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Post-Marital Agreements

Oakland Family Law Attorney

The #1 Most Misunderstood Issue in Family Law – Spousal Support

While many adults will look at the general rules for what is separate and what is community property and decide that they do not have any objection to the default property division rules, there is still the issue of spousal support.

Many young professionals believe that spousal support does not exist. This is not true. A temporary order of spousal support is the default rule in all bay area counties. The formula looks something like this:

40% of the higher earners income minus 50% of the lower earners income

for half the duration of the marriage

This means if Sue is earning $100,000 and her wife Jane makes $30,000 working at a non-profit and they are married for 8 years, the court will award $25,000 ($40k-$15k) per year for four years.

If Jane is disabled or decides she cannot work, Sue will be paying $40,000 per year for four years. From my experience professionally as well as personally, this result makes people want to throw-up blood. The higher earning party may have student loans, have not had a real vacation in ten years, given up their dream to work for the ACLU, or otherwise significantly sacrificed to earn more income. The lower earning party may have family support, have specifically chosen to work at a lower stress job even though they could have pursued corporate work, be more fulfilled by the work, or otherwise already be being rewarded for the lower pay. Not to mention that person is still taking half of the retirement from the higher earning spouse during the course of the marriage.

Spousal support was designed so that if one party gave up the opportunity to gain skills and experience in the workplace to provide for young children, they would have time and financial support to go get skills and training to work. Unfortunately, the way the formula is applied, it doesn't matter if the lower earning party gave up a career to raise children or if they decided they did not feel like working. The spousal support number is going to be the same and it makes calm people who otherwise could have had an amicable divorce hate each other. It is really sad.

Planning around this trap is not hard. Some couples will decide they do not want to do any form of spousal support, others will decide they want to do spousal support for a year or two if there are young children and one person decided not to work. There are meaningful loving resolutions to this problem available.

Due to Barry Bonds acting in an uncaring manner (or you can put in your own adjective) waiving spousal support requires two lawyers. This is because he made his wife sign a premarital when she was not represented by an attorney and there was only a short amount of time before the wedding. This is an unfortunate outcome for savvy equally prosperous people, but nonetheless, I am going to ask that one person in the couple speak with another attorney.

The # 2 Most Misunderstood Issue – Business Interests and Corporate Shares

This is a real and often unrecognized problem in first marriages. If you get married, and you start a business, work in a start-up or otherwise have literally been sweating tears out of your elbows to make this business work for years, it is not going to feel fair if your spouse gets half of those shares upon divorce, not to mention it might also kill your business.

Upon divorce, absent an agreement to the contrary your ex is going to get half of what you earned during marriage. This might be half of your corporate shares.

This is going to feel like an order for permanent spousal support because however your business does, your spouse who now owns half the shares is going to benefit as much from your hard work as you do. It makes people very unhappy. Not just the person working, but also the business partners.

Again, it is not hard to meaningful draft around these issues so that your spouse is provided for, feels loved, etc. Just don't get you and your business partners in a situation where your marital problems become business problems.

The major benefits to the non-business owning partner are:

  • Business assets are notoriously hard (meaning expensive and producing unreliable results) to evaluate. The boss gets to decide how much money they re-invest in the business, how much they pay themselves, and can easily mix personal expenses and business expenses. This rarely leads to a meaningful award of spousal support (and sometimes child support).
  • If the business tanks or gets sued, you can protect your assets. This is true even if you do not split up. The default rule is that have of the community property is collectable in action against one spouse. That includes half of your house. Keeping the assets separate can protect the assets from creditors, angry employees, etc.

#3 Most Misunderstood Issue – Splitting up the House

This is how the house becomes an issue. One party works for ten years saving every dime to buy a condo for $300,000, they put down $30,000. They then marry. Marital partner never works, or works but never makes a payment, and the parties separate after five years. During this time, the property doubles in value now making it worth $600,000. The person who purchased the house and has made every mortgage payment now has to take out a loan of another $270,000 to buy-out their marital partner who never made a payment.

This makes people very sad and angry and can be easily prevented.

#4 Most Misunderstood Issue – Cohabitation is not marriage/California does not have common law Marriage

In California we have this thing called a Marvin claim. The right is actually a claim in a partnership interest where the party, who does not own the business, house, etc, claims that they agreed to be partners with the other party and therefore they are entitled to a division of the partnership assets upon the division of the partnership.

The way it works out in practice is that if one party has a lot of money, they move their significant other into their house, and they live together for a bunch of years, and then break-up, the lower earning party can file an action asking for support or division of assets. This is most common in couples where one party is very wealthy and the other party does not work, but hosts dinner parties, maintains the property, does some work for the business, and otherwise supports the other party in being successful.

This situation is easy to avoid. The contact needs two parts:

  1. A statement that there is no partnership and the actions done by the lower earning party is done out of love and not as a service for which they expect compensation
  2. The agreement be conscionable. This means the person who is moving in with the higher earning party needs to either have a means of self-support or there needs to be some money set aside so they can leave if they want to. Because of the cost of housing in the bay area, I recommend $5k-$10k.

Putting this agreement in place is a great way to clear up any miscommunications about what the relationship is and is not. It is fair to both your partner and your future self that you be honest and clear about your expectations of the other person, your relationship, and your finances. It also can save you a huge bundle in legal fees on the other end.

Just like a pre-marital agreement, a post-martial contract can be a great legal tool for any couple. If you would like to discuss the benefits of a post-nuptial agreement, contact my practice today at (415) 275-3283. Please download my Postmarital Intake Form for what to expect in our first meeting, a summary of family law, required documentswe will need, and compensation information.

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Summerall Law, P.C. - Oakland Estate Planning Attorney
Located at 3873 Piedmont Avenue, Suite 8,
Oakland, CA 94611
Phone: (415) 275-3283
Local Phone: (510) 922-0747
Website:
Probate.com

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

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