ALTERING THE CHARACTER OF ASSETS BY AGREEMENT

Question 1

California has always allowed the parties to opt out of the CP and SP characterizations by agreement, either as to:

Answer 1

particular assets or as to all acquisitions.

Question 2

When can agreements to opt out of CP be made?

Answer 2

These agreements can be made before marriage (and thus governed by the Uniform Premarital Agreement Act) or be made during the marriage.

Question 3

When, by agreement during the marriage the character of an asset is changed (from SP to CP, from CP to SP, or from one spouse’s SP to the other spouses SP), this results in a…

Answer 3

Transmutation

Question 4

Transmutation can be made by:

Answer 4

Gift or Agreement

Question 5

Consideration for Transmutation or Premarital Agreement:

Answer 5

Unlike most contracts, no consideration is required for either a premarital agreement or for a transmutation during marriage

Question 6

Premarital agreements
General rule

Answer 6

Premarital agreements must be in writing, signed by both parties. Oral agreements are invalid.

Question 7

2 Exceptions to Premarital Agreement General Rule

Answer 7

1. Where oral agreement is executed (fully performed)
2. Estoppel based on detrimental reliance

Question 8

In a premarital agreement, what can parties agree to?

Answer 8

Just about anything

Question 9

In a premarital agreement, what can’t parties agree to?

Answer 9

Parties cannot agree to limit either party’s contribution to furnish child support. This is prohibited by statute.

Question 10

There are two defenses to enforcement of a premarital agreement:

Answer 10

1. Not signed voluntarily
2. Unconscionability

Question 11

premarital agreement shall be deemed not voluntary (and thus unenforceable) unless court finds that party challenging agreement:

Answer 11

1. Was represented by independent legal counsel at time agreement signed (or waived in separate writing); AND
2. Was given at least 7 days to sign; AND
3. If not represented by independent counsel, was fully informed in writing (in language in which party proficient) of terms and basic effect of agreement. Party must execute document declaring that they got information and identifying who provided it.

Question 12

Unconscionability claims divide into two areas, those involving:

Answer 12

1. Spousal Support
2. anything else

Question 13

Provision in premarital agreement regarding spousal support is unenforceable on unconscionability grounds on one of two grounds:

Answer 13

1. Party challenging was not represent by indep legal counsel at time signed; OR
2. Provision is unconscionable at the time of enforcement (even if party represented by independent legal counsel).

Question 14

Anything else – Unconscionable Agreement is unenforceable if:

Answer 14

1. if unconscionable when made AND
2. (no full and fair disclosure of other party’s property or financial obligations;
3. right to disclosure not waived in writing; and
4. party challenging had no adequate knowledge of other party’s property or financial circumstances.

Question 15

Unconscionability is decided by…

Answer 15

the court - not the jury

Question 16

Marital agreements (transmutations)
Before 1985:

Answer 16

oral transmutations were permitted, whether by express agreement or agreement -in-fact.

Question 17

Marital agreements (transmutations) after 1985 must be:

Answer 17

1. in writing;
2. signed by spouse whose interest is adversely affected; and
3. must explicitly state that a change in ownership is being made.

Applies to all transmutations: SP into CP; CP into SP; one spouse’s SP into other spouse’s SP.

Question 18

Do exceptions to the writing requirement (e.g., estoppel, partial performance, statute of frauds) apply to transmutations?

Answer 18

No

Only exception- gifts of tangible property of personal nature (e.g., inherited jewelry) which “are not substantial in value taking into account the circumstances of the marriage.”