Family Law Agreements
These agreements directly control the rights of married and divorced parties concerning their jointly and separately owned property. In family law, “property” means both assets and debts. These agreements often create lengthy, modifiable financial obligations that must be taken into account in any estate plan. They include:
• Pre-Nuptial Agreements. Also known as pre-marital agreements, these powerful agreements are entered into by parties who intend to marry each other. They are not binding unless the parties marry. After marriage, these agreements often transmute (change the character of) the separate property of one party into the community property of both parties, and parties frequently waive their after-marriage rights to share in the income and appreciation of each other’s assets. These agreements are business agreements made prior to marriage when emotions and optimism may cloud the judgment of one or both parties. Without knowledgeable representation, important rights are frequently waived in these agreements. Under limited circumstances, before they marry, the parties can waive the right to receive spousal support if they later divorce. However, child support cannot be waived. These agreements must be taken into account in any estate plan.
• Post-Nuptial Agreements. Also known as post-marital agreements, these agreements are contracts between spouses after marriage, and by registered domestic partners. During marriage and domestic partnerships, spouses and domestic partners are fiduciaries of each other. Accordingly, these agreements must be fair to both parties, otherwise, they can be set aside. They frequently transmute (change the character of) community and jointly owned property, and divide control over assets, including for estate planning purposes. For couples who choose to live apart without divorcing, they function as a divorce substitute that divides property and property control, while preserving benefits that would otherwise be lost in a divorce. These agreements must be coordinated with each spouse’s estate plan. Each party should be represented by independent, qualified legal counsel.
• Marital Settlement Agreements. Anyone who has been through a divorce knows the powerful effect of these agreements, and the judgments into which they are incorporated. They frequently remain in effect and enforceable for years until all of their provisions are performed. These agreements require representation by qualified legal counsel. They also must be taken into account in any estate plan to prevent them from disrupting dispositions to subsequent spouses and children. Consultation with a knowledgeable estate planning attorney versed in family law is essential in these cases.
• Post-Marital Trusts. Because the parties to these trusts are no longer married to each other, these are non-marital property trusts. It sometimes does not make sense to divide certain properties when a marriage and the fiduciary relationship between spouses is terminated by a judgment of divorce. These properties can either be hard to divide properties, or properties that would have to be sold in a down market for fire-sale prices. A trust, coordinated with each former spouse’s estate plan, can provide a solution that makes economic sense, and that creates a new fiduciary relationship to replace the one lost in a divorce.