Enforcing Prenuptial Agreements in California’s High-Asset Divorce Landscape

In the complex world of family law, prenuptial agreements stand as critical documents for couples entering marriage. Given California’s unique legal landscape and its stance on community property, understanding and enforcing these agreements in the event of a divorce is paramount, especially for high-net-worth individuals.

How Prenuptial Agreements Work

A prenuptial agreement, also known as a prenup or premarital agreement, is a legal contract entered into by a couple before marriage. This contract outlines the ownership of their respective assets and how these assets will be allocated in the event of divorce or death of a spouse. However, prenuptial agreements must follow specific criteria to be considered enforceable in California:

1. Voluntary Agreement: Both parties must have entered into the contract willingly, without any pressure or coercion.  
2. Full Disclosure: There must be a full and fair disclosure of all assets and liabilities by both parties before executing the agreement.
3. Legal Representation: Both parties are encouraged to have independent legal counsel review the agreement before signing it. If not, they must waive representation of  independent legal counsel in writing.
4. Understanding and Consent: The parties must fully understand the terms of the agreement and voluntarily consent to them.
5. Fairness: The contract must not be unconscionable or grossly unfair to one party at the time of execution of the agreement. When it comes to spousal support, it also must not be unconscionable or grossly unfair to one party at the time the agreement is enforced.
6. Seven-Day Rule: For premarital agreements executed between January 1, 2002 and January 1, 2020, the parties must have had seven days between the time they were first presented with the final agreement and advised to seek legal counsel and the time the agreement was signed.  For premarital agreements executed after January 1, 2020, the parties must have had seven days between the time they were first presented with the final agreement and the time the agreement was signed, regardless of whether a party is represented by legal counsel. 

Difficulties in Enforcing Prenuptial Agreements in High-Asset Divorces

Despite the clarity these requirements might suggest, enforcing these contracts in high-asset divorces in California can be fraught with challenges, including:

• Valuation Disputes: The accurate valuation of high assets, including businesses, investments, and property, can be contentious and complex.
• Hidden Assets: Discovering assets that were not disclosed at the time of signing the contract can lead to disputes and may invalidate the agreement.
• Changes in Circumstances: Significant changes in the couple’s financial situation or the law can impact the fairness and enforceability of a marital contract.
• Legal Loopholes: Skilled attorneys may find loopholes or argue that the contract was signed under duress or without proper representation or disclosure.

While these difficulties are not necessarily more likely in high-asset divorces, the consequences of an unenforced prenuptial agreement can be more significant in these cases. That’s why it’s crucial to ensure a prenuptial agreement is enforceable.

7 Strategies for Enforcing Prenuptial Contracts

Ensuring the enforceability of a prenuptial agreement, particularly in complex financial landscapes, requires careful planning, transparency, and adherence to legal standards. Here are seven key steps individuals can take to ensure their agreements are properly enforced:

1. Seek Independent Legal Advice: Both parties should have independent legal counsel to advise them throughout the process and to review the prenuptial agreement. This helps ensure that each party fully understands the terms and implications of the agreement and that it is fair and legally sound.
2. Full and Fair Disclosure: There must be a complete and honest disclosure of all assets, liabilities, and income from both parties before signing the prenup. Concealment of assets can lead to the agreement being challenged or invalidated.
3. Avoid Coercion and Duress: The agreement must be entered into voluntarily by both parties, without any pressure, coercion, or duress. To avoid claims of duress, the final agreement must sit untouched for seven days or more before signing, and should ideally be signed well in advance of the marriage date.
4. Ensure the Agreement Is Fair: While premarital contracts can establish terms that diverge from state law defaults, they should not be unconscionably unfair to either party. An agreement that is extremely one-sided may be subject to challenge and potentially be deemed unconscionable and therefore unenforceable. For example, in many circumstance, a complete spousal support waiver may be considered unjust, unfair, and unenforceable.
5. Consider Changes in Circumstances: The contract should be flexible enough to account for significant changes in circumstances, such as the birth of children, career changes, or substantial changes in net worth. 
6. Document and Update Regularly: Life events and financial situations change. Regularly reviewing and updating the prenuptial agreement to reflect these changes, with the assistance of legal counsel, can help ensure its enforceability. 
7. Professional Valuation of Assets: For high-asset individuals, obtaining professional valuations of complex assets (such as businesses, real estate, and investments) at the time of signing the contract can prevent disputes over asset value later on.

By following these steps, individuals can significantly enhance the likelihood that their prenuptial agreements will be enforced as intended, providing clarity and protection for both parties in the event of a divorce.

Legal Representation for Enforcing California Prenuptial Agreements

While prenuptial agreements offer a clear path to protect individual assets in a high-asset marriage, their enforceability hinges on strict adherence to legal standards and proactive management. The attorneys at Flicker, Kerin, Kruger & Bissada LLP have extensive experience with prenuptial agreements and will help you produce, review, or enforce any marital contracts necessary in your relationship. Learn more about how we can assist you by scheduling your consultation with our Northern California family law firm today.