in both names;

(b) Whether any loan documents, including applications, financial statements, promissory notes, or security documents, refer to or are signed by both parties;

(d) Whether the lender intended to, and/or did, rely on community income and assets, separate property of one or both parties, or a combination, for security or repayment.

The parties expressly intend that this Agreement will override the doctrines of Marriage of Grinius (1985) 166 CA3d 1179, and any similar or later case that looks to the lender’s intent and time of acquisition to determine the characterization of loan proceeds and/or property acquired with loan proceeds.

If a party borrows funds in _ _[his/her]_ _ name for business or personal use, the repayment of that loan shall be the sole responsibility of the borrowing party.

Comment: This clause has particular importance for anyone operating a business that relies on a revolving line of credit or a homeowner who refinances a home. This clause will protect a spouse who wants to maintain the separate property character of an asset that is his or her separate property.

17.35 13. Form: Certain Events Are Not Evidence of Transmutation
ceb_885813691043dl_17_35
form_885813691043dl

The parties specifically agree that the following events shall under no circumstances be evidence of any intention by either party of any agreement between them to change their separate property interest into community property:

(a) The filing of joint tax returns;

(b) The taking of title to property, whether real or personal, in joint tenancy or in any other joint or common form;

(c) The designation of one party by the other as a beneficiary of _ _[his/her]_ _ estate or as trustee or as any other form of a fiduciary;

(d) The commingling by one party of _ _[his/her]_ _ separate funds or property with the separate funds or property of the other party, including the time, toil, and talent of either of the parties and the pledging of general, joint, separate, or community credit for the benefit of the other’s separate estate;

(e) Any oral statement by either party;

(f) Any written statement by either party other than any express written agreement changing separately owned property into jointly owned property, or a written statement designating a particular piece of property as a gift to the other except as otherwise provided _ _[specify any exception, e.g., concerning gifts between the parties]_ _ in this Agreement; or

(g) The payment from the funds of either party of any obligations, including, but not limited to, the payment of mortgages, interest, taxes, repairs, or improvements on a separately or jointly owned residence.

17.36 14. Form: Property Settlement with Incremental Increase in Community Ownership and No-Contest Provision
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form_689662173085jv

The parties agree that _ _[name of first party]_ _ shall pay to _ _[name of second party]_ _, in addition to the community property rights set forth in paragraph _ _[specify paragraph]_ _ of this Agreement, those sums of money _ _[that will not be subject to federal and state income taxes to _ _[name of second party]_ _]_ _ that would be due and owing in accordance with the schedule as set forth below:

(a) 1 to 3 years of marriage: $_ _[specify amount, e.g., $25,000]_ _ per year of marriage, with a maximum of $_ _[specify amount, e.g., $75,000]_ _;

(b) 4 to 7 years of marriage: $_ _[specify amount, e.g., $40,000]_ _ per year, with a maximum of $_ _[specify amount, e.g., $280,000]_ _;

To avoid any interpretation that this section of the Agreement promotes divorce, _ _[name of first party]_ _ shall pay these funds to _ _[name of second party]_ _ out of _ _[his/her]_ _ separate property within _ _[specify period, e.g., 30 days of the anniversary of their marriage]_ _. _ _[Name of first party]_ _ can make any number of payments as required in this Agreement in advance. In the event that _ _[name of first party]_ _ fails to make a payment or payments, they shall be paid to _ _[name of second]_ _ _ _[party]_ _ on entry of judgment of dissolution of marriage (which includes a full disposition of all issues, or on entry of a further judgment on reserved issues in which there is a full disposition of all issues, whichever is later) or on _ _[name of first party]_ _’s death during the marriage. Because the payments are structured to increase, _ _[name of first party]_ _ will owe _ _[name of second party]_ _ on the _ _[specify date, e.g., fourth anniversary of their marriage]_ _ $_ _[specify amount, e.g., $45,000]_ _ more for the _ _[specify period, e.g., first 3 years of their marriage]_ _. That payment shall be made on the _ _[specify date, e.g., fourth anniversary of their marriage]_ _, in addition to the $ _ _[specify amount, e.g., $40,000]_ _ to be paid for the _ _[specify time, e.g., fourth year]_ _. Likewise, _ _[name of first party]_ _ will be required to make up past payments in the _ _[specify time, e.g., seventh and eighth years]_ _.

For the purpose of implementing paragraph _ _[specify paragraph]_ _ of this Agreement, the length of marriage shall be calculated from the date of marriage to the date of the parties’ separation or _ _[name of first party]_ _’s death, whichever is applicable. Partial years will be prorated by dividing the number of days the parties are married in a particular year by 365 and multiplying that ratio by the payment for that year. For example, if the parties are married 2 years and 200 days, _ _[name of second party]_ _ would be entitled to $_ _[specify amount, e.g., $50,000]_ _ for the 2 years. The 200 days would be divided by 365 to obtain a ratio of 0.55. That ratio, multiplied by $_ _[specify amount, e.g., $25,000]_ _, equals $_ _[specify amount, e.g., $13,698.63]_ _. Thus, _ _[name of second party]_ _ would be entitled to $_ _[specify amount, e.g., $63,698.63]_ _ for the term of the marriage.

The amounts payable to _ _[name of second party]_ _ as described in this Agreement shall in no event exceed one-half of _ _[name of first party]_ _’s total net worth.

In addition to the payments described above, _ _[name of first party]_ _ shall give to _ _[name of second party]_ _ a _ _[specify percentage amount, e.g., 1 percent]_ _ ownership interest in the _ _[specify asset, e.g., marital residence]_ _ on the _ _[specify date, e.g., first anniversary of their marriage]_ _, and a _ _[specify percentage amount, e.g., 1 percent]_ _ interest on each succeeding anniversary of their marriage for the _ _[specify time period, e.g., first 10 years of marriage]_ _. Beginning the _ _[specify time period, e.g., eleventh year of marriage]_ _, _ _[name of first party]_ _ shall give to _ _[name of second party]_ _ a _ _[specify percentage amount, e.g., 2 percent]_ _ interest in the _ _[specify asset, e.g., residence (or successor residence)]_ _ up to a total interest of _ _[specify amount, e.g., 50 percent]_ _ in the _ _[specify asset, e.g., current or successor residence]_ _.

_ _[Continue with provisions unique to asset in question, e.g., name of second party]_ _’s interest shall be subject to encumbrances on the residence, which shall not exceed the current encumbrance of approximately _ _[specify amount, e.g., $870,000]_ _. If the marriage terminates, then _ _[name of second party]_ _ will retain the percentage of _ _[his/her]_ _ prior ownership interest in the marital residence with _ _[name of first party]_ _, but _ _[he/she]_ _ will acquire no further interest thereafter. By way of illustration, after 4 years of marriage, _ _[name of first party]_ _ shall own _ _[specify amount, e.g., 96 percent]_ _ and _ _[name of second party]_ _ shall own _ _[specify amount, e.g., 4 percent]_ _ of said marital residence, and at the end of 10 years of marriage _ _[name of first party]_ _ will own _ _[specify amount, e.g., 90 percent]_ _ and _ _[name of second party]_ _ will own _ _[specify amount, e.g., 10 percent]_ _. If there shall be a termination of marriage, _ _[name of second party]_ _ shall be entitled to _ _[his/her]_ _ percentage interest in the property for each full year of marriage, which is calculated through the date of separation. _ _[Name of first party]_ _ may, at _ _[his/her]_ _ election, purchase _ _[name of second party]_ _’s interest in the property at the then-current market value if the marriage terminates. In the event the parties sell the current residence and purchase a new residence, the parties shall carry their respective interests in the residence into the new residence. _ _[Name of second party]_ _ will continue to acquire an interest in the new residence as specified in this Agreement, except that if either party makes separate property contributions to the property as defined in Family Code §2640, that party shall receive reimbursement under Family Code §2640. If the community makes a contribution to the residence, the community shall be reimbursed in the same manner.

If _ _[name of second party]_ _ directly or indirectly contests or attacks this Agreement or the validity of any of its provisions, or seeks to obtain an adjudication in any proceeding in any court that this Agreement or any of its provisions is void, or otherwise seeks to void, nullify, or set aside this Agreement or any of its provisions, then he or she shall forfeit and be deemed to have waived the provisions of paragraphs _ _[specify, e.g., 12.1 through 12.4]_ _ of this Agreement for _ _[his/her]_ _ benefit. For purposes of this paragraph, the words “contest,” “attack,” or “seek to obtain an adjudication” include, without limitation, any claims asserted against _ _[name of first party]_ _ or _ _[his/her]_ _ estate not provided for in this Agreement, whether made on (a) a “quantum meruit” theory; (b) a constructive trust theory; or (c) any alleged oral agreement (or an alleged written agreement that is to be proved by parol evidence) claiming that _ _[name of first party]_ _ agreed to give or bequeath anything to him or her, whether or not such alleged agreement is also alleged to be made in consideration for the provision of personal or other services to _ _[name of first party]_ _. If money has been paid to _ _[name of second party]_ _ or if an interest in real property has been conveyed to _ _[name of second party]_ _ under paragraphs _ _[specify, e.g., 12.1 through 12.4]_ _ of this Agreement before his or her contesting the Agreement, any sums paid or property conveyed to _ _[name of second party]_ _ shall be returned to _ _[name of first party]_ _ at the same time _ _[name of second party]_ _ files an action to contest the Agreement.

General Provisions

ceb_944516518245ca
17.37 1. Form: Release of Premarital Liabilities and Claims
ceb_9611237330824dc_17_37
form_9611237330824dc

[Include one of the following alternatives]

[Alternative 1: To provide for nonspecific release of premarital liabilities and claims]

_ _[Except as otherwise provided in this agreement, Each/each]_ _ party hereby releases the other from all premarital liabilities and from all premarital claims to the property of the other. The parties’ rights with respect to future liabilities and property will be determined by this agreement.

[Alternative 2: To provide for release of premarital liabilities and claims with waiver under CC §1542]

_ _[Name of first party]_ _ declares that _ _[he/she]_ _ has no rights in or claims to any property currently owned or acquired by _ _[name of second party]_ _ before the parties’ marriage. Nevertheless, _ _[name of first party]_ _ hereby releases and forever discharges _ _[name of second party]_ _ from all premarital actions, causes of action, suits, debts, liens, contracts, agreements, promises, claims, demands, damage, losses, liabilities, costs, or expenses, of any nature whatever, known or unknown, suspected or unsuspected, fixed or contingent, that _ _[name of first party]_ _ now has or may have against _ _[name of second party]_ _, by reason of any matter, cause, case, statute, or any other things before the date of this Agreement, including any court decision or any statute enacted to codify such decision that arises out of the parties’ relationship before their marriage. _ _[Name of first party]_ _ acknowledges that _ _[he/she]_ _ has been advised of and is familiar with Civil Code §1542, which provides: “A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.” Nevertheless, _ _[name of first party]_ _ hereby waives any right _ _[he/she]_ _ may have under Civil Code §1542, or under any other statute or rule of law with similar effect. The parties’ rights with respect to future liabilities and property will be determined by this agreement.

_ _[Name of second party]_ _ declares that _ _[he/she]_ _ has no rights in or claims to any property currently owned or acquired by _ _[name of first party]_ _ before the parties’ marriage. Nevertheless, _ _[name of second party]_ _ hereby releases and forever discharges _ _[name of first party]_ _ from all premarital actions, causes of action, suits, debts, liens, contracts, agreements, promises, claims, demands, damage, losses, liabilities, costs, or expenses, of any nature whatever, known or unknown, suspected or unsuspected, fixed or contingent, which _ _[name of second party]_ _ now has or may hereby have against _ _[name of first party]_ _, by reason of any matter, cause, case, statute, or any other things before the date hereof, including any court decision or any statute enacted to codify such decision, which arises out of the parties’ relationship before their marriage. _ _[Name of second party]_ _ acknowledges that _ _[he/she]_ _ has been advised of and is familiar with Civil Code §1542, which provides : “A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.” Nevertheless, _ _[name of second party]_ _ hereby waives any right _ _[he/she]_ _ may have under Civil Code §1542, or under any other statute or rule of law with similar effect. The parties’ rights with respect to future liabilities and property will be determined by this agreement.

Comment: A provision for the mutual release of rights must be used carefully. The attorney could be waiving any rights the client has against the other party for both “known” and “unknown” claims.

Of particular concern in drafting a waiver form is including a waiver for any Marvin type of action (oral contracts, written contracts, implied contracts), premarital torts, and the transmission of sexually related diseases. For a related provision that refers to Marvin claims, see §17.40 (second alternative).

17.38 2. Form: Execution and Delivery of Documents
ceb_005201056221qj_17_38
form_005201056221qj

Each party will be free to manage and control his or her separate property without the other party’s consent and without the necessity of the execution of any document by the other party. If it becomes necessary for one party to obtain a quitclaim deed or any other documents from the other in order to manage and control his or her separate property, the other party will sign and deliver the required documents without undue delay. The execution and delivery of such documents will not make the executing party liable for any indebtedness, and the party owning the property will indemnify the other for any liability, attorney fees, and related costs. Any proceeds or increased value derived from any transaction affecting separate assets will be the separate property of the owning party.

If a party fails to execute any document as required by this provision, the Court may appoint the court clerk or his or her authorized designee to execute the document on that party’s behalf.

Comment: Even when a premarital agreement precludes the creation of any community property, it may not be possible for either party to transfer or refinance real property without a quitclaim deed from the other party or the other party’s signature. Title and escrow companies usually require one or the other. A spouse may file an action to avoid any instrument affecting property standing of record in the name of the other spouse alone at any time within 1 year after the recording of the instrument. Fam C §1102(d). It appears to be implicit in Fam C §1102 that there be a community property interest in the subject property, and such an interest may be precluded by a premarital agreement. Nevertheless, this right of avoidance might prompt a title or escrow company to obtain from the other spouse either a quitclaim deed or his or her signature.

Some individuals may be able to establish relationships with title and escrow companies that enable them to avoid such requirements, but this outcome cannot be assumed. In some cases, a quitclaim deed or spouse’s signature may not be required if the subject property is held in trust. For this reason, it may be advisable for a party who has separate real property to place that property in a trust solely under his or her control as additional protection to that afforded by a premarital agreement. Another potentially effective method for transferring real property without a spouse’s signature is use of a limited power of attorney, which may either be incorporated as part of a premarital agreement or be signed concurrently with the agreement. There is no guaranty, however, that a title or escrow company will honor the power of attorney.

On the court’s authority to appoint a person to execute a document on behalf of a party who will not do so, see Rayan v Dykeman (1990) 224 CA3d 1629, 1635.

17.39 3. Form: Waiver of Rights on Death of Other Party
ceb_0196716491428ej_17_39
form_0196716491428ej

_ _[Except as otherwise provided in this agreement,]_ _ _ _[Each/each]_ _ party hereby waives the right to receive any property or rights whatsoever on the death of the other, unless that right is created or affirmed by the other under a will or other written document executed after the date of the parties’ marriage. Each party believes that he or she has received a fair and reasonable disclosure of the property and financial obligations of the other party. Each party’s waiver is intended to be an enforceable waiver of that party’s rights under Probate Code §§140–147.

The rights waived include, but are not limited to, rights to any of the following:

(a) Property that would pass from the decedent by intestate succession;

(b) Property that would pass from the decedent by testamentary disposition in a will executed before the waiver;

(d) The setting aside of exempt property;

(e) A family allowance;

(f) The setting aside of an estate;

(g) An election to take community or quasi-community property against the decedent’s will;

(h) The statutory share of an omitted spouse;

(i) An appointment as executor or administrator of the decedent’s estate, except as the nominee of a third party legally entitled to make such a nomination;

(j) Property that would pass from the decedent by nonprobate transfer, such as the survivorship interest under a joint tenancy, a Totten trust account, or a payable-on-death account;

(k) Proceeds as beneficiary of any type of insurance policy; and

(l) The right to take property as a pretermitted heir.

Comment: This provision assumes that the parties desire the broadest possible waiver of rights that otherwise might accrue to the surviving party on the death of the other, except by a writing of the decedent executed after the parties’ marriage, which is the effective date of the premarital agreement (Fam C §1613; see §17.20). If that is not their intent, the provision should be modified accordingly.

Often, modifications focus on the probate homestead and family allowance. An older party may want a probate homestead to ensure that he or she will not be evicted from the residence by the other’s children on the other’s death and may want a family allowance to enable him or her to maintain the residence. Provisions for such rights may be included in a premarital agreement. Regardless of what provision, if any, is used, no waiver such as this can take the place of a careful review and possible revision by the client of his or her estate plan, particularly with respect to any previously executed wills and beneficiary designations.

17.40 4. Form: Entire Agreement
ceb_738938786572ft_17_40
form_738938786572ft

[Include one of the following alternatives]

[Alternative 1: To provide general statement of final agreement]

This agreement contains the entire agreement of the parties on these matters, superseding any previous agreement between them.

[Alternative 2: To provide that document is entire and final agreement, with disclaimer of rights under Marvin v Marvin]

The parties acknowledge that they have each discussed with their respective legal counsel the rights that each of them may have gained or lost by reason of any contracts between them, their contemplated marital relationship, their past conduct and/ or cohabitation and any statements made orally to each other with respect to the property covered by this Agreement. By this Agreement, the parties waive and renounce all such claims, interests, rights, and/or duties that they each might have acquired by reason of any such contracts, relationships, conduct, and/or statements to the effect that this Agreement is controlling with respect to the property covered in this Agreement.

This Agreement, therefore, contains the parties’ entire agreement and otherwise supersedes any previous agreements between them as it relates to the property covered in this Agreement. No modification or waiver of any term(s) of this Agreement shall be valid unless it is in writing as described above.

The parties acknowledge that there are no prior agreements or understandings in existence between them, including, without limitation, any agreements or understandings with respect to property. Specifically, but not by way of limitation, the parties acknowledge that they have not entered into:

(a) Any pooling agreement;

(b) Any agreement for the joint or common ownership or transfer of property;

(d) Any agreement to provide services to the other;

(e) Any agreement to forego any business, career, or investment opportunity; or

(f) Any other agreement, written or oral, express or implied, that would be cognizable under Marvin v Marvin (1976) 18 C3d 660.

The parties acknowledge to each other that before the execution of this Agreement, neither of them has possessed or claimed any right or interest in the present or future income, assets, or other property of the other, and they acknowledge to each other that, before the execution of this Agreement, neither of them has had any responsibility for any debt or liability of the other. The rights of the parties with respect to their future income, assets, or other property, and with respect to their debts and liabilities, shall be determined by this Agreement.

The parties have made no representations to each other concerning their respective personal or financial statuses that are not set forth in this Agreement. The parties have made no promises to each other, express or implied, that are not set forth in this Agreement. The parties have made no representations to each other that are not set forth in this Agreement

[If appropriate, add]

_ _[and in the attached Exhibits]_ _.

17.41 5. Form: Confidentiality
ceb_759625819992rq_17_41
form_759625819992rq

Each party acknowledges that the information disclosed regarding the other’s financial circumstances is confidential, and neither party will disclose that information to anyone other than his or her counsel in this matter. This provision does not prohibit the submission of this agreement by either party to a Court of competent jurisdiction for the purpose of enforcement of its terms.

17.42 6. Form: Binding Effect of Agreement
ceb_256713479359eg_17_42
form_256713479359eg

This agreement will inure to the benefit of, and be binding on, the parties’ respective devisees, heirs, personal representatives, assigns, and successors in interest.

17.43 7. Form: Waiver of Breach
ceb_703699922268au_17_43
form_703699922268au

The failure of either party, at any time, to require the other to perform any of his or her obligations under this agreement will not affect the party’s right to enforce those obligations thereafter. Nor will the waiver by either party of any breach of this agreement by the other party be deemed a waiver of any subsequent breach, a waiver of the particular provision breached, or a waiver of any other provision of this agreement.

Comment: Advise the client in writing of the necessity of following the terms of the agreement, despite this clause. A court will be unlikely to enforce an agreement if the party seeking enforcement does not follow the agreement.

17.44 8. Form: Amendment or Revocation by Subsequent Agreement
ceb_902671412958dh_17_44
form_902671412958dh

This agreement may be amended or revoked only by a written agreement signed by the parties. The amended agreement or revocation will be enforceable without consideration.

Comment: This provision sets out the rule of Fam C §1614.

17.45 9. Form: Governing Law
ceb_14935109586776hi_17_45
form_14935109586776hi

This agreement will be governed and construed by, and interpreted in accordance with, California law. California law will also apply to the division of the property and to any award of spousal support.

Comment: This clause is often referred to as a “choice of law” clause. It is important to include such as clause in premarital agreements because the parties may dissolve their marriage in another state or country. If that occurs, the court in the other state will determine which law applies despite the terms of the agreement. Whether a court will enforce this provision may depend on the nexus the parties have with the jurisdiction in question. This may depend on the length of time they have lived there, their contacts with the jurisdiction, the property owned, and other similar factors.

Furthermore, many countries do not enforce premarital agreements. Some of these countries have premarital regimes in which a couple selects how they will hold their property before marriage. The parties meet with a quasi-judicial official and sign certain documents.

If the drafting attorney knows that a couple has a connection with another jurisdiction, it may be wise to seek the assistance of foreign counsel. The parties may choose to elect a marital regime and have a premarital agreement, or, if they have a connection with another state, the attorney may ask them to engage counsel in that state to prepare an agreement that would be enforceable there, in the event the parties divorced or died in that jurisdiction. See DeLorean v DeLorean (NJ Super 1986) 511 A2d 1257 (agreement had choice of law clause enforced in New Jersey). See also Marriage of Proctor (Or App 2005) 125 P3d 801 (choice of law provision in California premarital agreement limited to construction of agreement and did not control property division in Oregon, particularly absent any other provision requiring application of California law to division). In drafting a choice of law clause, it is prudent to draft the clause so it covers not only which law will apply to the construction of the agreement, but also to cover whether community property law or equitable division laws will apply.

In California, a contract is governed by the law and usage of the place where it is to be performed, or, if the place of performance is not indicated, by the law and usage of the place where it is made. CC §1646. When the application of §1646 is unclear, California courts are guided by the factors set out in Restatement (Second) Conflict of Laws §188 (1971) in determining what law to apply to the contract. Henderson v Superior Court (1978) 77 CA3d 583, 592 (under facts involved, Florida law applied to interpretation of cohabitation agreement). For instructive, illustrative cases from sister states, see §17.13. See, e.g., Black v Powers (Va App 2006) 628 SE2d 546 (applying law of U.S. Virgin Islands to interpretation of premarital agreement when agreement was to be performed there).

On potential California treatment of choice of law provisions in premarital agreements made in foreign countries, see generally Fam C §1612(a)(6); Nedlloyd Lines B.V. v Superior Court (1992) 3 C4th 459, 467. See also Walzer, A World of Agreements, Fam Advoc (Winter 2011); Walzer, Foreign Affairs, LA Law (Dec. 2008).

17.46 10. Form: Headings Not Part of Agreement
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form_0484797482521nl

The headings used in this agreement are not part of the agreement and will not be considered in its interpretation.

17.47 11. Form: Interpreting Agreement
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form_049212409994ha

This agreement is the result of the joint efforts of both parties and their attorneys. The agreement and each of its provisions will be interpreted fairly, simply, and not strictly for or against either party.

Comment: If ambiguity or uncertainty in the agreement cannot otherwise be reconciled, a provision must be construed most strictly against the party whose agent prepared the instrument or the ambiguous portion. CC §1654; Marriage of Williams (1972) 29 CA3d 368, 378. This provision expresses the parties’ intent to prohibit application of that rule in interpretation by the court of their premarital agreement and thereby tends, when applied, to aid the party whose attorney drafted the agreement.

17.48 12. Form: Severability in Event of Partial Invalidity
ceb_512538069136rp_17_48
form_512538069136rp

If any provision of this agreement is held in whole or in part to be unenforceable for any reason, the remainder of that provision and of the entire agreement will be severable and remain in effect.

Comment: This provision should be used in every agreement, but it is particularly important when it is anticipated that a particular provision might be set aside. A severability provision may preserve the remainder of the agreement. On the issue of severability of provisions in a premarital agreement, see Marriage of Facter (2013) 212 CA4th 967, 987. Compare Facter with Marriage of Clarke & Akel (2018) 19 CA5th 914, in which the court declined to “selectively enforce” provisions of a premarital agreement that it found lacked the predicate requirements of Fam C §1615 and was therefore invalid.

Note that under a special rule of judicial interpretation, if a premarital agreement includes several articles, and attaching a clause found in one article to another article would make the latter contradict earlier provisions, the clause will be held applicable only to the article in which it is found. Estate of Baubichon (1874) 49 C 18, 27.

17.49 13. Form: No-Contest Clause
ceb_199946368275dr_17_49
form_199946368275dr

If _ _[name of first party]_ _ in any way contests the validity of this agreement or of any of its provisions, or asserts any claims against _ _[name of second party]_ _ that are contrary to this agreement, _ _[he/she]_ _ will be deemed to have waived the provisions for _ _[his/her]_ _ benefit of paragraphs _ _[numbers]_ _ of this agreement. If any amounts have been paid or any property transferred to _ _[name of first party]_ _ under these paragraphs before _ _[he/she]_ _ initiates such a contest or asserts such a claim, those amounts or property will be returned to _ _[name of second party]_ _ or _ _[his/her]_ _ estate at the time of initiating the contest or asserting the claim.

Comment: One purpose of a premarital agreement is to avoid litigation at the time of divorce or death. Providing an express incentive for the agreement to be followed may help to achieve that objective. Requiring a party to choose between generous provisions of an agreement and the unpredictable results of litigation may reduce the likelihood of an attempt to challenge the agreement. The use of this clause in the agreement must make sense. If payments are going to be made during a marriage, it is not practical to demand the money back. If the agreement provides for the payment of a lump-sum amount at the time of a dissolution, this “in terrorem” clause may work, but counsel should consider whether the payment could be construed as “promotive of divorce,” and thus render that part of the agreement unenforceable.

17.50 14. Form: Arbitration of Disputes Regarding Validity of Agreement
ceb_0680492025086he_17_50
form_0680492025086he

Any disputes between the parties regarding the validity of this agreement will be resolved by binding arbitration under Code of Civil Procedure §§1280–1294.2 or successor provisions. Each party understands and acknowledges that, by agreeing to binding arbitration, he or she waives the right to submit the dispute for determination by a Court and thereby also waives the right to a court trial and, if otherwise available, to a jury trial.

Comment: The use of arbitration clauses in premarital agreements is not common. There is no reason, however, that a provision like this may not eventually become standard. Alternatively, the parties may provide that the matter will be resolved under the rules of the American Arbitration Association, or they may select a private judicial officer to handle the matter. Note, however, that because it may be many years before a marriage dissolves, the person or agency selected may no longer be available.

17.51 15. Form: Future Attorney Fees and Costs Related to Agreement
ceb_041403574537jv_17_51
form_041403574537jv

If either party reasonably retains counsel for purposes related to this agreement, including, but not limited to, enforcing or preventing the breach of any provision, seeking damages for any alleged breach, and seeking a declaration of his or her rights or obligations under the agreement, and the matter is settled by a judicial determination, including arbitration, the prevailing party will be awarded reasonable attorney fees and costs.

Comment: Before using this clause, analyze which party will benefit. A party with no funds who seeks to set aside an agreement may have no earnings or assets to garnish if there is a judgment against him or her for attorney fees. On the other hand, if the higher earning spouses loses, he or she has a significant amount to lose by this provision. For a case holding that a wife was precluded from an award of fees based on need when the marital settlement agreement she had attempted to set aside contained a provision awarding fees to the “prevailing party” in any subsequent litigation, see Marriage of Guilardi (2011) 200 CA4th 770, 775.

Legal Representation

ceb_053430212988di
17.52 a. Form: Each Party Independently Represented
ceb_148362003864ck_17_52
form_148362003864ck

Each party has been represented in the negotiations and in preparation of this agreement by an independent attorney of his or her own choosing: _ _[Name of first party]_ _ by _ _[name]_ _ and _ _[name of second party]_ _ by _ _[name]_ _. Each party has carefully read this agreement in its entirety, and his or her attorney has fully explained its contents and legal effect.

Comment: When a party has consulted with an attorney but has not actually been represented by him or her, the provision should be modified accordingly. There must be independent representation if there is a spousal support limitation clause. Fam C §1612(c). Further, even if the agreement does not have a spousal support clause, it is imperative that both parties be represented by counsel to ensure its enforceability. See Fam C §1615(c) (imposing high standard to establish finding of voluntary execution of agreement). Use of a mediator does not qualify as independent representation.

17.53 b. Form: One Party Unrepresented by Counsel
ceb_245523366864kb_17_53
form_245523366864kb

This agreement has been prepared by _ _[name]_ _, attorney for _ _[name of first party]_ _. _ _[Name of second party]_ _ has not been represented in the negotiation or preparation of this agreement. _ _[Name of second party]_ _ acknowledges that _ _[name of first party’s]_ _ attorney has informed _ _[him/her]_ _ that the attorney represents only _ _[name of first party]_ _, that _ _[name of second party]_ _ has the right to obtain independent legal advice, and that _ _[name of second party]_ _ should do so but that _ _[he/she]_ _ has voluntarily declined to obtain such advice. _ _[Name of second party]_ _ further acknowledges that _ _[he/she]_ _ has carefully read this agreement in its entirety and voluntarily chooses to execute it.
Both parties were advised to seek independent legal counsel, and _ _[name of second party]_ _ expressly waived, in a separate writing, representation by independent legal counsel. The writing is attached to this agreement as Exhibit A.
The parties had not less than 7 calendar days between the time _ _[name of second party]_ _ was first presented with the agreement and advised to seek independent legal counsel and the time the agreement was signed.
_ _[Name of second party]_ _ was fully informed of the terms and basic effect of the agreement, as well as the rights and obligations he or she was giving up by signing the agreement, and was proficient in the language in which the explanation of the party’s rights was conducted and in which the agreement was written. The explanation of the rights and obligations relinquished shall be memorialized in writing and delivered to _ _[name of second party]_ _ before signing the agreement. _ _[Name of second party]_ _ shall, on or before the signing of the premarital agreement, execute a document declaring that he or she received the information required by this paragraph and indicating who provided that information.
The agreement and the writings executed pursuant to paragraphs 2 and 4 immediately above were not executed under duress, fraud, or undue influence, and the parties did not lack capacity to enter into the agreement.

Comment: Dealing with an unrepresented party presents special dangers. On the requirements for an enforceable premarital agreement when one party is unrepresented, see §17.12. It is not prudent for counsel to handle a matter with an unrepresented party.

17.54 17. Form: Signatures and Dates
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form_104279425791lq

The foregoing is agreed to by:

Date: ______

_ _[Typed name]_ _

Date: ______

_ _[Typed name]_ _

Approved as conforming to the agreement of the parties:

Date: ______

Attorney for _ _[name]_ _

Date: ______

Attorney for _ _[name]_ _

17.55 VI. FORM: COMPLETE SAMPLE AGREEMENT
ceb_537347868015hu_17_55
form_537347868015hu

PREMARITAL AGREEMENT

IDENTIFICATION OF PARTIES. This agreement is made between RONNIE SMITH, hereafter referred to as “Ronnie,” and LESLIE JONES, hereafter referred to as “Leslie.”
PARTIES’ CIRCUMSTANCES. The parties plan to be married on December 17, 2014. They currently reside together at 123 Fox Avenue, Los Angeles, California, a residence owned by Ronnie, and plan to continue residing there after their marriage. Ronnie is a shareholder and president of Acme, Inc., is 40 years old, and is in good health. Leslie is an attorney, employed by West & Swanson LLP, is 35 years old, and is in good health. Neither party has children.
PURPOSE OF AGREEMENT. This agreement is made in contemplation of marriage and is intended to be effective on marriage. Its purpose is to define the parties’ respective property rights after marriage. Specifically, it precludes the creation of any community property, except as it expressly provides.
DISCLOSURES OF PROPERTY AND FINANCIAL OBLIGATIONS. Exhibit A is a list of the property in which Ronnie has an interest with a value exceeding $500, along with the extent and value of each such interest, and of his financial obligations that exceed $500, along with the amount of each such financial obligation.

Exhibit B is a list of the property in which Leslie has an interest with a value exceeding $500, along with the extent and value of each such interest, and of her financial obligations that exceed $500, along with the amount of each such financial obligation.

The parties have attempted to provide reasonable, good faith disclosures of property and financial obligations in Exhibits A and B. The values presented there are only approximate, however, and may be considerably higher or lower than the actual values. They are provided only to indicate values generally and are not intended to be relied on as exact indications.

DISCLOSURES REGARDING INCOME. Ronnie is currently a shareholder and president of Acme, Inc. and has a gross income from all sources of approximately $15,000 per month. Exhibit C contains copies of his federal income tax returns for 2011–2013.

Leslie is currently employed by West & Swanson LLP and has a gross income from all sources of approximately $10,000 per month. Exhibit D contains copies of her federal income tax returns for 2001–2003.

6.01. ALL PROPERTY TO BE SEPARATE PROPERTY; TREATMENT OF DEBTS. All property of either party will be entirely his or her separate property, except as provided in paragraphs 7 and 8. The parties acknowledge that, as a result of this agreement, certain assets and interests that would otherwise have been the parties’ community property, belonging equally to each of them, will be one party’s separate property. These include, but are not limited to, earnings resulting from the efforts of either party during marriage and before separation; assets acquired with such earnings; increased values in separate property resulting from the application of such earnings, or from the efforts of either party, during marriage and before separation; certain assets or interests acquired by loan or extension of credit during marriage and before separation; and certain commingled funds.

6.02. Ronnie acknowledges that during the time of the marriage, Leslie may develop and enjoy continued good business relationships with others in any industry or endeavor in which Leslie may involve herself and she may become more well known and sought after by clients and customers as a result of her continued work. Such good business relationships, experience, or celebrity may or may not have any value. Ronnie agrees that notwithstanding the expenditure of Leslie’s time, skill, and effort that might otherwise constitute a community interest or asset, any and all goodwill in whatever form will remain the separate property of Leslie and that Ronnie shall have no interest in any such goodwill.

6.03. Leslie acknowledges that during the time of the marriage, Ronnie may develop and enjoy continued good business relationships with others in any industry or endeavor in which Ronnie may involve himself and he may become more well known and sought after by clients and customers as a result of his continued work. Such good business relationships, experience, or celebrity may or may not have any value. Leslie agrees that notwithstanding the expenditure of Ronnie’s time, skill, and effort that might otherwise constitute a community interest or asset, any and all goodwill in whatever form will remain the separate property of Ronnie and that Leslie shall have no interest in any such goodwill.

6.04. Leslie acknowledges that she understands that during the time of the marriage, Ronnie may receive compensation, the payment of which may be deferred until some later time, such as pension contributions, profit-sharing plans, deferred annuities, incentive stock options, or other compensation. Leslie agrees that notwithstanding the expenditure of Ronnie’s time, skill, and effort that might otherwise constitute a community interest or asset, any and all deferred compensation in whatever form, or any increase in the demand for or value in Ronnie’s services will remain Ronnie’s separate property and that Leslie shall have no interest in any of these.

6.05. Ronnie acknowledges that he understands that during the time of the marriage, Leslie may receive compensation, the payment of which may be deferred until some later time, such as pension contributions, profit-sharing plans, deferred annuities, incentive stock options, or other compensation. Ronnie agrees that notwithstanding the expenditure of Leslie’s time, skill, and effort that might otherwise constitute a community interest or asset, any and all deferred compensation in whatever form, or any increase in the demand for or value of Leslie’s services will remain Leslie’s separate property and that Ronnie shall have no interest in any of these.

6.06. Any property acquired during the time of the marriage by either Ronnie or Leslie by way of gift, bequest, devise, or inheritance from a third party shall be deemed the separate property of the acquiring party; such property includes, but is not limited to, any income or other interest on such income, increments, accretions, or increases in value of such assets at any time, whether as a result of market conditions or the services, skills, or efforts of either party.

6.07. No contribution of either Ronnie or Leslie from any source to the care, maintenance, improvement, custody, or repair of the other party’s separate property—whether the contribution is in the form of money, other property, or personal services rendered—shall in any way alter or convert any of such property, or any part or portion of such property, or any increases in the value of such property, to the status of community property. The parties further agree that any contributions made by either party from any source to the care, maintenance, improvement, custody, or repair of the other party’s separate property shall become part of that other party’s separate property, without any claim by the contributing party for reimbursement or for a share of any kind in that separate property.

6.08. Each party shall be free to buy, sell, use, transfer, exchange, abandon, lease, assume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control that party’s property without the consent, agreement, or participation of the other party and without the necessity of the execution of any deed, consent, assignment, or other document by the other party. In the event it is necessary for one party to obtain a quitclaim deed from the other party in order to buy, sell, use, transfer, exchange, abandon, lease, assume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control his or her separate property, the other party shall execute such a quitclaim deed.

6.09. The parties expressly intend that this agreement will override the doctrines expressed in the California cases of Van Camp v Van Camp (1921) 53 CA 17, and Pereira v Pereira (1909) 156 C 1, and similar later cases, under which a business operated by a party may be deemed to be partially separate property and partially community property using an apportionment method based on either the asserted reasonable return on invested capital or the asserted reasonable value of services for a business (regardless of whether that business is incorporated or unincorporated).

6.10. With respect to any business operated by a party, that party’s separate property shall include any compensation for services actually paid by that business, any deferred compensation (as defined in paragraphs 6.04 and 6.05), any dividends actually paid by that business, and any increase in the value of that business, regardless of whether that increase was the result of financial contributions or of the time, service, skill, and effort of a party.

6.11. Each party waives any claim made—either in the disclosure that is served as part of this agreement or during the parties’ marriage—that compensation actually paid to the other party for services rendered by that party was not reasonable compensation. The parties acknowledge that Ronnie and Leslie may be, have been, or will be in a position to influence or directly control the amount of compensation actually paid to them.

6.12. If separate property of either party is commingled with any other property and/or acquired by the parties during marriage in joint form, including property held in tenancy in common, joint tenancy, or tenancy by the entirety, or as community property, there shall be no presumption in favor of the fund or property being community property and it shall not become community property. If that separate property, which was commingled and/or acquired in joint form, cannot be traced to a separate property source of either party, then all such untraceable property shall be apportioned between the parties in the same proportion that contributions to the fund or property were originally made by each party.

6.13. Unless the parties acquire a credit card, establish a charge account, or obtain a loan and/or an extension of credit in their joint names, the financial obligation related to any credit card, charge account, loan, or other extension of credit obtained by a party during marriage shall not be considered a community debt.

6.14. During the marriage, each of the parties shall be the exclusive owner of all of his or her respective separate property, and each shall have the exclusive right to dispose of all separate property during his or her lifetime by inter vivos or testamentary transfer or by any other disposition, and shall have the exclusive right to encumber or pledge the separate property without any interference by or joinder of the other. Each party expressly waives and releases any claim he or she may have by reason of the marriage, or otherwise, to the separate property of the other party. Each party agrees that if the marriage is terminated, the separate property of the other party shall be free from any and all claims to that property by the other party, including claims of community property, division of property, marital debt, or breach of fiduciary duty.

6.15. Each party waives any right of management and control of the separate property of the other party, and acknowledges that the law imposes no fiduciary duty on a spouse concerning the management and control of the separate property of the other spouse. The parties acknowledge that without this agreement there could be rights of management and control of any community property—keeping in mind that the only community property is that which is set forth in paragraphs 7 and 8. The parties further acknowledge that without this agreement there could be the fiduciary duty that each spouse act in good faith with respect to the other spouse in the management and control of any community property, and a fiduciary duty to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of assets in which the community has or may have an interest, and debts for which the community may be liable. The parties agree that with respect to any and all community property acquired during the marriage, they will waive the provisions of Family Code §§721 and 1100–1101 (and any successor statute(s) on these issues enacted after the date of this agreement) relative to one another concerning the management and control of community property—namely, consent of a spouse to the disposition of such property and remedies for breach of fiduciary duty concerning such property.

6.16. Each debt existing as of the date of the marriage will be the separate obligation of the party who incurred it.

6.17. Notwithstanding any other provision in this agreement, either party may transfer, convey, devise, or bequeath any property to the other, or nominate the other as executor of his or her estate. Neither party intends by this agreement to limit or restrict in any way the right to receive any such transfer, conveyance, devise, or bequest from the other, or to limit or restrict the ability to act as such executor if so nominated.

6.18. Except as otherwise provided in this agreement, property or interests now owned or hereafter acquired by the parties that by the terms of this agreement are classified as the separate property of one of them can only become the separate property of the other party or the parties’ community property by a written instrument executed by the party whose separate property is being reclassified, other than as provided in section 7 of this agreement.

6.19. Should either party or both parties borrow any funds or acquire any asset or assets with borrowed funds during the marriage, the presumption created by the time of acquisition under Family Code §§760 and 803 or any similar statute or case holding shall not apply. Such loan proceeds and/or any property acquired with those loan proceeds shall belong to the party or parties in the manner that title is held to them. Therefore, if title to that property is held in one party’s name alone, it shall be and remain that party’s separate property, subject to change only as provided for in this agreement. Such property can only be community property or have any community property interest if there exists an agreement, in writing, signed by both parties, expressly creating such community property. The manner in which the loan proceeds or credit was obtained shall not be a factor in determining the character, separate or community, of loan proceeds or property acquired with loan proceeds. As used in this agreement, “manner in which the loan proceeds or credit was obtained” includes, but is not limited to, the following:

(a) Whether the loan was applied for in both names;

(b) Whether any loan documents, including applications, financial statements, promissory notes, or security documents, refer to or were signed by both parties;

(d) Whether the lender intended to, and/or did, rely on community income and assets, separate property of one or both parties, or a combination of community and separate property for security or repayment.

The parties expressly intend that this agreement will override the doctrines of Marriage of Grinius (1985) 166 CA3d 1179, Gudelj v Gudelj (1953) 41 C2d 202, and any similar or later case that looks to the lender’s intent and time of acquisition to determine the characterization of loan proceeds and/or property acquired with loan proceeds.

6.20. If Ronnie borrows funds in his name for business or personal use, the repayment of that loan shall be Ronnie’s sole responsibility. If Leslie borrows funds in her name for business or personal use, the repayment of that loan shall be Leslie’s sole responsibility.

6.21. The parties specifically agree that the following events shall under no circumstances be evidence of any intention by either party of any agreement between them to change their separate property interest into community property:

(a) The filing of joint income tax returns;

(b) The taking of title to property, whether real or personal, in joint tenancy or in any other joint or common form;

(c) The designation of one party by the other as a beneficiary of his or her estate, or as trustee, or as any other form of a fiduciary;

(d) The commingling by one party of his or her separate funds or property with the separate funds or property of the other party, including the expenditure of time, toil, and talent by either of the parties in effecting such commingling, and the pledging of general, joint, separate, or community credit by one party for the benefit of the other party’s separate estate;

(e) Any oral statement by either party;

(f) Any written statement by either party, other than any express written agreement changing separately owned property into jointly owned property, or a written statement by one party designating a particular piece of property as a gift to the other party, except as provided in paragraph 6.18 of this agreement;

(g) The payment from the funds of either party of any obligations, including, for example, the payment of mortgages, interest or taxes, repairs, or improvements on a separately or jointly owned residence; and

(h) The joint occupation of a separately owned residence, even if it is designated as a homestead. This paragraph 6.21(a) through (h) is intended to preclude the creation of community property in situations other than those particularly described in sections 7 and 12 of this agreement.

JOINT ACCOUNTS AND OTHER COMMUNITY PROPERTY. The parties will maintain at least one joint account in both their names, from which joint living expenses will be paid. “Joint living expenses” include, but are not limited to, food at home, household supplies, utilities, telephone, laundry and cleaning, joint entertainment, and joint gifts to third parties. The parties will contribute to such accounts the amounts needed for their joint expenses. Contributions will be equal.

Despite any other provision of this agreement, the following will be the parties’ community property:

(a) All amounts deposited into the joint accounts, including any increases in those amounts; and

(b) Any property acquired with amounts withdrawn from the joint accounts, including, but not limited to, any income produced by the property, increases in its value, and proceeds from its sale.

GIFTS MADE TO PARTIES JOINTLY. Despite any other provision of this agreement, gifts made to the parties jointly will be their community property.
GIFTS AND OTHER TRANSFERS BETWEEN PARTIES. Any gift between the parties of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature that is used solely or principally by the party to whom the gift is made and that has a value, at the time of the gift, of less than $1000 will be valid without the requirement of a writing and will be the separate property of the recipient. Other gifts and transfers between the parties will be valid only if accompanied by an express declaration in writing that is made, joined in, consented to, or accepted by the party whose interest in the property is adversely affected.
CONTRIBUTIONS OF COMMUNITY PROPERTY TO SEPARATE PROPERTY. If either party contributes community property to separate real property, other than the property at 123 Fox Avenue, Los Angeles, California (or residences purchased with the sale proceeds of that Los Angeles property), the parties agree that the Moore/Marsden formula shall be used to determine their respective interests in the property. The Moore/Marsden formula is described in Marriage of Moore (1980) 28 C3d 366, and Marriage of Marsden (1982) 130 CA3d 426.

[Add, if applicable, to describe nonowner’s interest in family residence]

In addition to any other payments made by Reggie to Leslie under this agreement, Reggie shall give to Leslie a 1-percent ownership interest in the residence at 123 Fox Avenue, Los Angeles, California (or any successor residence) on the first anniversary of their marriage, and an additional 1-percent interest in that residence on each succeeding anniversary of their marriage for the first 10 years of marriage. Beginning on the 11th anniversary of their marriage and on each succeeding anniversary thereafter, Reggie shall give to Leslie a 2-percent interest in that residence (or any successor residence) up to a total of a 50-percent interest. Leslie shall have no other interest in that residence (or any successor residence). By way of illustration, after 4 years of marriage, Reggie shall own 96 percent and Leslie shall own 4 percent of the residence; and at the end of 10 years of marriage, Reggie shall own 90 percent and Leslie shall own 10 percent of the residence. Leslie’s interest shall be subject to encumbrances on the residence, which shall not exceed the current encumbrance of $870,000. If the parties’ marriage terminates, Leslie shall be entitled to her percentage interest in the residence for each full year of marriage as calculated in this paragraph through the date of the parties’ separation, and she shall acquire no further interest thereafter. Reggie may, at his election, purchase Leslie’s interest in the residence at the then-current market value if the marriage terminates. If the parties sell the current residence and purchase a new residence during marriage, the parties shall carry their respective interests in the current residence into the new residence. Leslie will continue to acquire an interest in the new residence as specified in this paragraph, except that if either party makes separate-property contributions to the acquisition of the property (as defined in Family Code §2640), the contributing party shall receive reimbursement as provided under Family Code §2640 if the parties terminate their marriage. If the marital community makes a contribution to the acquisition of the new residence, the community shall be reimbursed in the same manner if the parties terminate their marriage.

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[12.01.] CONTRIBUTIONS TO PROPERTY IN JOINT NAMES. If real property other than the residence at 123 Fox Avenue, Los Angeles, California, is titled in joint names, it shall be divided according to the parties’ respective contributions to the purchase price, and any appreciation shall be allocated according to each party’s pro tanto share of appreciation. For example, if Ronnie contributes $200,000 to real estate from his separate property and the parties’ contribute funds (e.g., $200,000) from their joint account (for a total of $400,000), Ronnie would be entitled to $300,000 (one-half the joint account plus his $200,000 in separate property), and Leslie would be entitled to $100,000 (one-half the joint account). If the property has increased in value to $800,000, Ronnie would be entitled to $600,000 and Leslie would be entitled to $200,000 of the total value of the property. This paragraph specifically deviates from the statutory scheme described in Family Code §2640 for allocating contributions to the purchase price of jointly owned property.

[12.02.] Contributions to property that is titled in joint names in the form of improvements and payments that reduce the principal of any loan used to finance the purchase or improvement of the property—but not payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property—shall be reimbursed to the party who made the contribution to the extent that he or she can trace the contribution to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and shall not exceed the net value of the property at the time of division. This paragraph is in accordance with Family Code §2640.

[13.] CHARACTERIZATION OF CERTAIN PERSONAL PROPERTY. There are presently furnishings in the residence located at 123 Fox Avenue, Los Angeles, California, owned by Ronnie before the parties’ marriage. These furnishings are Ronnie’s separate property. The parties agree and understand that the furnishings and other household goods and effects owned by each party before marriage shall remain that party’s sole and exclusive separate property and shall under no circumstances be considered to be community property of the parties. After marriage, if furnishings are purchased with community funds (i.e., out of the parties’ joint accounts), it shall be community property. However, if furnishings are purchased with a party’s separate property, that property shall be separately owned by the party who purchased it.

[14.] INCOME TAX RETURNS. The parties will file joint federal and state income tax returns for tax years for which the parties agree to do so. If one party elects to file joint returns and the other does not, the second party will pay the first party the additional amount of income tax obligation incurred by the first party as the result of filing separate returns. For each tax return to be filed jointly, the proportion of the income tax obligation to be borne by each party will be the amount of income tax obligation that that party would have had if the parties had not filed jointly, divided by the sum of the amounts of income tax obligation that the two parties would have had in that event. Once each party’s respective share of the income tax obligation on any joint return is determined, adjustments will be made between the parties, in connection with distribution of any refund or payment of any amount owing and taking into account the parties’ respective shares under law of any credits for income taxes withheld and estimated taxes paid, so that each party bears his or her respective share of the income tax obligation. The expense of preparation of the parties’ joint federal and state income tax returns will be shared by the parties equally. “Income tax obligation” as used in this provision means the total income tax owed before any credits for taxes withheld or estimated taxes paid.

[15.] WAIVER OF RIGHTS UNDER EQUITABLE DISTRIBUTION LAWS. Under California law and this agreement, neither party has any rights in the separate property interests of the other. Both parties understand, however, that the laws of many other states, often referred to as “equitable distribution” laws, allow the courts in divorce actions to order the transfer of separate property interests of one party to the other party. To avoid such a result in the event of a divorce or dissolution action between the parties in another state, each party hereby waives any right that he or she might otherwise have on divorce to receive a share of the other’s separate property interests.

[16.] NO RESTRICTIONS ON TRANSFERS AT DEATH OR NOMINATION OF EXECUTOR. Despite any other provision of this agreement, either party may transfer any property to the other at death or nominate the other as Executor of his or her estate, under a will or other written document executed after the date of the parties’ marriage, and the other party may receive such transfer and act as Executor if nominated.

[17.] WAIVERS OF SPOUSAL SUPPORT. Each party waives any right, statutory or otherwise, that he or she may have to receive spousal support from the other party, and each party releases the other party from any obligation, statutory or otherwise, to provide spousal support to the releasing party.

[18.] RELEASE OF PREMARITAL LIABILITIES AND CLAIMS. Ronnie declares that he has no rights in or claims to any property currently owned or acquired by Leslie before the parties’ marriage. Nevertheless, Ronnie hereby releases and forever discharges Leslie from all premarital actions, causes of action, suits, debts, liens, contracts, agreements, promises, claims, demands, damage, losses, liabilities, costs, or expenses, of any nature whatever, known or unknown, suspected or unsuspected, fixed or contingent, that Ronnie now has or may have against Leslie, by reason of any matter, cause, case, statute, or any other things before the date of this agreement, including any court decision or any statute enacted to codify such decision, that arises out of the parties’ relationship before their marriage. Ronnie acknowledges that he has been advised of and is familiar with Civil Code §1542, which provides: “A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.” Nevertheless, Ronnie hereby waives any right he may have under Civil Code §1542, or under any other statute or rule of law with similar effect. The parties’ rights with respect to future liabilities and property will be determined by this agreement.

Leslie declares that she has no rights in or claims to any property currently owned or acquired by Ronnie before the parties’ marriage. Nevertheless, Leslie hereby releases and forever discharges Ronnie from all premarital actions, causes of action, suits, debts, liens, contracts, agreements, promises, claims, demands, damage, losses, liabilities, costs, or expenses, of any nature whatever, known or unknown, suspected or unsuspected, fixed or contingent, that Leslie now has or may later have against Ronnie, by reason of any matter, cause, case, statute, or any other things before the date of this agreement, including any court decision or any statute enacted to codify such decision, that arises out of the parties’ relationship before their marriage. Leslie acknowledges that she has been advised of and is familiar with Civil Code §1542, which provides: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected the settlement with the debtor.” Nevertheless, Leslie hereby waives any right she may have under Civil Code §1542, or under any other statute or rule of law with similar effect. The parties’ rights with respect to future liabilities and property will be determined by this agreement.

[19.] EXECUTION AND DELIVERY OF DOCUMENTS. Each party will be free to manage and control his or her separate property without the other party’s consent and without the necessity of the execution of any document by the other party. If it becomes necessary for one party to obtain a quitclaim deed or any other documents from the other in order to manage and control his or her separate property, the other party will sign and deliver the required documents without undue delay. The execution and delivery of such documents will not make the executing party liable for any indebtedness, and the party owning the property will indemnify the other for any liability, attorney fees, and related costs. Any proceeds or increased value derived from any transaction affecting separate assets will be the separate property of the owning party.

If a party fails to execute any document as required by this provision, the Court may appoint the court clerk or his or her authorized designee to execute the document on that party’s behalf.

[20.] WAIVER OF RIGHTS ON DEATH OF OTHER PARTY. Each party hereby waives the right to receive any property or rights whatsoever on the death of the other, unless such right is created or affirmed by the other under a will or other written document executed after the date of the parties’ marriage. Each party believes that he or she has received a fair and reasonable disclosure of the property and financial obligations of the other party. Each party’s waiver is intended to be an enforceable waiver of that party’s rights under Probate Code §§140–147.

The rights waived include, but are not limited to, rights to any of the following:

(a) Property that would pass from the decedent by intestate succession;

(b) Property that would pass from the decedent by testamentary disposition;

(d) The setting aside of exempt property;

(e) A family allowance;

(f) The setting aside of an estate;

(g) An election to take community or quasi-community property against the decedent’s will;

(h) The statutory share of an omitted spouse or pretermitted heir;

(i) An appointment as executor or administrator of the decedent’s estate, except as the nominee of a third party legally entitled to make such a nomination;

(j) Property that would pass from the decedent by nonprobate transfer, such as the survivorship interest under a joint tenancy, a Totten trust account, or a payable-on-death account; and

(k) Proceeds as beneficiary of any type of insurance policy.

[21.] ENTIRE AGREEMENT. This agreement contains the entire agreement of the parties on these matters, superseding any previous agreement between them.

[22.] CONFIDENTIALITY. Each party acknowledges that the information disclosed regarding the other’s financial circumstances is confidential, and neither party will disclose that information to anyone other than his or her counsel in this matter. This provision does not prohibit the submission of this agreement by either party to a court of competent jurisdiction for the purpose of enforcement of its terms.

[23.] BINDING EFFECT OF AGREEMENT. This agreement will inure to the benefit of, and be binding on, the parties’ respective devisees, heirs, personal representatives, assigns, and successors in interest.

[24.] WAIVER OF BREACH. The failure of either party, at any time, to require the other to perform any of his or her obligations under this agreement will not affect the party’s right to enforce those obligations thereafter. Nor will the waiver by either party of any breach of this agreement by the other party be deemed a waiver of any subsequent breach, a waiver of the particular provision breached, or a waiver of any other provision of this agreement.

[25.] AMENDMENT OR REVOCATION BY SUBSEQUENT AGREEMENT. This agreement may be amended or revoked only by a written agreement signed by the parties. The amended agreement or revocation will be enforceable without consideration.

[26.] GOVERNING LAW. This agreement will be governed and construed by, and interpreted in accordance with, California law. California law, as modified under this agreement, will apply to the division of the property and to any award of spousal support.

[27.] HEADINGS NOT PART OF AGREEMENT. The headings used in this agreement are not part of the agreement and will not be considered in its interpretation.

[28.] INTERPRETING AGREEMENT. This agreement is the result of the joint efforts of both parties and their attorneys. The agreement and each of its provisions will be interpreted fairly, simply, and not strictly for or against either party.

[29.] SEVERABILITY IN EVENT OF PARTIAL INVALIDITY. If any provision of this agreement is held in whole or in part to be unenforceable for any reason, the remainder of that provision and of the entire agreement will be severable and remain in effect.

[If applicable, add one or more of the following options]

[Option 1: Arbitration of disputes regarding validity]

[30.] ARBITRATION OF DISPUTES REGARDING VALIDITY OF AGREEMENT. Any disputes between the parties regarding the validity of this agreement will be resolved by binding arbitration under Code of Civil Procedure §§1280–1294.2 or successor provisions. Each party understands and acknowledges that, by agreeing to binding arbitration, he or she waives the right to submit the dispute for determination by a court and thereby also waives the right to a court trial and, if otherwise available, a jury trial.

[Option 2: Future attorney fees and costs to prevailing party]

[31.] FUTURE ATTORNEY FEES AND COSTS RELATED TO AGREEMENT. If either party reasonably retains counsel for purposes related to this agreement, including, but not limited to, enforcing or preventing the breach of any provision, seeking damages for any alleged breach, and seeking a declaration of his or her rights or obligations under the agreement, and the matter is settled by a judicial determination, including arbitration, the prevailing party will be awarded reasonable attorney fees and costs.

[Or]

[31.] FUTURE ATTORNEY FEES AND COSTS RELATED TO AGREEMENT. If either party reasonably retains counsel for the purpose of enforcing or preventing the breach of any provision of this agreement, for damages by reason of any alleged breach of any provision, for a declaration of his or her rights of obligation under the agreement, or for any other judicial remedy, each party (whether at trial or on appeal) shall pay his or her own respective attorney fees and costs and shall have no right to obtain payment of these attorney fees and costs from the other party.

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[32.] LEGAL REPRESENTATION. Each party has been represented in the negotiations and in preparation of this agreement by an independent attorney of his or her own choosing: Ronnie by Alice Westover and Leslie by Thomas Reinhart. Each party has carefully read this agreement in its entirety, and his or her attorney has fully explained its contents and legal effect.

The foregoing is agreed to by:

Date: ______

Ronnie Smith

Date: ______

Leslie Jones

Approved as conforming to the agreement of the parties:

Date: ______

Attorney for Ronnie Smith

Date: ______

Attorney for Leslie Jones

Comment: This agreement is a separate-property agreement and may be difficult to negotiate without providing significant incentive for the party with less means. Each agreement must be tailored to the needs of the parties, and therefore it is not to be used in all situations, and when used, each paragraph must be evaluated to determine its applicability to the case at hand. Many people enter into confirmation agreements that provide that property owned before marriage is separate property and that what the couple acquire during marriage is community. The latter type of agreement is easier to negotiate than the separate-property agreement.

This sample agreement (in paragraph 17) includes a provision for mutual waivers of spousal support. For an alternative provision to limit the amount or duration of spousal support, see §17.33 (second alternative). This agreement also includes a broad waiver of rights under CC §1542, regarding release of claims. For a more limited form of release, see §17.37 (first alternative).

In addition, provisions concerning the treatment of borrowed funds and assets acquired with those funds (see §17.34), the nontransmutation of property on the happening of various events (see §17.35), and a settlement of property rights with an incremental increase in community ownership over time (see §17.36) may be added. For a provision disclaiming any Marvin rights that may be added, see §17.40 (second alternative).

Premarital Agreements (Prenups) in Financial Discovery

Peter M. Walzer, one of California’s most acclaimed and best family law attorneys, authored the chapter on Premarital Agreements (prenups).

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