Category Archives: Prenuptual Agreement

Do Prenuptual Agreements and Forum Shopping Pay Off? What Can Be Learned From The Breakup of Katie Holms and Tom Cruise

The shorthand answer to that question is that with careful planning, a divorcing couple can Kattie, Tom, Suriavoid a long drawn out court battle.  They can resolve the major issues within a matter of weeks, thus avoiding the stress and expense that is inherent in most dissolution cases.

First, Tom and Katie had a prenuptial agreement regarding their finances, in the event that they ever split up. Therefore, they avoided a long drawn out court battle over division of property and assets. Katie gets $15 million does. That is $3 million for each year that the couple was married.

A prenuptial agreement is a tool used by wealthy people or people with assets. It gives them the ability to alter the normal rules regarding spousal support and community property in the event of divorce. It is a contract between engaged people that takes effect when they get married.

Since the parties financial situation may change during the course of their marriage, it is not always possible to predict, in advance, whether or not a prenuptial agreement will be legally enforceable when the parties separate or divorce. That is why it is important to hired skilled legal counsel when entering into a prenuptial agreement, to ensure that you have adequately complied with all of the legal requirements. While the cost of drafting a prenuptial agreement may be costly, it is far more cost efficient than not having one, and having to litigate property issues when the parties divorce.

A prenuptial agreement cannot include issues regarding child custody and child support. However, Katie was able to get control of the child custody issue by careful planning. First, she moved with her daughter to their home in New York. She stayed in New York long enough to make sure she met the “residency” requirement. She changed her cell phone number and fired all of their New York staff. (She probably did this to get away from the influence of the church of Scientology). She then filed for divorce in New York, rather than California. In New York, there is a presumption of sole custody. While in California, there is a presumption of joint custody. Also, in New York, judges are more likely to listen to arguments regarding the influence of fringe religions, such as Scientology, on children. I am also told that New York is a little more sensitive to mothers who are filing for sole custody.

Thus, by carefully planning this out, and making sure that she met the residency requirements to file for divorce in New York, Katie was able to select a jurisdiction, where the law is more favorable to her position.  In the end, Tom Cruise agreed that Katie would have primary physical custody of their daughter,  Suri, while he would have regular and meaningful ‘visitation’ rights. The distinction between joint physical custody and visitation is important when dividing up parental rights and responsibilities.  Katie also has exclusive say over the choice of her daughter’s religion and education. She enrolled her daughter into a private catholic school. Had this matter been decided in California, they probably would have had joint legal custody. That means that Tom would have had equal say in his daughter’s education and religion.  The parties could have very likely been back in court battling over these issues long after the divorce was final.

As to the issue of child support, in California, that is done by guideline. It is based on the time that each party spends with the child, and the respective incomes of both parties. In any event, I doubt if child support was an issue of contention for Tom and Katie. I cannot imagine Tom Cruise refusing to pay child support, or arguing about the amount. He probably does want his daughter to be financially secure.

So the moral of the story, or the lesson to be learned from the split of Tom and Katie, is that with careful planning, parties can resolve major issues of finances, property division and child custody and support within a matter of weeks, if not days. (Tom and Katie settled most of these issues within 11 days after she filed for divorce)! Thus, they can avoid the stress and expense of what otherwise could have been a long and drawn out court battle.

Should I get a Prenuptial Agreement before I get married in California?

When making this decision, it is important to have an understanding of what Prenuptial Agreements can and cannot include in California.

A prenuptial agreement is a contract between an engaged couple which takes effect when they get married. It is enforced if and when the parties divorce. It is generally a tool used by wealthy people who have assets, and who want certainty as to how their assets will be divided in the event that their marriage winds up in divorce. The parties can alter the general rules regarding spousal support and division of community property with this agreement.

In order to be enforceable, the party seeking to limit spousal support must fully disclose the Prenuptial agreement in Californiaextent of his or her assets and financial resources. There must be no coercion involved, and the other party must understand what s/he is signing and giving up. Along those lines, the party who is agreeing to limit or waive spousal support must have the agreement reviewed by his or her own independent counsel before signing it.  California law requires seven days between the time when the party, whose rights will be limited, is first presented with the agreement, and the time when s/he signs the agreement.

A prenuptial agreement must not be unconscionable at the time of enforcement. Since a parties financial circumstances may change during the course of his or her marriage, that makes it difficult to predict in advance whether or not the agreement will be legally enforced when the parties separate or divorce.

A prenuptial agreement cannot include issues regarding child support or child custody. It also cannot include agreements regarding obligations that arise during marriage, such as household chores, sexual relations or penalties for adultery.

It is advisable to be represented by counsel when entering into a prenuptial agreement, to ensure that you have compiled with all of the legal requirements. Otherwise, there is a good chance that the agreement may invalidated by the court when the parties get divorced.

 

What Are the Consequences of Not Having a Prenuptual Agreement?

Jessica Simpson was recently quoted as saying that her biggest money mistake was her first marriage to Nick Lachey.  She was spot on. In addition to her notoriety as an actress,

Jessica Simpson and Nick Lachey during 2005 MTV Video Music Awards - MTV ShowBox at American Airlines Arena in Miami, Florida, United States. (Photo by Michael Loccisano/FilmMagic)

Jessica Simpson and Nick Lachey during 2005 MTV Video Music Awards – MTV ShowBox at American Airlines Arena in Miami, Florida, United States. (Photo by Michael Loccisano/FilmMagic)as an acclaimed actress, Jessica has also become a fashion Icon. Today, her fashion empire is said to be worth close to $1 billion.

she has become a fashion Icon.

In contrast, her ex husband, Nick Lachey, never achieved the same level of fame that she did. Accordingly, when they split up, Jessica wound up paying.  Nick Lachey walked away with half of the value Jessica Simpson’s estate when their divorce became final, back in 2006.  At that time, the parties settled for about $2 million. Fortunately for Jessica, she made most of her fortune in the fashion industry after the parties split.

Before getting married, carefully weigh the economic consequences. Be very clear about what you may be giving up, before saying “I do.”  Under California law, one spouse could be giving up a lot for the other.

There are two solutions to avoid this outcome. The first, and most obvious, would be not to get married.

The second would be to get married, but to make sure to have an air tight prenuptual agreement. A well written prenuptual agreement can avoid harsh laws regarding spousal support and the division of community property.

The problem with a prenuptual agreement is that no one can predict the future.  No matter how carefully the agreement is drafted, things inevitably change over the course of a few years, including one’s financial situation. Accordingly,  at some future point when the parties split, the agreement may no longer be a true representation of the parties current financial situation.  Thus,  the agreement may be hard to enforce.