Do you live in California and own your own company? Are you getting married?

Do you live in California and own your own company? Are you getting married?

When it comes to marriage, there are many important decisions to make. One of the most important is whether or not to get a premarital agreement in California.

This is especially true if you own equity in a business before marriage; because if you work on that business during your marriage, it may become in part community property, entitling your spouse to a portion of that business.

For example, let’s say you are the founder and owner of an innovative B2B service company prior to getting married. After tying the knot with your partner, you continue working on this company as normal. Unfortunately for both parties involved, without proper planning through a premarital agreement; under California law this means that your spouse may be entitled to some ownership rights over this business due to its classification as community property—even though they never contributed financially or physically towards its growth and success.

On the other hand, if you have already worked in a separate property venture (like our hypothetical B2B service) but now only serve as a passive investor instead of actively working on it anymore—a premarital agreement can help protect those assets from being considered community property should any disputes arise later down the line.

Similarly, even if both spouses contribute money and/or labor into their separate businesses after getting married—the Van Camp or Pereira approaches allow for equitable apportionment between them so no one person has exclusive rights over what was once theirs alone before entering into matrimony. In conclusion: when considering all these factors together—there’s no doubt why having an airtight premarital agreement is such an important step for couples who own equity in businesses prior to getting married. Not only does it provide legal protection against potential disputes arising out of contributions made by either party while they were still single; but also offers peace-of-mind knowing exactly where each individual stands regarding their respective investments going forward within their new relationship status.

Do you need a premarital agreement?

A premarital agreement, also known as a prenuptial agreement or "prenup," is a legally binding contract that is entered into by two people prior to getting married. It outlines how certain financial and property matters will be handled in the event of a divorce or the death of one spouse.

There are several factors to consider when deciding whether or not you need a premarital agreement. Some common reasons that people choose to have a prenup include:

1. To protect pre-existing assets: If you or your future spouse have significant assets, such as a business or real estate, a premarital agreement can help to protect these assets in the event of a divorce.

2. To define financial responsibilities: A premarital agreement can specify how financial matters, such as bills and debts, will be handled during the marriage.

3. To address potential inheritance issues: If you or your future spouse has children from a previous relationship, a premarital agreement can clarify how inheritance will be handled in the event of your death.

4. To address future financial goals: If you and your future spouse have different financial goals or expectations, a premarital agreement can help to clarify these expectations and ensure that both parties are on the same page.

Ultimately, the decision to have a premarital agreement is a personal one that depends on your individual circumstances. It is a good idea to discuss the idea with your future spouse and consider seeking legal advice to determine if a prenup is right for you.

Do you own rental property? Are you getting married?

It is important to get a premarital agreement in California if you own a real estate development business before marriage.

If you manage your properties during marriage, the profits may become in part community property entitling your spouse to some of the rental income or alternatively you could be imputed with a reasonable wage that the community should be entitled to based on the use of your time energy and effort towards the rental properties. If you previously worked in a business and now are only a passive investor, then your assets are protected but if you actively manage any properties then under Van Camp v Van Camp (1921) 53 CA 17 the court allocates to the community reasonable compensation for the efforts of providing spouse or RDP (if they had not already received such compensation). The balance of profits or increased values attributable to normal earnings on separate property investment will go towards separate property.

A prenuptial agreement can protect both parties from any potential disputes regarding division of assets after divorce and also help both parties understand their rights regarding ownership before entering into marriage. This helps avoid costly litigation down the road by providing clarity about who owns what prior to getting married. It also sets out how financial decisions should be made when it comes to investments done together during marriage which can save considerable time and money later down the line.

Getting an enforceable prenuptial agreement in California is essential for couples who intend on starting businesses together or have existing ones prior to entering into marital union since it provides legal protection for all involved parties regardless what happens afterwards!

What is a Postmarital Agreement?

A Postmarital Agreement, sometimes called a Postnuptial Agreement, is an agreement created by a couple during their marriage for many of the same reasons that an engaged couple creates a Premarital Agreement: to govern their financial lives during the marriage and to determine what will happen in terms of property division and spousal support if they should divorce.   

Requirements

There is an additional enforceability hurdle for couples wishing to enter into a Postmarital Agreement: as spouses, they are subject to a set of fiduciary duties that do not exist for fiancés.   This includes the duty not to take financial advantage of the other spouse.  Because a Postmarital Agreement usually includes some circumventing of community property law, the Agreement is going to be subject to a presumption that one spouse is taking advantage of the other.

So while Postmarital Agreements do not appear to be expressly governed by California Family Law section 1600, case law has confirmed that the same rationale applies when enforcing them:  each party must sign “freely, voluntarily and intelligently.”  

In order to avoid the presumption of unfair advantage, most professionals believe that it is imperative that both spouses be represented by attorneys and that all steps be taken to show that both spouses signed the agreement freely, voluntarily and with full knowledge of rights he or she could be giving up. 

If you are interested in a pre or post nuptial agreement, you can contact me at Amanda@gordonfamilylaw.com for more information.

What can't I include in my prenup?

You can protect your property, define your marital rights, limit litigation upon dissolution, and limit litigation on death.  For example, you can waive pension rights, waive property rights, and may even waive probate rights. You can also prevent your spouse from taking a stake in your business or equity. 
Here are some examples of provisions that you cannot do and that have been found unenforceable by California courts:

(1)   Provision for liquidated damages if Husband had a sexual affair during the marriage.

(2)   Clause that made Wife pay a financial penalty if Husband’s drug addiction reoccurred

(3)   Prenup that gave Wife more money if she refrained from placing Husband in a nursing facility when he lost the ability to make decisions.

If you are drafting a premarital agreement and have questions,  you can contact me at Amanda@gordonfamilylaw.com for more information.