Parties Can Enter into Post Nuptial Agreements Regarding Ownership of Assets and Spousal Support and Change Ownership from Community to Separate Property
I wager most people know the basics of a prenuptial agreement (they are also called premarital agreements or prenups). Many people do not know that couples can agree after marriage on division of assets and spousal support. Such an agreement is called a post nuptial agreement or post marital agreement. Very few people know (judging by the number of questions I get on the topic) that couples can change the nature of the property after marriage as well. I just received this query from a caller:
Question: My spouse and I live in California. I am the primary bread earner (though my spouse works too). My spouse wants to take a large loan and start a business. I am against this since I don’t want to put our assets (which I earned for the most part) at risk. I am fine with her taking risk against her income and assets, but not mine.
Can we have a transmutation agreement that separates my and her assets (bank accounts, home equity, investments)? Can we maintain separation going forward too, in such a way that my wife doesn’t risk what I earned, against my will?
Answer: You can do what you desire if both parties are informed of their rights and agree to transmutation.
According to California Family Code Section 852, valid, enforceable, and binding transmutation agreements must be “made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.” So, transmutation agreements must:
Be in writing;
Include an express declaration of the intention to transfer the status of property ownership; and
Signed by the spouse whose interest in the property is being reduced or removed.
There are two ways a transmutation agreement may be set aside.
A divorcing spouse may contest the validity and enforceability of a transmutation agreement if he or she believes that the agreement was obtained through undue influence, coercion, duress, or deceit;
A court may strike the transmutation agreement if it appears as though one spouse gained an economic advantage at the expense of the other spouse.
If a transmutation agreement is contested the spouse receiving the economic advantage (i.e., the property) must overcome the presumption that the transmutation agreement was the result of undue influence. If the spouse fails to overcome this presumption the transmutation agreement may be set aside.
The spouse fighting this presumption must show:
The transfer was made freely and voluntarily by the spouse reducing their economic advantage;
The transfer was made with full knowledge of all relevant factors; and
The transfer was made with a complete understanding of the effect and purpose of the transfer.
Consider Having a Lawyer draft your post nuptial agreement / transmutation agreement: You should probably have an attorney draft any post-nuptial agreement. Online legal drafting services and self-drafting have some risks. You should enquire if attorneys with experience in family law near you are willing to engage in limited scope representation to prepare your agreement. Using a lawyer for a discrete task is less expensive.
General Information regarding Post Nuptial Agreements:
Not All Postnuptial Agreement Terms Are Enforceable
Couples may agree to terms such as debt and asset division, and sometimes spousal support matters, but other terms are prohibited and will not be enforced by courts. For example, contract provisions regarding child support and child custody are invalid. Any terms that violate public policy or criminal statutes are also not enforceable.
The Postnuptial Agreement Language Must Be Clear
Courts will not enforce postnuptial agreement terms that are vague and ambiguous. General references to property that do not clearly define the property are typically invalid. The language and meanings should not be implied but should be direct and specific, leaving no question as to what the terms provide.
All Debts And Assets Must Be Disclosed
Before parties enter into a postnuptial agreement, they must each disclose all assets and debts. If one party fails to make proper disclosures, the court may find that the entire agreement is invalid and unenforceable.