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Recent Posts in Prenups Category
| January 21, 2012 |
| Court Upholds PRENUPTIAL AGREEMENT Where Wife Alleged Husband Falsely Stated Net Worth |
| Posted By Thurman Arnold, C.F.L.S. |
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While prenuptial agreements were once viewed with suspicion by trial courts, a recent decision reflects the current trend to uphold them particularly when the complaining party has competent legal representation and practical access to all relevant information concerning the other person's finances - whether they took advantage of that opportunity or not. One lesson is that people need to take the waivers set forth in these agreements quite seriously, because there is high likelihood you will become stuck with them.
One of the useful aspects to the Second Appellate District's decision in In Re Marriage of Hill and Dittmer is that the justices kindly include an Appendix setting forth selected portions of the prenup which were upheld as fully enforceable, providing family law practitioners who draft premarital agreements a useful partial template for language that will likely pass muster.
The opinion also demonstrates how important it is for the parties, and their attorneys, to maintain a complete file of the negotiations leading to the execution of such agreements including maintaining copies of the succession of drafts that come to be altered as discussions evolve, as potential evidence when the agreement is (inevitably?) attacked. Whether premarriage agreements will be enforced years later is a highly fact specific inquiry. Many lawyers are reluctant to be involved in drafting them, because they are seen to be potential malpractice traps. Those that do often charge significant fees as a result, in order to justify the risks of subsequently being sued by their own former clients. This case is interesting because the wife, who came to challenge the agreement some seven years after she signed it, ultimately had her own attorney be the primary drafter of the agreement. That attorney evidently did a good job in helping to create an agreement that would be, and turned out to be, binding - which is not what the wife wanted to have happen years later, after the fact. Where one party later perceives that they will be better off if their premarital agreement can be set aside, the first thing their (new) lawyer will do is to try to find a "hook" for attacking its enforceability. This case represents a creative attempt by wife's attorneys to create such a hook by contending that the husband had misrepresented his net worth when it was signed, but their efforts failed.
Parties' Circumstancs
Sandra Hill and Thomas Dittmer married in April, 2001. Some six months prior to the wedding, Dittmer insisted that before he would marry, they needed to execute a premarital agreement. At that time, Hill agreed. Each was wealthy and business savvy by any standard. Hill had a net worth of at least $10 million, and Dittmer possessed at least $40 million. Each had "high-pressure jobs which required deadlines to be met and contracts reviewed, edited, and signed." Hill had been a magazine editor and published author, and had her own television production company; Dittmer was the founder of a major commodities trading company.
Hill hired Santa Barbara family law attorney Jamie Raney to represent her, and they first met to discuss it three months before the marriage. While Dittmer's attorney prepared an initial draft, Raney decided that it would be better for her client if Raney drafted the agreement and Dittmer agreed to allow this to occur. Numerous versions were created and exchanged as the agreement took shape, and evidently these drafts were maintained in the attorneys' files over the ensuing years and so came to be admitted into evidence in the subsequent trial. The more drafts that are generated, as they agreements are being formed, the greater the inference that both parties are actively engaged in an arm's length transaction to create a contract that they both intend to be binding and which they both fully understand. Hence, when one soon to be spouse is favored over the other, or gains benefits they view as important, that spouse's counsel very much wants the other party's attorney to actively input into changes to the agreement. For instance, when I draft them on behalf of the person with greater income or assets, the last thing I hope for is that the other side will just accept my version. Indeed, some lawyers intentionally leave mistakes in a draft (misidentifying parties, misspellings, provisions they know aren't acceptable) exactly so there is a record that these were corrected or changed.
The agreement came to be signed on the day of the wedding, before the ceremony. It included a waiver of spousal support and precluded the creation of community property during the marriage by reason of the contributions of time, skill, and efforts of each party, that would otherwise have belonged to them jointly but for the prenup.
As is often the case where the enforceability of a premarital agreement is in issue, the trial court bifurcated the proceedings and permitted an early trial of that issue alone since if the agreement was upheld, the overall case would be severely truncated and shortened.
Hill's best argument to challenge her agreement was evidently that Dittmer had failed in the agreement to actually disclose the nature and extent of his income and assets beyond a generalized representation that his net worth amounted to $40 million. To prove this assertion Hill attempted to obtain discovery of Dittmer's net worth when the agreement was signed, which would likely have consisted in the information she could have obtained but did not then obtain. Dittmer resisted this discovery as largely irrelevant, but the trial court allowed some limited inquiry by Hill but not to the degree that she had wanted.
Dittmer's attorney had smartly insisted a provision be added to the agreement that acknowledged that Dittmer had provided Hill's legal counsel with full and complete access to Dittmer's financial information, including an opportunity to consult with Dittmer's attorney and his accountants and other representatives "as to the nature, value and cash flow from any of his assets and the nature and extent of his liabilities." This turned out to be Hill's undoing - Hill never availed herself of this invitation, and conducted no inquiry. This effectively waived her right to contest the agreement on this basis later, notwithstanding the fact that the first draft that Raney circulated was presented on March 23, 2011, and that the revision with this acknowledge came "a week later" and therefore on or about April 1. Raney faxed Dittmer's attorney the final draft of the agreement on April 11, 2001, three days before the wedding day, when it came to be signed. Hence, evidently the "opportunity" to inspect Dittmer's net worth representations, including what would certainly have been questions about a complex financial estate, was open for just the two weeks leading up to the marriage. As a practical matter relating to how we humans are hard-wired, I find it difficult to imagine how Hill could have undertaken any kind of real investigation within that time period (without, for instance, canceling or moving the wedding date). Nonetheless, she had the chance to do so and her decision not to deprived her of a legal basis to claim fraud for nondisclosure, or inadequate disclosure, of Dittmer's holdings and income as of that time.
Apparently the terms that the parties came to agree upon had little to do with specifics relating to their assets - one can speculate that if Hill cared enough then about what she claimed to care about now, had her inquiry resulted in the discovery that Dittmer was worth $50 million rather than merely $40 million, her attorney might have been motivated to negotiate a better deal or request some additional provisions. Of course, what is unsaid but implied in the decision is that Hill loses because her theory of the case is simply a technical ruse to invalidate what she doesn't like today - something that evidently didn't matter then. How the Court Ruled
The court's opinion states:
"The contention that the Agreement is tainted by fraudulent and inadequate disclosures is refuted by evidence that Hill, both in the Agreement itself and in her conduct during the three-month period of negotiation, waived this claim. The Agreement states in part: 'Each party waives the provisions of California Probate Code Section 143 and California Family Code Section 1615 relating to financial disclosures. . . . The absence of disclosures shall not create any legal right in favor of either party, nor any legal remedy by either party against the other including, but not limited to, challenging the validity or enforceability of this Agreement. Based upon each party's knowledge of the other's income and assets and their access to same, and in consideration of the prospective marriage, each party acknowledges that this Agreement is fair and equitable at the time of its execution. The foregoing waivers of disclosure are voluntary and express and shall be deemed conclusive for the purposes of Section 1615 (a)(2)(8) of the California Family Code and for all other purposes.'
The circumstances surrounding the execution of the premarital Agreement provide substantial evidence that Hill entered into the Agreement voluntarily. She had the advice of two attorneys specializing in family law and estate planning during the nine months the Agreement was being discussed and negotiated. Hill's lawyer drafted the Agreement and revised drafts of the Agreement in consultation with Dittmer and his attorney. These facts, coupled with Hill's professional background and evident skills are strong evidence that she entered into the Agreement voluntarily.
There is no evidence that Hill took any steps to obtain financial disclosures from Dittmer during the negotiation period, although she was invited to do so by Dittmer's attorney. Dittmer's attorney sent a memorandum to Rainey in this regard as follows: 'Article IV (perhaps in Section 4.4) should acknowledge that the financial information provided by Tom includes his Trust and that 'Tom has provided Sandy's legal counsel and representatives with full and complete access to the books and records of Tom and his Trust, with the opportunity to consult with him, and any of his accountants, agents and representatives as to the nature, value and cash flow from any of his assets and the nature and extent of his liabilities.' This provision was contained, in substance, in the Agreement.
Hill's additional argument, that she did not see the final draft of the Agreement until the date of the wedding and that the agreement she signed was incomplete, is not persuasive. As the trial court found, the record shows that the provisions upon which Hill bases her claims of invalidity had been in prior drafts of the Agreement. Hill's assertions that she was too busy with wedding preparations to read or understand the Agreement ring hollow in light of her education and her extensive business experience. In this regard, the trial court said: 'The Court further finds that the prenuptial agreement signed by [Hill] was full and complete and contained page 14. Even if the version that [Hill] signed was missing that page, the Court finds that the failure to include it was a clerical error by [Hill's] attorney and not a surprise to [Hill] and was included in prior drafts of the prenuptial agreement provided to [Hill]. It was a provision that had been agreed to by the parties prior to the execution of the agreement.' Moreover, any failure on her part in this regard is not a sufficient basis for invalidating a contract. (See, e.g., Wal-Noon Corp. v. Hill (1975) 45 Cal.App.3d 605, 615 ['[f]ailure to make reasonable inquiry to ascertain or effort to understand the meaning and content of the contract . . . constitutes neglect of a legal duty such as will preclude recovery for unilateral mistake of fact'].)
The trial court found as a fact that Hill had adequate opportunity to review the various drafts of the agreement and that she was aware of and understood its contents. Substantial evidence supports this finding. Furthermore, even if it were true that she was unaware of portions of the final Agreement, her failure to take reasonable steps to become aware of the contents of the Agreement, particularly given her business background, her awareness of earlier drafts, and her access to counsel, precludes a finding of that she entered into the Agreement involuntarily. (See, e.g., Bauer v. Jackson (1971) 15 Cal.App.3d 358, 370 ['[o]rdinarily, when a person with capacity of reading and understanding an instrument signs it, he may not, in the absence of fraud, imposition, or excusable neglect, avoid its terms on the ground he failed to read it before signing it'].)"
Hill also contended that the changes to Family Code section 1615 that became effective a year later, in 2002, should be retroactively applied to the question of the agreement's validity and that if they were a different result would have occurred. Specifically, current section 1615(c)(2) creates a presumption that a prenup is not executed voluntarily unless the court makes a finding that the party against whom enforcement is sought had at least seven calendar days between the date he or she was "first presented" with the agreement and advised to seek independent counsel, and the time he or she signed the agreement.
Hence, the amended provisions that are no effective presumes a premarital agreement is unenforceable when the party who is challenging it did not receive it at least seven days before it was signed - Hill argued that the final version was only given her the day of the wedding. The decision ignores the question whether the "final, final" draft needs to be presented more than seven days before, because the Court (and an earlier decision) have found that the 2002 revisions to the Uniform Premarital Agreement Act are not to be applied retroactively to agreements entered into prior to January 1, 2002.
The language that Dittmer's attorney requested will likely become the standard for future agreements like this one, and will create a method of by which actual disclosure of assets and debts in the prenup can be avoided - which, the standard of professional care now suggests based on this decision should become the rule and not the exception. Why now ever give a detailed financial disclosure, whether by way of exhibits or statements made in the agreement itself, when that can be waived? Giving detailed facts in an agreement would appear to be unwise, since the party who is attacking enforceability then has something specific to challenge. A 'multitude of sins' can be shielded if the opportunity to investigate is extended, but not undertaken.
It bears repeating that the provisions attached in the Appendix, including a form of spousal support waiver, are a very good starting point for drafting the language for your own agreements.
Thurman Arnold, III, C.F.L.S.
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| November 13, 2011 |
| Wife Bears Own ATTORNEY FEES In Failed SET ASIDE MOTION Involving MSA |
| Posted By Thurman Arnold, CFLS |
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Marriage of Guilardi (11/7/11) 200 Cal.App.4th 770
The Sixth District Appellate Court (including Santa Clara County) has upheld a trial court denial of recovery for the attorney fees incurred by and during a former wife's unsuccessful bid to set aside a Marital Settlement Agreement (MSA), based upon express language and implied waivers contained in that agreement (which became incorporated into the Judgment once it was approved by the court), and some misconduct on Wife's part.
Wife sought an award of $157,650 which she had paid (or that possibly remained unpaid) to her attorney, under the "needs" based provisions of Family Code section 2030, even though she incurred them on an underlying motion to set aside the MSA and Judgment that had been determined adversely to her. Her application was made on the basis of fraud, mistake, perjury and noncompliance with the Family Code disclosure requirements - which are standard grounds that
Family Code section 2122 enumerates for setting aside family law judgments. It appears from this decision, which is obtusely written at times, that Wife had waived spousal support in that agreement.
Her motion was filed one day before the one-year statute of limitations expired as to some of those grounds (i.e., mistake). When Wife signed the MSA she was not represented by counsel, and for "reasons known only to her" declined to consult with anyone despite being warned by language in the MSA that she might wish to do so and would be bound by it in any event. The MSA contained two standard provisions that the trial court seized upon in denying Wife recovery of any fees: a) a waiver of all claims under Evidence Code section 1542 and b) a clause that stated that in the event of further litigation arising from the agreement, the prevailing party would be entitled to recover their attorney fees and costs. It did not contain any express waivers of need based or other attorney fee claims, but the trial court implied this waiver from the language and intent of the document.
Unfortunately for Wife, also, the trial court found that she had intentionally destroyed a premarital agreement - although the decision is vague about how the prenup related to the MSA (apparently it too waived spousal support, but the trial court refused to uphold that waiver to the extent it arose in the premarital agreement) - and this fact may be useful to distinguish this decision from other cases, and their lines of reasoning that suggest some courts might reach a different result. (The decision recognizes this split of authority and briefly discusses these other cases). Reference to Wife's destruction of the prenup is also confusing because it was apparently nonetheless litigated so someone must have retained a copy.
So began three years of litigation, and ended after two more years of appellate processes. And lots of attorney fees for both sides.
I have mixed feelings about this decision. Sometimes bad facts make bad law. The decision doesn't tell us what burden of proof the trial court applied in finding a "waiver" of rights - whether by a preponderance of the evidence or by clear and convincing proof - and the additional fact of wife's destroying the Prenup, which the appellate decision repeatedly points out, makes this case muddy in terms of its potential application. I suspect that trial judges who wish to apply this case to fact patterns they see in their courtrooms may apply this holding without regard for similar bad acts in their own cases; in this sense, if indeed wife's destruction of the prenup sealed her fate, as the decision seems to imply, other people's fates may be similarly sealed in the future even in the absence of bad faith. And, is it good public policy to declare that a party who, in good faith, prosecutes a set aside motion should not recover fees if they ultimately lose? The two provisions in this MSA that the trial court relied are pretty much universal in MSA's and Stipulated Judgments for Dissolution and related marital or domestic partnership proceedings. Provisions that might be enforceable in most business or nonmarital contracts, particularly as they relate to power imbalances over the control of property or income that may be controlled by an "in-spouse", arguably should not apply within the family law context.
On the other hand, the fiduciary relationship arising under the fact of the marriage ("de facto" fiduciary relationship) ended when the parties separated and began their divorce battle. This is to be contrasted with the continuing legal obligations ("de jure" fiduciary duties) between the parties that don't end until the community property has been distributed. Additionally, there is a strong public policy interest in the finality of judgments - and this case, extending over 3 years at the trial court level, must have been expensive for the Husband. To have prevailed but still to have been required to pay $156,000 (or some other substantial amount) to Wife for her failed attack seems inherently unfair. This is especially so to the extent that she was destroying documents or otherwise defrauding him or the court. Moreover, Wife did sign the MSA and never apparently satisfactorily explained how this was not her own fault. While she was unrepresented at that time, she made that choice willingly.
Another unanswered question in the reported decision is whether Husband himself sought attorney fees against the Wife as the prevailing party; it seems not. Presumably this is because Wife signed away substantial rights to property and support when she executed the MSA, and so had little to give towards his attorney fees. Notably this was a lengthy 16 year marriage, and it produced a 10 year old daughter. We know nothing about Wife's education, background, or the parties' assets and income.
Incidentally, Wife complained for the first on appeal that the denying her a need's based attorney fee award per Family Code section 2030 was inappropriate given that issues of child custody and support were also determined in the MSA; she did not urge this point in the lower court. The appellate decision implies that such an argument, if properly made, could have caused a different result even if Mom still had lost the set aside application.
This is an important case for protecting the interests of parties once settlement agreements are executed and approved by family court judges. It is also one of those cases that parties who are resisting set aside motions will use to intimidate the other side. It is not at all clear from the decision what would happen where a party files a fee application to underwrite their set aside motion and sets it to be heard before the final determination, i.e., before the other side is determined to have "prevailed." But the implications seem clear. This case should not be considered the final word on the subject.
T.W. Arnold, III, CFLS |
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| May 30, 2011 |
| Court Upholds SPOUSAL SUPPORT WAIVER In PRENUPTIAL AGREEMENT |
| Posted By Thurman Arnold, CFLS |
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Marriage of Howell (May 24, 2011) 195 Cal.App.4th 1062
The Fourth District out of San Diego County recently published an opinion upholding a spousal support waiver contained in a premarital agreement that was executed before 2002, when California adopted the Uniform Premarital Agreement Act (UPAA) and amended
Family Code section 1612.
Section 1612 invalidates any provision in a premarital agreement regarding spousal support, including, but not limited to, a waiver of such support if (i) the party against whom enforcement of the spousal support provision is sought was not represented by independent counsel at the time the agreement containing the provision was signed or (ii) that provision is unconscionable at the time of enforcement.
Michael and Pamela Howell began dating in 1997 and married in mid-May, 1998. They separated in March, 2008. Prior to marriage they executed a prenuptial agreement that included, among other things, a provision that they each waived any right to seek spousal support from the other in the event of divorce. At trial there was a dispute concerning the circumstances surrounding the timing and execution of the agreement, with Michael claiming he contacted his lawyer to draft the prenup a year before the wedding, and that he gave her a copy to review in December, 1998. He testified that he told Pamela to take her time in reading it, and to consult a lawyer. He said that Pamela reported she'd discussed it with family members and friends and that she concluded there was no need to have it independently reviewed because Michael had "nothing" to protect. It was signed on January 30, 1999.
Pamela's story was that Michael waited until the wedding day was fixed and paid for by Pamela and her family before raising the issue of a prenup. She said they argued about it, and Michael threatened to call of the wedding and so cause her great embarrassment and expense if she refused to sign. She claimed she had the agreement for only about three days before she signed and didn't understand what rights she was waiving. Nor did she have the money to hire a lawyer and advise her, since she'd spent it all on the wedding and Michael never offered to pay for to consult with an attorney.
The agreement recited that Michael had been previously married twice and had a daughter; Pamela was never married and had no children. Michael worked for the U.S. Postal Service earning $38,000/year and Pamela worked at a mortgage company and made $24,000 annually. Paragraph 5 stated that the agreement had been drafted by Michael's attorney, who represented Michael only, and it urged Pamela to seek independent counsel but that she has declined to do so with full knowledge of the interests she was waiving. In another portion the language stated both parties were of sound mind and not acting under duress. Both parties fully disclosed their assets, liabilities, and income.
The spousal waiver stated: "The parties mutually waive any right to receive future spousal support, maintenance or alimony from the other in the event of a Dissolution of Marriage or Legal Separation."
The trial court found that the waiver did not comply with the 2002 amendments to Family Code section 1612, even though it was executed four years before their enactment, and that Pamela had lacked independent counsel. Nonetheless, however, the court went on to make a number of findings for the record including:
- that Pamela entered the agreement voluntarily
- Pamela was capable of understanding the admonition to obtain her own attorney
- she had sufficient time to do so
- at a minimum she could have inquired into the cost of retaining counsel but didn't
- the premarital agreement was twelve pages long, not particularly complex, involved a small estate, made full disclosure, and basically sought to maintain the parties' separate property interests
- she was fluent in English
- she was employed in the field of bookkeeping, which involves the keeping of finances
- under either parties' version, she had at least 14 days prior to the wedding to consider the agreement
- there was no evidence of duress - it was presented to her at least four months prior to the wedding; indeed, she'd provided her own financial information some five months earlier
- given that Michael had been twice divorced, it was reasonable that he would have raised the request for a prenup much earlier than admitted by Pamela, which was way before the parties began to plan for a wedding
- she had mental capacity and there was no evidence of trick or deception
- there was no evidence the agreement was unconscionable when signed
Nonetheless, because the Court believed that FC section 1612 had to be applied retroactively it declined to enforce the waiver and ordered Michael to pay spousal support of $1,015 per month as temporary support, and then $1,659/month until further of court. It ordered Michael to contribute $10,000 to Pamela's attorney fees per Family Code section 2030. Michael appealed the support ruling but not the attorney fees' order.
Justice Benke of the the Fourth District reversed the trial court's determination that FC § 1612 could be applied retroactively. The Court decided that the California legislature must have intended otherwise because (a) there was no express retroactivity provision contained in the statute itself, (b) there was nothing in the legislative history to suggest the legislature so intended; and (c) the addition of the requirement of independent counsel added in 2002 constituted a material change in prior law and to apply it retroactively would upset the expectations of parties to a contract based upon the state of the prior law by imposing a new duty (to obtain counsel) that hadn't existed earlier.
Ironically, it wasn't until 2000 that the California Supreme Court first declared that a waiver of spousal support did not per se violate public policy (IRMO Pendleton and Fireman, 24 Cal.4th 39). Up to that point it was an open question in California whether premarital agreements could ever be enforced as to support waivers.
The Howell trial court had been careful to lay the groundwork in its factual findings to support a knowing and intelligent waiver by Pamela, but for the reach of the 2002 amendments to FC section 1612. Without retro application, there was sufficient evidence in the record to enforce the waiver. Pamela's lack of independent counsel in a pre-2002 prenup was just one of several factors that a court needs to consider in answering whether a support waiver is enforceable in a pre-UPAA agreement.
The appellate court ruled:
"In light of the trial court's findings, which are supported by ample evidence in the record, and based on the law as it existed at the time the parties executed their premarital agreement, we conclude on this record that Pamela, despite not having independent counsel at the time she executed that agreement, knowingly and voluntarily waived her right to spousal support in that agreement."
This prenup was executed in January, 1999, at a time when most family law attorneys anticipated that premarital waivers of spousal support would one day be upheld as enforceable, but had no idea when and under what conditions. Prenuptial agreements used to be viewed with great suspicion by the Courts under the assumption that they were 'promotive of divorce.' The law has radically shifted since then, as has the legislative and public sentiment. Many people - and evidently Michael in this case - who have prior marriages and children won't get married without one. In that sense they may actually serve to promote marriage.
I find one of the most interesting facts of this case to be the evident simplicity of this particularly premarital agreement. Rarely have I seen a prenup agreement that is only twelve pages long. We lawyers tend to make them quite complicated, partly out of fear of committing malpractice in this area of the law; we may want to reconsider this strategy. The Howell decision, which would have had a different outcome if the agreement had been executed after the enactment of the 2002 amendments to FC § 1612, expresses a major new judicial attitude that support waivers in premarital agreements are to be enforced when they are not unconscionable at the time they are signed, or under current 1612 at the time a party seeks to enforce them. It may serve people to reduce them to their bare essence rather than elongating them. An agreement that is 50 pages long may seem incomprehensible to most nonlawyers.
By the way, prenups that don't mention spousal support will be much more easily enforced. While it is possible for a court to strike only the spousal support language in agreements that contain them, it is also possible the entire agreement could be stricken if the waiver is rejected depending upon how interrelated various provisions are.
For those contemplating drafting or signing a prenup it remains very difficult to predict whether they will be enforced under the circumstances of a contemporary divorce or legal separation. Section 1612(c) reads:
"(c) Any provision in a premarital agreement regarding spousal support, including, but not limited to, a waiver of it, is not enforceable if the party against whom enforcement of the spousal support provision is sought was not represented by independent counsel at the time the agreement containing the provision was signed, or if the provision regarding spousal support is unconscionable at the time of enforcement. An otherwise unenforceable provision in a premarital agreement regarding spousal support may not become enforceable solely because the party against whom enforcement is sought was represented by independent counsel." [Emphasis added].
We await further appellate rulings to determine what the bounds of "unconscionab[ility] at the time of enforcement" are. This is where drafting these agreements is especially tricky, and requires great skill. Don't believe that support waivers will always be enforced, particularly where they are blanket waivers (as opposed to limiting spousal support rights by duration, amount, or future circumstances at time of enforcement).
In the meantime, as to this decision, it appears that Pamela's side threw all the standard objections at the trial court that one would expect where there is a challenge to a prenup (wedding already planned, embarrassment and cost, duress, lack of understanding, no independent review and Michael didn't offer to pay for her to get one), and they didn't stick. She has to repay all the alimony she received, plus Michael's costs on appeal.
T.W. Arnold, C.F.L.S. |
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| July 16, 2010 |
| DISCOVERY in California Marital Proceedings - What Are Requests for Admission? |
| Posted By Thurman Arnold |
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Q. How do I use Requests for Admission in my dissolution proceeding?
A. Requests for Admission ("RFA's") can be a useful discovery tool in family law proceedings because they allow parties in divorce and partnership litigation to resolve issues one way or another so that no evidence need be introduced at trial by asking the other party to admit or deny something. This typically involves establishing that certain documents are genuine (i.e., a prenuptial agreement entered into before marriage or a transfer deed or promissory note or copies of documents where original are missing or destroyed). Once this document is admitted as genuine, no further foundational evidence needs to be offered to admit the item into evidence. Other uses include establishing that certain property belongs to the community estate, or that it is one party's separate property. In such situations no further evidence need be offered on the subject issue at any later hearing in order for the Family Court to take what was admitted to be established fact. Once something is established in this way, no contradicting evidence can be introduced to disprove it.
Requests for Admission are governed by California Code of Civil Procedure section 2033.010 and the statutes that follow with that code. We have provided some of the more important ones on our Family Code Statutes page.
You are entitled to ask a total of 35 RFA's as a matter of right. But you can ask as many as you need, as long as they are requested for a proper purpose, relevant, not overly burdensome, and you also have executed and supplied the Declaration for Additional Discovery required by CCP § 2033.050.
There is a Judicial Council form that you can use for RFA's, but it is not required. I will upload and link to that form shortly. I also intend to provide my own form that you can modify for your use on our California Family Law Form Library page.
Another important use for Admission's Requests is that you can combine them with Civil Form Interrogatories, Number 17.1, which requires the responding party to state all facts and evidence that they know of, and other relevant information, for each RFA which they refuse to admit. This can flesh out claims and defenses of the other party that you may be wondering about, and the evidence and witnesses which the other party claims will support them. The answers to these form interrogatories may also establish that a denial of an otherwise undisputed fact, or genuine document, was not in good faith.
One of the chief benefits of RFA's beyond putting to rest matters that are really not issues (and hence saving the time and money to otherwise prove or disprove them), is that a failure to admit them in good faith gives the Court discretion to award the asking party their legal expenses and costs in producing evidence on those same issues if the Court later decides at trial that they were not reasonably in dispute.
As with some other types of discovery (interrogatories and production requests) the responding party has thirty days to answer (plus five more if you serve them by mail). Make sure you always provide a proof of service signed by a nonparty with any type of discovery you serve.
If the other party fails to respond to your Requests for Admission, you are entitled to file a motion that the requests be deemed admitted. Other sanctions might be available, like a court finding no evidence challenging the proposed undisputed items may be offered by the other side in later proceedings.
The subject of objections to discovery is a complicated one for another day. Check our search engine to see if I 've written about it by the time you've landed here.
TWA
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| June 14, 2010 |
| Is a PRENUPTIAL AGREEMENT signed without an attorney ENFORCEABLE? |
| Posted By Thurman Arnold |
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Q. Before my wife and I married, she convinced me to sign a Prenup prepared by her brother, who is a Los Angeles divorce attorney. It says that I waive any right to property acquired with her earnings. It also says I had the opportunity to get legal advice but was choosing not to. At the time she had all the money and I couldn't afford an attorney. Besides, she told me she would be fair if we separated. Now, six years later, she says I have no rights to the house we bought soon after our honeymoon. A friend told me that since I didn't have an attorney at the time I signed it, the agreement cannot be enforced. Is this true?
A. Whether or not a Prenup - formally known as a premarital agreement - gets enforced is highly fact specific, so it is impossible for me to answer your question except in general terms. I would need more information and to look at the document carefully. I can give you some useful pointers, however.
California has adopted the UPAA (The Uniform Premarital Act) as Family Code sections 1600-1617. Prior to its adoption prenups were viewed by courts with suspicion, and they were much harder to enforce. One reason was that as a matter of public policy it was believed that prenuptial agreements undermined marriage and so promoted divorce. Today they are viewed as supportive of the marriage institution, particularly in cases of second marriages where many people won't remarry without one. Although we speak in terms of marriage, the UPAA applies equally to registered domestic partnerships.
Still, they are viewed somewhat technically and to be enforceable they must meet the requirements of the statutes. Family Code section 1612 speaks to what rights are properly altered by a Prenup. Subsection (a)(1) and (3) deal with property interests. As a starting point, there is no question but that a premarital agreement can waive interests in real property like residences.
The critical family code section dealing with enforceability is section 1615. Anybody considering a Prenup, or questioning its validity, should scan this statute. The chief defense to a Prenup is that it was not executed voluntarily. If you can prove that, it will be treated as void. If the agreement was signed as result of duress, coercion or undue influence it will likely not be enforced. The lack of an independent attorney can result in a finding that the agreement was not entered voluntarily.
If one expects a premarital agreement to be enforceable, there is simply is no safe reason for dispensing with legal counsel. Prenups should only and always be drafted by qualified attorneys, and both parties must actually be advised about their legal effect, or they may not be worth the paper they are written on.
In all cases where my office drafts a premarital agreement, we will not proceed if the other party is unrepresented. In fact, where the other party lacks sufficient financial resources to do so, we insist that person select counsel and that our client pay for it. In my opinion it is a dangerous practice to deny a less financially empowered spouse or domestic partner the ability to access legal counsel in these situations.
The importance of having independent counsel in these matters is evident from the language of FC section 1615:
"(a) A premarital agreement is not enforceable if the party against whom enforcement is sought proves either of the following:
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(c) For the purposes of subdivision (a), it shall be deemed that a premarital agreement was not executed voluntarily unless the court finds in writing or on the record all of the following:
(1) The party against whom enforcement is sought was represented by independent legal counsel at the time of signing the agreement or, after being advised to seek independent legal counsel, expressly waived, in a separate writing, representation by independent legal counsel.
(2) The party against whom enforcement is sought had not less than seven calendar days between the time that party was first presented with the agreement and advised to seek independent legal counsel and the time the agreement was signed.
(3) The party against whom enforcement is sought, if unrepresented by legal counsel, was fully informed of the terms and basic effect of the agreement as well as the rights and obligations he or she was giving up by signing the agreement, and was proficient in the language in which the explanation of the party's rights was conducted and in which the agreement was written. The explanation of the rights and obligations relinquished shall be memorialized in writing and delivered to the party prior to signing the agreement. The unrepresented party shall, on or before the signing of the premarital agreement, execute a document declaring that he or she received the information required by this paragraph and indicating who provided that information...."
Notice how these provisions are almost shouting 'independent legal counsel.' It is rare to see a phrase repeated so often within the same code section.
So examine whether your agreement, and the required separate writing, seem to address these requirements. Also, check to see whether the other conditions for enforceability are met. There may be other reasons why your Prenup will not be enforced, as where undue influence was exerted to obtain your signature (notice the seven day waiting period, which is intended to overcome the social pressures where a wedding date is looming). But you would be ill-advised to embark upon a challenge to the agreement without legal counsel this time around; don't compound the problem.
A final comment: Setting aside the prenuptial agreement may only have a limited affect upon the status of the house. For instance, the rules relating to transmutations and reimbursements still apply. I have written about those elsewhere in this Blog, but if the house was acquired by your wife as her separate property independently of the Prenup it remains her separate property even if the agreement is voided. However, if there was a mortgage and it was paid down with her earnings during marriage the cancelation of the Prenup may benefit you because the community will thereby gain a Moore Marsden reimbursement right in the principal pay down and appreciation.
Again, seek out an experienced family law attorney. And, I always urge that people consider mediating these types of family law disputes.
T.W. Arnold
http://www.ThurmanArnold.com
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| April 23, 2010 |
| Do I need a COHABITATION AGREEMENT? |
| Posted By Thurman Arnold |
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Q. I am thinking about asking my girlfriend to move in with me. Should I be considering a Cohabitation Agreement and what would it say?
A. A lawyer's job is to give conservative advice that protects clients from both seen and unseen potential legal consequences relative to the circumstances that are unique to these client's lives. Family law attorneys are reminded every day that most nonlawyers never consider that their new (or old) relationship might one day breakup or dissolve and if so what the fallout might be in terms of property, debts, or even support obligations. People are particularly vulnerable for setting themselves up for future legal difficulties in the early stages of relationship. This is the time when they are least likely to seek family law legal advice but when they need it most.
I commonly encounter several sets of circumstances that justify executing cohabitation agreements, and which affect how they are written and what provisions to include:
1)
Protecting assets, income, and wealth of one party:
Where one partner brings into the relationship assets, debts, or an income stream which is proportionately greater than that of the other partner, the partner in the financially superior position may reasonably be concerned about protecting what they have. I call these "limiting agreements" because their aim is primarily to ensure that the other partner acquires no interest (or only specified interests) in property which is already owned or that is acquired during the relationship - typically through the use of joint bank accounts, joint borrowing, inheritances, or by just plain inadvertence.
Often one partner in these situations has a near zero net worth. The economic reality in our culture is that this is usually the woman, who may also be a custodial parent of a minor child and under economic pressure. The fact is that our culture values the contributions of partners quite differently depending upon whether that contribution is in the form of money, property, or services. People joke about being called 'domestic engineers' and we may talk about women not being employed 'outside the home.' Families are not merely emotional and social units, they are also economic units. Coupling enables people to specialize between themselves so that one person can devote a greater percentage of attention to the job marketplace, for instance, while the other can invest their energies in establishing and maintaining a stable and supportive home environment.
We act as though money is the more valuable contribution to relationship when this may not at all be true. Any sociologist will tell you that if we were to count the hours that most women spend taking care of the home (and especially children), which frees the man up to work for money, and then value this time at a reasonable rate, the economic worth of the non cash contributions by domestic engineers often exceeds the value of the wages earned outside the home by the working partner in most low to middle-high income partnerships (illustrated if you consider what it would cost some outside worker to perform these tasks).
Whether the monetarily disadvantaged partner is a man or a woman, this person's interest lies in avoiding limiting agreements or in having them crafted so that some level of financial protection exists. There are compromise solutions that can be achieved which afford these persons protections they would not otherwise have, which is good reason for obtaining guidance from a qualified attorney.
If partner A earns $50,000/year and partner B works part-time outside the home or not at all, such that his efforts at home help to free up partner A's time so she can devote her attention to competing successfully within the job marketplace, the partners' respective contributions in terms of hours may be the same. If it is similar on a fairness scale, then is it really appropriate that partner A should be solely entitled to a $10,000 savings account she accumulated during the cohabitation when partner B worked only in the home and so did not have access to the dollar wages that could be tucked away?
You don't need to agree with this philosophical analysis, although it is the modern view, but perhaps these examples make it clear that cohabitation agreements include moral, ethical, and fairness considerations which deserve attention. These can be negotiated and compromised in an even handed manner that is respectful of and sensitive to the dignity and relative contribution of both cohabitants. Truly, if two partners enter a relationship where the underlying assumption is that only the partner who works for wages is bringing value into it, this is not an auspicious beginning.
2) Protecting assets, income, and wealth of both parties: Many people who utilize cohabitation agreements have previously been married and divorced, and have ongoing responsibilities for children or aging parents. They cannot afford the economic consequences of another break up and they want the companionship and benefits of a committed relationship.
In many cases the partners may have substantially equal assets and liabilities, or their relative net worths may not be too disproportionate. Two-earner households are more common today than ever before.
I call this variety of cohab contracts 'roadmap agreements.'
In California persons who cohabit who are not married or who are not domestic partners have no rights or obligations between themselves under the Family Code, assuming they have no children together. Their rights or obligations, if any, are determined solely by contract - and if there is no written contract it becomes very difficult to determine what people intended at the time they acquired what they acquired or did what they did. All kinds of claims can be made about verbal promises, and verbal agreements are enforceable when a Judge believes they exist.
Unmarried partners who have not been protected by a written agreement have no right to claim an interest in the other partner's property accumulated during the relationship, and they have no inheritance or survivorship rights absent an existing will or trust. Common law marriage is not recognized in California, unless it was first established in another state which does recognize it.
There are very good reasons to carefully draft and execute cohabitation agreements beyond trying to exclude the other partner from making a claim if the cohabitation ceases. It may be helpful to create a template for how the relationship can be disentangled in an orderly and equitable manner once it ends; however, it can be very useful to have a roadmap about how certain activities should be handled even in an intact relationship. Knowing one's rights in advance and having a formula for confirming them is always a smart thing which can positively affect decision-making.
3) Creating Nonmarital Partnerships: Just as a cohabitation agreement can be designed to protect against creating unintended rights in the other partner, so too it can be positively used to create protections that would otherwise not exist under the law. These are generally called "pooling agreements".
If you create a business partnership or joint venture you do it with the expectation of generating profits, including the coequal sharing of an increase in the value of the partnership and whatever money is spun off and distributed from the partnership. Some people wish to do the same thing with their nonmarital cohabitation partnerships.
Is it any more wise to enter into a nonmarital cohabitation without any form of agreement than it is to enter a business partnership on a handshake? In these times lawyers must shake our heads in dismay when people proudly tell us that their word is their bond and that they make their deals on a handshake. While such sentiment is admirable, it is not realistic.
A cohabitation agreement can be used to specify what property and assets becomes joint and under what circumstances, what the proportionate joint interests are, what to do with debt, and what property is to become or remain separate as to one partner alone. It can be used to protect the partners in the event of death as to property that may be jointly owned but not jointly titled. It can create a structure for valuing and dividing assets that avoids litigation and high legal fees, not to mention hostility and resentment, upon termination of the joint living arrangement.
It can also be used to create certain rights and obligations of support under specified settings.
Whether family attorneys counsel a particular client to utilize a cohabitation agreement, as with prenuptial or premarital agreements, often depends upon who has - or who over time is anticipated to have - the larger economic power and financial resources in the relationship.
The obvious situation is where the economically better off person wants the security of the protections. The common assumption is that the person with wealth should always insist upon a cohab agreement, and that view is probably correct - the agreement, however, can become something much larger and more creative than simple property waivers.
Ironically, people with some degree of economic advantage often don't avail themselves of a cohabitation agreement because they feel embarrassed, uneasy, or frightened to ask the other about it, on the belief the other partner may be offended. In my experience people are only offended when the agreement runs in one direction.
If a woman with zero assets and little income seeks advice about how to structure her economic relationship with the man or woman she is about to move in with, a cohabitation agreement may or may not be in her best interest depending upon the terms. It may come as a surprise, however, to learn that she will probably be far better off in all situations with one than without.
If one participant in a joint living arrangement is obsessed with acquiring and keeping all of the marbles, you are headed for trouble anyway. For me it is always best to admit that there is an elephant in the room. By placing these concerns on the table there is a huge potential freedom to address them in ways which are ignored when there is no agreement. People can be guided into thinking about consequences they otherwise block out of their minds. This can nurture a positive beginning, rather than a beginning by default with neither person is talking about a multitude of what-if's. It provides an opportunity to honor both persons, and is not at all mutually exclusive with reasonable legal protections.
People rarely seek marital counseling outside the church or education before marrying. Similarly they rarely give much thought to how to structure their lives when they undertake living together outside of marriage.
Cohabitation agreements provide an amazing opportunity to consciously and mindfully embark upon a new relationship.
If you intend to share a household with a romantic partner other than only temporarily, my recommendation is that you always consider entering into a cohabitation agreement.
However, it is important that you locate counsel in your area who is not merely a traditional adversarial lawyer, because their resource toolbox for assisting you with all your issues tends to be relatively empty.
Thurman W. Arnold III
http://www.ThurmanArnold.com
4/23/10
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| April 07, 2010 |
| When I get MARRIED, how do I avoid my husband's DEBT? |
| Posted By Thurman Arnold |
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Q. If I marry is it possible to avoid any of my fiance's debt liability?
A. Yes. First, your separate property doesn't become liable for a spouse's premarital debt simply by marrying. But community property as it comes into being does.
Secondly, to the extent you or your spouse will incur debt during marriage, prior to marriage both can agree to eliminate or restrict the creation of community property as between you. This is accomplished through a prenuptial or premarital agreement. Essentially you agree to restrict or eliminate the creation of community property in the first instance, since that will remain liable for debts incurred prior to (with some exceptions) and during the marriage, and so you can ensure that your separate property remains protected.
None of this applies to debts you jointly incur - the joint credit card, the jointly purchased car, or the jointly refinanced home. This is why creditors try to insist that both spouses sign loans.
But you can modify your behavior in order to protect yourself by not signing. It is possible to enter a post-nuptial agreement which achieves substantially the same thing, although it won't necessarily change the character of debt incurred prior to its signing but it may nonetheless eliminate future community debt by eliminating community property. Remember, as between the two of you, you cannot affect third party's rights who are not parties to your post marital agreement, and to do so may be considered a fraud upon creditors which means the agreement may be set aside and voided.
Thurman W. Arnold III
Desert Cities Divorce |
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| March 06, 2010 |
| Is a WAIVER OF SPOUSAL SUPPORT in a PRENUP VALID? |
| Posted By Thurman Arnold |
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Q. Before I married we signed a prenup that says I waived any right to spousal support. Is this valid?
A. Maybe yes, maybe no. Sections 1612 and 1615 of the California Family Code impose important limitations on spousal support waivers effective 1/1/02.
Spousal support waivers absolutely require that the party waiving the right was represented by independent legal counsel at the time the agreement was entered into. Family Code section 1612(c). If a lawyer has not advised the party and signed off on the agreement, the waiver is unenforceable.
Even if a party was in indeed represented by independent counsel who advised the client and approved the prenup, the spousal support waiver will not operate "if the provision regarding spousal support is unconscionable at the time of enforcement." Family Code section 1612(c). Time of enforcement means when a party attempts to force the other party to adhere to the terms of the agreement, or is resisting a support request in divorce court.
Creative attorneys anticipate these potential bars to enforcement by carefully drafting the language of the prenuptial agreement, and by creating various scenarios within the support waiver. For instance, a straight waiver of spousal support is much less likely to be enforced than a conditional waiver of support. A conditional waiver might contain language that precludes the waiver if the party seeking support is gravely ill, unable to work, or receiving welfare benefits.
Lawyers drafting premarital agreements tend to charge moderate minimum fees because of the potential attorney malpractice exposure years down the road. Many attorneys won't handle them at all, or refuse to recommend that a party ever waive support and so they will not execute the agreement.
There are a number of other restrictions which must be overcome before a premarital agreement can be enforced. One is that at least seven calendar days must have passed between the date that a party was first presented with the agreement and then later signed it.
While you may be able to accomplish what both parties say they want are are willing to do before marriage in a prenup, you must retain legal counsel who is experienced in this area of the law or things may turn out differently than you expect down the road.
Once a wedding date is set, the earlier you get the agreement negotiated and signed the greater the likelihood it will survive objection or attack later.
If you already signed one and want to know whether it will be enforced for or against you, seek a family law expert immediately.
TWA
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| January 18, 2010 |
| Are my EARNINGS during marriage LIABLE for my spouse's PREMARRIAGE DEBTS? |
| Posted By Thurman Arnold |
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Q. Are my earnings liable for my spouse's debts incurred before marriage? A. Your earnings during marriage are not liable for your spouse's debt incurred before marriage so long as these earnings when received are held in a deposit account which is not also in your spouse's name, and as to which they have no right to withdraw funds.
Once these monies go into the common pot, however, they become available to satisfy debts incurred prior to marriage. Family Code section 911.
You earnings are liable for debts the other spouse incurs after the date of marriage, because the earnings are community property and debts incurred during marriage are community debts.
The only way to avoid this is by way a prenup or post-nup established before the debt is incurred (which agreement may limit or preclude the creation of community property). |
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| December 30, 2009 |
| My New Wife Works. Can this NEW MATE INCOME Be Used to Increase my CHILD SUPPORT? |
| Posted By Thurman Arnold |
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Q. I have two children from a previous marriage. I remarried two years ago, and my new spouse earns $8,500 month. While my hours have been reduced during this recession and my monthly gross averages $3,500. The ex is threatening to take me back to Court to increase child support based upon my new mate's income. Can she do this?
A. Of course ex-spouses can always take the other back to court, but that doesn't mean they will win. We call these support modification proceedings. In order to obtain a new order, she must prove there has been some material change of circumstances with regard to her needs, the childrens' needs, or your ability to pay a greater sum in support.
The key California statute on when and how new mate income can be considered is Family Code section 4057.5. The basic rule is that courts cannot consider new mate or nonmarital partner income in the context of making child support or support spousal orders. This means as a general proposition that your new wife's income of $8,500/month is not to be inputted into the support guideline formulas.
There are two exceptions where new mate income may need to be disclosed and where it can be considered in setting child support: 1) Where there are "extraordinary circumstances" that would cause the exclusion of this income to create an extreme or severe hardship to a supported child. However, if this hardship is shown, the court must first consider the effect of inclusion of new mate income on any other children including the new mate's children, and so that their interests trump the hardship to the child for which support orders are being sought. 2) By marrying somebody with high earnings, a spouse will pick up additional taxes based upon the other's income. Since as far as the IRS and California Franchise Tax Board (FTB) is concerned, you are liable under community property laws for one-half of your new mate's income, regardless whether you file jointly, the added tax consequences upon this additional income can actually be the basis for a downward decrease in child support (County of Tulare v. Campbell) since there is less after tax income available to you from which to pay support.
There are very few reported California appellate decision on new mate income or which explain how FC section 4057.5 is to be applied. In Marriage of Loh (93 CA4 325) a mother/former spouse convinced a trial court, based upon photos of the father's extravagant lifestyle (homes, cars, etc.) which were funded by his girlfriend's income and assets, to impute income to him for purposes of basing a child support award. The appellate court reversed, stating "Evidence of lifestyle, particularly a lifestyle subsidized by a new 'nonmarital partner', is not a cheap substitute for proper discovery of income reported on tax returns."
In a very recent appellate decision (Marriage of Knowles (Oct. 2009) 178 CA4 35) a trial court was reversed after it accepted the former wife's argument that the community property income and assets of both he and his new wife should be used to determine his income available for support. The trial court's mistake was include the half that belonged to the new wife, although it could have included just the half that belong to him. There was no evidence of extreme hardship that justified considering the new mate's half.
We’ve waited a long time for another case dealing with consideration of new-mate income under Fam C §4057.5. One of the few cases that has, In re Marriage of
Wood (1995) 37 Cal.App.4th 1059 is cited here, but it came down in 1995. Neither the statute nor the cases provide any definitive answer regarding what actually constitutes either an “extraordinary case” or an “extreme and severe hardship,” although Wood seems to say that new-mate income can be considered where one of the parents is voluntarily unemployed or underemployed.
Rather than arguing for NMI (new mate income), a party seeking to have income assigned to a person who has remarried or is living with a nonmarital partner may find more success by arguing that income should be imputed to that spouse on the basis that they have an earning capacity which is not being realized. For instance, if because your new spouse had sufficient income you chose to quit work or take a lower paying job it might appear you are shirking your support responsibilities. Rather than charging you with NMI, a trial court could find that you had the ability to earn X dollars a month and so charge you for this phantom income by making that the basis for a support award. Then, the community property (including your new mate's share) could be tapped to satisfy this obligation.
Incidentally, a California prenup can be an effective way to limit this exposure.
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