Prenups: Considering drafting your own prenup with a lawyer? Don’t.
Don’t Draft your Own Prenup
Seriously, don’t! In California, there are a litany of cases which hold prenups unenforceable. In the latest decision by the First District, a man named Matthew Clarke drafted his own prenup, and it was thrown out. Read the entire decision here – Clarke and Akel.
In re Marriage of Clarker and Akel
Matthew Clarke and Claudia Akel were set to marry on March 7, 2008.
On February 26, 2008, Matthew downloaded a template he found online (thank you Nolo Press) and drafted his own prenup to give to his fiancée, Claudia. The draft provided, inter alia, the following provisions regarding his pre-marital property located at 538 Palomar Drive:
1. It would remain his separate property after marriage.
2. After 7 years, it would become , that the property would become “community property”.
3. If they separate prior to 7 years, Claudia would receive 2% interest per year of marriage.
4. If they separate, Claudia and kids would have lifetime tenancy in house.
Matthew drafted this agreement, and hired Attorney Clifford Chernick to represent Claudia.
On February 29, 2008, Matthew emails a copy of the prenup he drafted to Chernick’s office. Matthew then makes some changes (but none relating to the property), and emailed over revised copy on March 3, 2008 to Chernick’s office.
On March 4, 2008, Attorney Chernick meets with both Matthew and Claudia. Attorney Chernick advises Matthew that he should obtain independent counsel. He clarifies with Matthew if he is waiving his Family Code 2640 reimbursement rights should property become community. Matthew declines, stating he can represent himself.
Attorney Chernick also speaks to his client Claudia alone to ensure her understanding of the agreement.
On March 5, 2008, Attorney Chernick sent both Matthew and Claudia a redline version of Matthew’s draft, which added these provisions:
1. Both parties waive any separate interest in their community property, including any Family Code 2640 reimbursement rights.
2. Matthew specifically waives his reimbursement rights to 538 Palomar.
3. Matthew to pay all expenses on 538 Palomar for as long as Claudia’s lifetime tenancy.
In this draft, the Agreement stated they both had more than 7 days to review before signing.
On March 6, 2008, the parties signed a substantially similar version of Chernick’s March 5, 2008 revised
agreement. ON same day, Matthew also signed a separate written waiver of counsel, which stated:
1. He acknowledges Chernick only represents Claudia;
2. Chernick advised him to seek independent counsel;
3. He was financially able to seek counsel but was waiving the right to consult with attorney.
As par for the course, Matthew and Claudia don’t make it 7 years. They separated in 2013 or 2014. Matthew filed for divorce and Claudia sought enforcement of the prenup, in particular the ”lifetime tenancy paid for by Matthew” at 538 Palomar.
Prenuptial Thrown Out, No Good!
The Trial Court tossed out the prenup. Claudia appealed, and the First District affirmed.
WHY WAS THEIR PRENUP UNENFORCEABLE?
Here is the law on prenups, found in CA Family Code 1612 and 1615.
(a) A premarital agreement is not enforceable if the party against whom enforcement is sought proves either of the following:
(1) That party did not execute the agreement voluntarily.
(2) The agreement was unconscionable when it was executed and, before execution of the agreement, all of the following applied to that party:
(A) That party was not provided a fair, reasonable, and full disclosure of the property or financial obligations of the other party.
(B) That party did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided.
(C) That party did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.
(b) An issue of unconscionability of a premarital agreement shall be decided by the court as a matter of law.
(c) For the purposes of subdivision (a), it shall be deemed that a premarital agreement was not executed voluntarily unless the court finds in writing or on the record all of the following:
(1) The party against whom enforcement is sought was represented by independent legal counsel at the time of signing the agreement or, after being advised to seek independent legal counsel, expressly waived, in a separate writing, representation by independent legal counsel.
(2) The party against whom enforcement is sought had not less than seven calendar days between the time that party was first presented with the agreement and advised to seek independent legal counsel and the time the agreement was signed.
(3) The party against whom enforcement is sought, if unrepresented by legal counsel, was fully informed of the terms and basic effect of the agreement as well as the rights and obligations he or she was giving up by signing the agreement, and was proficient in the language in which the explanation of the party’s rights was conducted and in which the agreement was written. The explanation of the rights and obligations relinquished shall be memorialized in writing and delivered to the party prior to signing the agreement. The unrepresented party shall, on or before the signing of the premarital agreement, execute a document declaring that he or she received the information required by this paragraph and indicating who provided that information.
(4) The agreement and the writings executed pursuant to paragraphs (1) and (3) were not executed under duress, fraud, or undue influence, and the parties did not lack capacity to enter into the agreement.
(5) Any other factors the court deems relevant.
The Court found the agreement to be unenforceable under 1615 (c) 2 and (c) 3, as bolded above.
California Family Code 1615 makes essential that a prenup is executed VOLUNTARILY. It also defines what is “voluntary”. One of the provisions states that in order for it to be voluntary, the party presented with the prenup must have at least 7 days to review and obtain counsel before signing.
Here, Matthew emailed Attorney Chernich his first draft on February 29. They signed on March 6, 2008. That’s only 6 days! In addition, the Court held that Attorney Chernick’s March 5, 2008 changes (waiving reimbursement, having Matthew pay for lifetime tenancy costs) were SO substantial that they materially altered the initial agreement – suggesting the clock should start ticking on March 5, 2008. At the very most, it would start on March 4, 2008, at the meeting where Matthew was advised to obtain independent counsel. Whether the clock starts ticking on the 4th of 5th, signing on the 6th was nowhere near the required 7-day waiting period.
EVEN THOUGH the agreement stated they both had at least 7 days (Claudia raised the estoppel by contract doctrine in Evidence Code 622 which states:”The facts recited in a a written instrument are conclusively presumed to be true as between the parties”) in support of her claim, the Court held that doesn’t apply in an invalid contract such as this one.
Thus, under Family Code 1615 (c) 2, this prenup gets thrown out.
The Justices continue, this prenup ALSO violates 1615 (c) 3, because Matthew never signed a written waiver of his rights here! He certainly did not receive a “written explanation of rights and obligations relinquished”, and did not “execute a document declaring he received this information”.
The prenup is no good! Thrown out.
Struggling, Claudia argued that even if these particular provisions are tossed out, the rest of the prenup should stand.
Sorry, Claudia. There was no severability clause. Didn’t your counsel read 212 Cal.App.4th 967, A134191, In re Marriage of Facter? Always always always include. A. Severability. Clause.
The moral of the story is that prenuptial agreements are not as easy as they look. If drafted or executed wrong, they are unenforceable. Worthless. Pointless. May as well write it on toilet paper and flush it.
Make Sure Other is Represented
1. When representing a party on a prenup, always make sure the other side is represented. ALWAYS! The problem with 1615(c) 3 is that if the other side is not represented, it requires you to prepare a written waiver of rights for the other party to sign. California law states you must ensure they were “fully informed of the terms and the basic effects of the agreement as well as the rights and obligations he or she was giving up by signing the agreement, and was proficient in the language in which the explanation of the party’s rights was conducted and in which the agreement was written”. How is this any different than “giving legal advice” to the other side?? Doing this almost always creates a conflict of interest with your own client. NEVER do this. If you are handling prenups, be savvy enough to know the other side needs an attorney – well ahead of the 7-day deadline!
Leave Sufficient Time, Way Beyond 7 days
2. When representing a party on a prenup, make sure that you leave sufficient time at the end to begin the 7-days waiting period. Whenever I draft a prenup, even with minor changes, even with the other side being represented by counsel, I wait until there is a meeting of the minds as to the final version. I never play with fire as to when to label something “material” or “clerical”. All changes are changes which starts the clock again. Once we agree upon a final version, I send out a LETTER with today’s date as the FINAL version. THEN I start the 7 -day waiting period. Practically, this means that you must allot enough time for the preparation, negotiation, editing and explaining of the prenup. My personal cut-off for accepting a prenup is no less than 30 days prior to the wedding, I must be retained (fee agreement signed, retainer paid), and the other side must also have counsel. No less.
Always Severability Clause
3. ALWAYS. INSERT. SEVERABILITY. CLAUSE. ALWAYS always always. On every single contract. Even if I am representing the party who may not want the contract to be enforceable, I insert this.
Cover your ass
4. Cover yourself. Even if you dot all your i’s and cross all your t’s, even if it’s bulletproof, even if GOD himself wrote it- you run the risk that one side will challenge it, and it gets thrown out. This case teaches us this. It is risky. I always include in representation a recital of all the codes and case law relevant to this field and include a CYA letter that says even if all the stars are aligned, your fiancé or fiancée can still challenge it and win. But it’s better to discuss and memorialize rather than have nothing at all.
Hire an expert
5. Be careful! Prenups are not easy. I know people are offering to sign off on them for less than $1,000. This is simply amazing. I mean, sure, if everyone lives happily ever after, and never needs their prenup ever, that sounds like a fair deal. But we are family lawyers! We know what happens. If you’ve been around as long as I have, you’re bound to have a prenup you signed off on come back in a divorce. DO IT RIGHT. Or just do it yourself and flush it down the toilet, because it’s worthless and not even worth the $1,000 you paid for it.
Marriage is Grand. Divorce- a Hundred Grand! Prenups considering drafting without lawyer, Don’t!