California Court Rejects Post-Nuptial Agreement in Recent Divorce Case

Couples who intend to marry, or who are already married, have a variety of tools with which to legally identify their respective interests in assorted assets and debts existing between them. Depending on the particular circumstances, parties may choose to prepare and sign a prenuptial agreement or a postnuptial agreement, setting forth these rights to property and other assets, should the couple seek to divorce. Of course, the document must adhere to local laws applicable to such matters. As with most family law issues, it is important to ensure that your legal and financial interests are protected, no matter which agreement you intend to sign. Couples are encouraged to seek the assistance of an experienced San Diego family law attorney as early in the process as possible.

As a general matter, courts will uphold “nuptial” agreements as long as they are considered to be equitably constructed under fair and just circumstances. And while historically courts seemed to have preferred pre- over postnuptial agreements, there has been an increase in the number of couples entering into postnuptial agreements. In a recent California divorce case, the couple signed a postnuptial agreement after almost 30 years of marriage. The parties got married in 1979 and entered into the agreement in 2010, which identified the couple’s respective interests in certain properties and two corporations. In 2012, the wife filed for divorce.

The court first held a trial on the issue of whether the property identified in the postnuptial agreement had been validly “transmuted” from the husband’s separate property into community property under California Family Code Section 852. Under the law, couples may transmute separate property to community property by agreement or other transfer. According to the statute, however, a transmutation is not valid unless it was:  1) made in writing, 2) an express declaration, and 3) accepted (in some manner) by the spouse whose interest in the property is adversely affected.

In 2014, the court concluded that the postnuptial agreement was a valid transmutation under Section 852 of the husband’s separate property interests into community property. On appeal, the court looked at the statutory requirements for a valid transmutation. Among other things, the court pointed out that the agreement must contain an express declaration that unambiguously effects a change in the character of the property at issue. That is, there must be a clear understanding in writing that the agreement changes the character or ownership of specific property.

The court of appeals concluded that the postnuptial agreement did not contain an unambiguous, express declaration in accordance with Section 852. Instead, the court found that the agreement merely expressed the parties’ belief that the business interests were already community property. Specifically, the court noted that the agreement did not indicate a change in character or ownership, but instead it described the parties’ impression of the preexisting character of the property. Therefore, the court reversed the order deeming the postnuptial agreement to be a valid transmutation under the applicable law, and it remanded the matter back to the trial court.

As this case nicely illustrates, it is extremely important to make sure your rights are sufficiently protected in any family law proceeding, especially one that affects your financial interests after divorce. For more than 20 years, Doppelt and Forney, APLC has been representing parties in family law matters in Southern California. The office serves clients in Linda Vista, Encinitas, Scripps Ranch, San Diego, and throughout Southern California. For a free consultation with an experienced family law attorney, contact Doppelt and Forney, APLC through the firm’s website or give us a call toll-free at (800) ROY IS IT (769-4748).

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