Postnuptial Agreements in California 101
postnuptial agreements are written consensus between two parties, entered into after the marriage occurs. The purpose of a postnuptial agreement (also known as a Marital agreement or Transmutation agreement) is similar to the purpose of a pre-nuptial agreement in that it helps parties work through potential problems before they occur so there are fewer surprises down the road.
What does a postnuptial agreement do?
A postnuptial agreement offers protection to both parties by allowing the couple to discuss the division of assets without leaving that division up to guidelines provided under California law.
Why do couples get postnuptial agreements?
California is a community property state, meaning all property, real or personal, acquired by a married person during the marriage while living in the state of California is subject to division upon divorce. If there is some property or asset that was purchased by one party to the marriage, during the marriage, and that person wishes to have that asset considered separate from the community property in the event of divorce, that item could be included in a postnuptial agreement.
Similarly, if one party to the marriage accrues some substantial debt during the marriage, such as student loan debt, a postnuptial agreement can contain language that excludes that debt from being considered communal. Many clients ask us to prepare a postnuptial agreement so that it is consistent with their estate plan.
Transmuting property from the separate property of one spouse to community property can save married couples and domestic partners hundreds of thousands of dollars in taxes. If a spouse dies before a property is sold, and the property has not been transmuted to "community"(joint), then the surviving spouse may face thousands of dollars in capital gains. Had the property been community property, there would have been a serious capital gain advantage that could save the surviving spouse.
Who creates a postnuptial agreement?
The terms and details contained in a postnuptial agreement are often the product of a collaboration between spouses and either a marital mediator or lawyers. The product of this meeting can then be taken to each person's respective lawyer for review. When the postnuptial agreement is the product of the collaboration of the two parties, who care deeply for one another at that point in time, the result of the agreement is far more likely to be fair and just to both parties.
What goes into a postnuptial agreement?
Though postnuptial agreements can be written to designate specific debts or assets to a particular person, they cannot be written to negate the presence of family responsibilities such as agreeing to not pay child support. Any postnuptial agreement must also be fair and should be drafted with the understanding that each party is providing full financial disclosure to the other party.
Once the document is properly executed, that agreement is binding. However, California courts retain the authority to throw out a postnuptial agreement that they deem to be unfair, or if any evidence is presented that either party was taken advantage of. This is why it is so important to have trained, experienced help when drafting, reviewing, and/or certifying your legal documents. Should you have any questions or need assistance, schedule a call with Hello Divorce or request a quote here.