Friday, November 30, 2012

The 'PreNup Primer'

Whether you are in agreement with Premarital Agreements or not -- it's always a hot topic and one that breeds fascination, gossip and emotion. What we do know is that in California, they are legal and the longer I am in practice, the more I am asked to draft them and/or litigate against their enforcement.

A Premarital Agreement(aka Prenup) or Pre-Domestic Partnership Agreement (for registered Domestic Partners) may be legal, but that certainly doesn't mean you can agree to whatever you want. Usually, my clients are interested in contracting with regard to property (keeping their premarital property separate and opting out of community property laws) and spousal support. It's also important to follow all the laws surrounding creation and enforcement. For example: don't wait until your wedding day to sign your Prenup and ensure there is adequate time (7 days min) between presentation of the Prenup and signature. Independent attorney representation is also key!

A Premarital Agreement can cover the following:
  • Rights and obligations with respect to property (pets are included as property);
  • Right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest, encumber, dispose of, or otherwise manage or control property;
  • Spousal Support (but with limitations)
  • The making of a will or trust;
  • The choice of law governing the agreement;and
  • Any other matter, including the spouses' or registered domestic partners' personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
What can't you put in a Premarital Agreement? Below are some examples:
  • Children! You cannot require religious practices or instruction for children or create a term that adversely affects the right to child support. You cannot provide for custody of children.
  • Punishment! Terms requiring or rewarding personal services between the parties are prohibited. What does that mean? Examples: No liquidated damages for cheating on your spouse. (We have a no-fault divorce system). No financial penalty for a spouse's substance abuse recurrence.  
  • Unlawful behavior! Shocker. 
Premarital agreements can be effective tools but beware -- don't try this at home. They are a complicated endeavor that requires experienced legal advice!

Saturday, November 10, 2012

Pre-divorce planning: Do you have an exit strategy?

Pre-Divorce Planning

If you are considering leaving your Domestic Partner or Spouse, a good plan of action is essential. I am not talking about taking our ex for all you can. What is most important is making smart choices without letting your emotions get the best of you. The more you think about  your next steps (with a clear mind) -- the better your position will be when the divorce is over. 

If you are a parent, separation is even more complicated. You'll need to be prepared for how to tell your kids about the divorce - and preferably, with the cooperation of your spouse. You will also want to think about how to help your kids cope and understand how their lives will be impacted. Reach out to your support system and local resources (such as Kids Turn) to alleviate as much of their anxiety as possible.

While child support and alimony can be helpful, it certainly will not take care of your finances in total. By the same token, if you are the higher earner partner, be prepared to see a large cut in your net income. Damage control is key but leaving your spouse penniless is not an option either. Financial planning is key! You will want to seek legal advise to determine the approximate amount you can expect to receive/ pay in support. Making a budge it important. You will also want to control debt -- when possible keep your credit card expenditures to a minimum. Continue to pay bills to avoid problems in court. That being said, you will have to prioritize your bills to ensure the most important ones are taken care of (rent, mortgage, insurance, essential utilities, credit card minimum payments, loans and income taxes). 

If you don't currently have copies of statements for all of your family accounts, get them now. Consider taking inventory of all personal property including video taping or photographing items in the house. It can be almost impossible to prove their existence when they "disappear" post-separation ("he said, she said") but if you've got evidence, you will likely be in a better place. Gather joint documents too like tax returns. While the law provides that each of you are entitled to access (disclosure) to all financial documents, some spouse's will do their best to 'stone wall' their ex's which can lead to time consuming and expensive litigation.

CAREER: Making your career plans a top priority can help you become self sufficient. If you aren't going to be able to support yourself post-separation start thinking about career counseling, re-training or going back to school -- while you can!

FUTURE: We know that divorce is devastating. Your jointly held goals are now gone and we've all struggled with depression. Create new, attainable goals for your future. I suggest a written list that you can cross off as you accomplish new and different tasks. Having something positive, productive or fun to look forward to can make you feel a whole lot better. 

Don't be afraid to reach out to friends and family. Don't be afraid to make new friends who aren't connected to your spouse. A divorce support group may sound uncomfortable or silly but has helped many of my clients to feel less isolated and more proactive. 

Nothing about divorce is easy but focusing on your emotional and financial wellbeing can not only help you in the NOW -- but will set you up for a more prosperous and satisfying future. It can also make your divorce less messy and give you a sense of empowerment.