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Premarital & Postnuptial Agreements

by Michael Tobriner

Over his years of practice Michael has prepared and negotiated numerous premarital, postnuptial, and cohabitation agreements.

What Is a Premarital Agreement?

A premarital agreement (sometimes called a Prenuptial Agreement) is a contract between individuals who are planning to be married and who wish to enter into a legally binding commitment about their property and financial relationship during marriage. California law gives prospective spouses very broad authority to arrange their marital financial affairs as they wish through the use of a premarital agreement. In premarital agreements prospective spouses can characterize assets as community property, or as separate property, or as community and separate property in given proportions. Parties can specify whether future earnings or retirement contributions and accounts will be community, separate, or combined. They can agree about the ownership of the residence they occupy or a future residence they may purchase later. They can make these agreements even though what they specify might not be what California law would otherwise provide.

Because discretion is so broad, and because premarital agreements address the long-term future, parties and counsel must employ great care in drafting these contracts. California law does impose certain procedural requirements, including disclosure and timing, that parties and counsel must follow. Although California law does not require parties entering premarital agreements to have counsel, the better practice suggests (and some lawyers require) that both parties have representation.

What Is a Postnuptial Agreement?

A postnuptial agreement is a contract between married spouses who wish to enter into a legally binding commitment about their property or financial affairs. As with premarital agreements, California law gives married spouses very broad latitude in determining their respective ownership interests in property or in otherwise specifying their financial relationship. Postnuptial agreements can change the character of existing property from community to separate or from separate to community and can specify in advance the character of property the spouses are about to acquire. Such agreements can determine the community or separate character of earned income and can do the same for retirement assets. As with premarital agreements, in post-nuptial agreements parties can make these property and financial determinations regardless of what underlying California community property law would otherwise provide.

Also as with premarital agreements, post-nuptial agreements must be negotiated and drafted with great care. Under California law married couples have the highest level of fiduciary duty to each other, so that in financial dealings each must act toward the other as a trustee would toward a beneficiary. Changing the character of property during marriage, an event know legally as a “transmutation”, can raise a presumption of invalidity if one spouse is disadvantaged by the change. To maintain the validity of a post-nuptial agreement that effectuates such a transmutation requires showing that the spouse who is disadvantaged fully understood and agreed to the transaction. Having that spouse represented by counsel forms a virtually essential element of such a showing.

What Is a Cohabitation Agreement?

A cohabitation agreement is a contract between unmarried persons who are cohabiting in a marriage-like relationship and who wish to specify how they will manage their financial affairs. Parties may want to establish such agreements in order to avoid the implication that simply because of their personal relationship they have agreed to share ownership of the earnings and assets they acquire while they are together. Other parties may want to share ownership of assets and need an agreement expressly and formally so providing.

California law gives unmarried cohabitors wide discretion to provide for ownership of property. Cohabitation agreements can designate property, including real estate, bank and investment accounts, and other assets, as joint tenancy, tenancy in common, or individually-held. As with premarital and post-nuptial agreements, cohabitation agreements require careful consideration and drafting. Although cohabitors are not married and have no fiduciary duty to each other, each party must enter a contract willingly, voluntarily, and with full knowledge and understanding of what the contract means. Representation by counsel is desirable.