Like Cheese, Foreign Prenups Don’t Travel Well

177708665The following is a guest blog post by Peter M. Walzer of Walzer Melcher LLP in Los Angeles, a firm focused exclusively on family law. Mr. Walzer has been a Certified Family Law Specialist for 25 years.

It’s not uncommon for out-of-state attorneys to call California attorneys asking them to “just approve and sign a prenup.” The caller has drafted a premarital agreement in another state or country that he or she hopes will be enforced in California. Those hopes are usually dashed.

If you get that call, you probably don’t want to simply approve and sign. However, collaborating with a foreign attorney may make sense if there’s a chance that the parties could be divorced (or die) in California. You may choose to either have one agreement that covers both jurisdictions or two agreements—one if they divorce or die in California and the other for the foreign jurisdiction. How you decide to handle the situation will depend on your relationship with the other attorney, whether the laws of the two jurisdictions are mutually contradictory, your tolerance for risk, and what the client can afford.

Expertly drafted premarital agreements can be expensive, and agreements drafted to cover more than one jurisdiction can even be more expensive. On the other hand, if two attorneys from different jurisdictions attempt to write one agreement, you may be including in your agreement provisions that can’t be enforced in California and, by doing so, put yourself at risk for malpractice.

You may be wondering why a choice of law provision in a foreign prenup wouldn’t just resolve the issue of which law should apply. Although California courts may apply the law of the other jurisdiction under a choice of law clause, they won’t do so if it will offend public policy. Given how differently other jurisdictions handle prenups, this issue commonly arises.

Choice of law clauses are particularly problematic when dealing with premarital agreements from another country. Most countries don’t have premarital agreements as we use them in the U.S. In most countries, the couple elects a marital regime before marriage—separate property, joint property, or a combination of both—in which they will hold their property during their marriage. Recognition of the validity of premarital agreements is relatively new to the United Kingdom and its former colonies; their courts consider a premarital agreement as a factor in an equitable division of marital property, but not binding.

Similarly, a choice of law clause may not be enforced when it comes to the law of another state; California judges might question whether it makes sense to apply another state’s law to a local couple, particularly if there’s property in California.

Even when a foreign prenup is enforceable in California, problems can arise because the drafting attorney failed to address all the issues that arise under California laws. Here are a few issues that shouldn’t be missed:

  • The agreement can’t promote divorce (e.g., no lump sum payments may be required at the time of divorce).
  • Loan proceeds may be community property in California and need to be properly addressed in the agreement.
  • The parties may limit spousal support only if it’s not unconscionable.
  • A well-drafted agreement should cover what will happen to the parties’ assets on death as well as divorce.
  • The agreement can waive survivorship rights in retirement plans only if the waiver is executed after marriage.
  • The agreement must address whether community property will be acquired during the marriage.
  • The agreement should take into account the tax laws of the United States, particularly IRC §1041 and its application to nonresident aliens.

The attorney in the other jurisdiction should refer the client to a lawyer who understands California premarital agreements, and likewise, the California attorney shouldn’t draft a prenup for a party who is moving to another state or country. In short, do your client a favor and refer him or her to an attorney who knows the territory.

For everything you need to know about premarital agreements, including sample forms and practical tips on drafting them, turn to CEB’s California Marital Settlement and Other Family Law Agreements, chap 17.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

 

2 Responses

  1. […] Like Cheese, Foreign Prenups Don’t Travel Well […]

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