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PRENUPTIAL AGREEMENTS AND THEIR EQUIVALENT FOR REGISTERED DOMESTIC PATNERSHIPS

by Michele Sacks Lowenstein, Attorney at Law,
Certified Family Specialist, State Bar California

1.            DEFINITIONS:   A prenuptial agreement or premarital agreement is an agreement entered into by two people in contemplation of marriage.  There is no “official” name for an agreement entered into by two people who are planning to become Registered Domestic Partners.  Is calling the “equivalent” a prenuptial agreement fair to people who don’t have the legal ability to marry?  For our purposes when not specifically referring to agreements entered into in contemplation of marriage we will use the all encompassing term “agreement”.  It is important to make the distinction for purposes of understanding the history of these types of agreements and the limitations faced by people who are unable to marry.

2.         Do they only apply to people are legally “married”? 

No.  So long as you are not contracting for an illegal purpose (sexual services for example) parties are free to make agreements which affect the disposition of their property and rights of support.  (This does not include child support or child custody – discussed below.)

3.         What’s the difference between a registered domestic partnership and a marriage? 

Since 2005 registered domestic partners in California have the same rights and obligations as married couples.  This means:

A. All the rights and obligations as spouses including the requirement to support each other.

B. Community Property Rights – The creation of community property with the same rights of survivor and equal management and control as spouses.

C. Joint obligation for community debts incurred during the partnership.

D. The right not to be excluded from the dwelling of another except in certain circumstances.

E. Custody and visitation rights where the children belong to both partners and limited rights where step parent rights apply.  (Cannot be limited by agreement.)

F. Death Related Matters – The right to control the disposition of a partner’s remains; authorize an autopsy; make anatomical gifts and authorization of exhumation of a deceased partner.  The right to be buried in a joint or family cemetery plot and to identification as the surviving partner on a death certificate.  Probate righths.

G. The collection of compensation provided to victims of violent crimes. 

H. Legal Rights - The privilege of confidential communications between partners.  The right to sue for loss of consortium, the right to sue for wrongful death.

I. The requirement to file a joint tax return in California.  Not a Federal requirement.  In fact, it is not allowed.

4.         Why have an agreement? 

Traditionally the purpose of a prenuptial agreement is to provide for alternative form of the division or distribution of property upon Death or Divorce.  (The big “Ds” – one will always get you; sometimes the other will, too.)  Rather than have the law of the state of a person’s residence control the division or distribution of assets – the parties decide for themselves how the assets should be divided or distributed.

5.         How long have these agreements existed in California? 

Certainly since the 19th Century.  In an attempt to gain uniformity over the construction of these agreements the Uniform Premarital Agreement Act (UPAA) was drafted in 1983 and adopted, to date, by 27 states including California.  It replaced sections of the California Civil Code which previously governed the construction of these kinds of agreements.

6.         What kinds of topics to these agreements cover? 

The waiver of community property rights, including businesses, real estate, retirement plans, etc.  Where enforceable they parties may waive spousal support.  Other topics include the liability for loans and the receipt of loan proceeds as well as the waiver of probate rights.  Parties may specify  who will own the home and who be able to live it upon the death of a party.  These agreements become a contract.

7.         Can these agreements be enforced in other states?

Yes.

8.         What do the agreements not cover? 

Custody, religion, personal habits (smoking/not smoking), liquidated damages for being unfaithful, child support.

9.         What about spousal support/alimony waivers? 

These have recently been permitted in California but note that Family Code Section 1612 states that they are not enforceable unless the party against whom enforcement is sought was represented by an attorney and even if represented by an attorney the provision regarding spousal support is unconscionable at the time of enforcement.

10.       What else would make an agreement unenforceable? 

Failure by one party to disclose his or her assets and obligations and the absence of a valid waiver to have that disclosure.  Failure to have seven days to review the agreement prior to its execution.  Terms that are promotive of divorce are unenforceable – payment of a large lump sum which encourages the potential recipient to file for a divorce.  If you move to another state and it is not enforceable outside of California.  If there is fraud, duress or undue influence.  The original agreement and all copies have been lost.  For reasons that are unanticipated.  This area of the law is frequently subject to change.

11.       What if the parties fail to abide by the agreement and acquire community property? 

This will render the agreement ineffective.

12.       How do you minimize a successful attack on an agreement? 

Make sure both parties are represented by counsel; that they have had ample time to review the agreement (no last minute agreements).  Try to negotiate a “fair” agreement – don’t given the other party incentive to attack the agreement.  Make sure the agreement is clearly written.  And, abide by the terms of the agreement.

13.       Can you amend the agreement? 

Yes, but note that it then becomes a post nuptial agreement and there are different rules.  The largest issue is that once married or once you are a registered domestic partner you have fiduciary duty to the other.  Again, each side needs to be represented by counsel.

14.       When do you want to amend the agreement? 

If there is a change in the law or in your finances.  If you move it would be a good idea to have it reviewed by an attorney living in your new state although note that properly written agreement will contain a “choice of laws clause”.  (The agreement will set forth which State’s law governs the agreement.)

15.       Are there different considerations for registered domestic partners if they are treated the same as married couples? 

Yes.  For married couples transfers between spouses are nontaxable.  This is only true for registered domestic partners under California tax law.  This is not true with respect for federal law. And, because of this, for the registered domestic partner, the need for this type of agreement can be even more critical.  Spousal support payments are not recognized by the Federal government in same sex divorces or the dissolution of a registered domestic partnership.  Most states don’t recognize registered domestic partnerships or same sex marriages.

16.       How are these agreements negotiated? 

Traditionally, one person gets the agreement drafted and has his or her

17.       Do you have a checklist?

A. Make a list of all your assets and debts.  You will also need the back up documents.

B. How do you want to handle assets you acquired prior to the marriage or the registered domestic partnerships?  Will they remain your separate property (this means no joint interest.)  How you will handle the payment of premarital or pre partnership debts?  Will there be some “credit” for paying down the mortgage of a house you owned prior to marriage or partnership?  Will a party have the right to be reimbursed for payment of a pre marital or pre partnership debt?  (Think about not only mortgage payments but school loans and credit cards as well as spousal or child support obligations which have been previously incurred.)

C. What if you use premarital or pre partnership property as the down payment on the house?  Do you expect to be reimbursed?  How?

D. Do you want your income to become community property?

E. Do you want to waive spousal support?  (Assuming this provision is enforceable at a future date.)

F. What estate planning provisions do you wish to make?  Is this a second marriage or partnership?  Do you children from a previous relationship?

G. If this is a same sex relationship, how are you going to handle the fact that transfers between you and your partner will still be taxable in eyes of the Internal Revenue Service?  The tax impact is very severe upon the division of retirement accounts in this instance and may not even be very workable from the perspective of Federal law.  Note the difference between PERS and FERS benefits.attorney present it to the attorney for the other party. The parties do everything through their counsel and treat the agreement as if it is a large pink suede elephant.  More recently, there has movement to have the parties meet together with their attorneys and frequently a tax advisor (a must in a same sex relationship) to engage in a meaningful, holistic discussion.

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