Prenuptial Agreements

CALIFORNIA ULTRA HIGH NET WORTH PRENUPTIAL AGREEMENTS

“In California, a lot of ultra high net worth individuals have their in-house family office lawyer draft their prenup. Not unusual and not particularly advisable because they seldom practice family law. Trust me, you don’t want an attorney without experience drafting your ultra high net worth (UHNW) prenup. Prenup drafting is a specialty even amongst practicing family law attorneys. You want someone who actually litigates in the family court day in and day out, ideally someone who litigates UHNW divorces, where you see the issues and terms outlined in the prenup play out in court all the time. Errors that so easily could have been avoided.”

Caitlin Ashton

Most couples enter into a marriage without understanding the full legal impact of what exactly they’re entering into. At Laughlin Legal, the prevailing belief is that all engaged couples in California, and certainly all ultra high net worth engaged couples, would benefit from a prenup or at the very least, a prenup consult. In fact, the firm offers them free of charge strictly to encourage prospective spouses to become educated about the legal dimension of marriage.

UHNW couples were once a more homogenous group of people. But in 21st century California, the couple is as likely to include a 30-something founder of an AI startup as a retired CEO who’s twice divorced and 70-something. Whatever their story, whether they wish to protect their business or their brokerage account or their income, what leads them to contact an ultra high net worth prenup attorney is a grasp of the risk they would face if they don’t. And peace of mind in moving forward with the marriage if they do.

When does a California high net worth prenuptial agreement become a California ultra high net worth prenuptial agreement?

Technically, UHNW couples have liquid or investable assets of greater than $20M. But when it comes to drafting an ultra high net worth prenuptial agreement it’s not the size of the estate that’s defining – it’s the personalities in the room. People with a lot of assets or income to protect know what’s at stake so they are generally more adamant about obtaining a prenup and tend to take the process more seriously than people with fewer assets and little income.

What is one of the biggest mistakes ultra high net worth prenup couples in California make?

Not allowing enough time for the process. Ideally, a couple schedules a first meeting 6 months before the wedding; 3 months prior at the very latest. In California, the ultra high net worth prenup process takes time. The couple and their attorneys have to allow enough time for financial disclosures to be assembled, for negotiating, for legal review and changes. And then there’s the 7-day rule. In California, couples are required to wait at least 7 days between when the final draft is shared with the other attorney and when the agreement is signed. The rule was created to prevent one party from pressuring the other into signing without adequate review. An ultra high net worth prenup represents hugely consequential decisions that need to be talked about and considered, and should not be made in haste. Sprinting to finalize an ultra high net worth prenuptial agreement the week before the wedding can weaken the odds of it serving both parties and standing up in court.

Wondering where to get a prenup for ultra wealthy couples in California? How should you choose your ultra high net worth prenup attorney?

Certainly you should seek a consult with a California ultra high net worth prenup attorney or two to make sure you’re a good fit. Every prenup case, and particularly an ultra high net worth prenup case, has separate counsel for each spouse. And it’s essential because one of the fastest ways to challenge a prenup is to claim you didn’t know what you signed when you signed it, or didn’t understand what you were signing. It’s a much harder argument to make when you’re represented.

If you’re worried about adequate asset protection in your prenup and you’re an ultra high net worth couple, choose an attorney who also handles ultra high net worth divorce cases because there’s no substitute for experience. A California ultra high net worth prenup attorney who is also an ultra high net worth divorce lawyer understands the many nuances of how things are likely to play out in court compared to what the letter of the law states.

Terminology

Community and separate property

California operates on the community property principle when it comes to asset division in divorce: each spouse is entitled to half the marital property unless there’s a signed settlement agreement to the contrary. There are two categories of assets. Community property is property accumulated over the duration of the marriage. Separate property is gifts or inheritances, or assets acquired either before the marriage or after legal separation.

Community and separate debt

According to selfhelp.courts.ca.gov, if you took out a mortgage to buy a house while married, that debt is community property. You’re both responsible for it. If you bought a car with money that only you earned while married, the car is community property even though the money used to pay for it was earned by you and not your spouse.

Case Story

An ultra high net worth prenup case from an ultra high net worth prenup attorney’s perspective

“An ultra high net worth prenup client was getting very close to signing her prenup. She had a $38M estate thanks to an inheritance, was embarking on a second marriage, and was under a great deal of pressure from her fiance to sign. And the wedding was two weeks away.

Rushing a prenup is never a good idea with that kind of money on the line. We had met the statutory requirements for the 7 day rule, that wasn’t the problem. The problem was the fiance who had been alternately rushing the process from the start and regularly unavailable for scheduled calls and meetings. A suspicious combination if ever there was one. It seemed as if they were essentially manipulating the schedule.

Though it technically isn’t required, there’s an extra precaution we tend to recommend in ultra high net worth prenups, something called a voir dire. On the record, with a court reporter, we basically asked the fiance a bunch of questions that would show that they were signing the agreement voluntarily, that they completely understood the prenup and weren’t under any sort of duress to sign it. That was a few years ago, and contrary to our concerns at the time, recent correspondence indicates all is good with the couple.

We’ve never had a prenup that was successfully contested and we like to think it’s because we’re meticulous, diligent, direct and creative when it comes to ultra high net worth prenup solutions for our clients. Though we can’t choose who they marry, so far we’ve financially kept them safe regardless.”

Should you get a prenup?? Let’s ask a skilled family law and prenuptial agreement attorney.

Prenuptial agreements or prenups are definitely on the rise. Those of us in family law find that encouraging. Having handled many divorce cases over the years, we believe that it’s

Read

Next Step

Book a FREE ultra high net worth prenuptial agreement consultation.

How we can help?

If you need an experienced prenup lawyer for an ultra high net worth prenuptial agreement or an ultra high net worth prenup attorney in California, let’s talk. Call us at 650.343.3486 or email us here.