The Basics of a Prenup
Understanding that a prenuptial agreement is a contract between intended spouses providing for the terms of how their property will be disposed in the event of death or divorce is critical to understanding the role of a premarital agreement. A marriage is a contractual relationship, the terms of which are dictated by California law and public policy. To the extent that the premarital agreement modifies the statutory marital property laws, the contract is controlling.
Contrary to popular belief, a prenuptial agreement is not only designed to protect the wealthier spouse at the expense of the poorer spouse. A prenuptial agreement is a contract which protects both spouses, and it can allow a working husband or housewife to create an estate plan during his or her life. If a husband or wife dies and neglects or forgets by accident to provide for the other spouse in his or her estate plan, the family provisions of the Family Code control notwithstanding that doing so may interfere with the deceased spouse’s wishes. The provisions of the prenuptial agreement can avert such unintentional consequences.
Furthermore, if the contract was freely and voluntarily entered into , it will not be overturned or invalidated by the court. In addition, the contract saves the time and expenses of litigation should a couple divorce. This is especially important where minor children are involved. The conflict and stress that are usually created when determining the distribution of your and your spouse’s assets can be avoided in its entirety by entering into a premarital agreement. A premarital agreement can also determine how the spouses’ debts will be handled.
Furthermore, the contract protects the rights of a subsequent spouse when one spouse of a previous marriage has been disinherited and the surviving spouse wants his or her spouse’s property to go to his or her children from a previous marriage instead of to his or her children from the second marriage. Even in the absence of a pre-marital agreement, however, the law does provide a surviving spouse minor "elective rights" for children from a former marriage. The children by the first marriage cannot simply be cut off, as the surviving spouse must receive a "share" of the separate property and community property of the deceased spouse, and may also be entitled to a family allowance during the surviving spouse’s lifetime.
The Price Tag for a California Prenup
The cost for drafting a prenuptial agreement in California can vary widely based on a number of factors. On the low end, a straightforward agreement that requires little issue identification and resolution may range from $2,500. The California State Bar Association ("State Bar"), a professional organization for attorneys in the state, recommends that a complex agreement prepared by an experienced attorney be between $5,000 and $10,000. Of course, there are many factors that can affect this estimated range. A more complex prenup or one that draws on the expertise of multiple professionals (e.g., real estate appraisal, business valuation) may drive the cost for individuals and couples upwards of $50,000. Although rarely necessary, in instances where the parties do not speak the same language, the costs incurred by both parties to have a document translated may be significant and, again, the price of the agreement may increase.
In order to understand more fully the cost of a prenuptial agreement, it is important to consider the factors that go into negotiating and drafting one. Below are just some of the many issues that can lead to a price variation:
What Determines Prenuptial Agreement Pricing?
Factors Affecting Prenuptial Agreement Costs in California
The cost of a prenuptial agreement can vary significantly based on several factors. Generally speaking, as is the case with many agreements and contracts, the more complex the document, the more it will usually cost.
In addition to complexity, the costs associated with creating a prenuptial agreement are also influenced by you and your spouse’s financial situation and whether there is potential for conflict with regard to its terms. Further, attorney fees are typically calculated based on the number of hours dedicated to the creation of the document, and the more involved the process is, the more hours the attorney will likely spend on it. As such, an alternative dispute resolution (ADR)-based prenuptial is usually less expensive – and less time-consuming – than a traditional one, particularly if the couple has already been able to resolve most of the terms through mediation.
DIY or Hire an Expert? Your Money Factor
Venturing into the world of DIY prenups can significantly cut costs. You can, like in the case above, whip up a basic prenuptial agreement with virtually no expense as long as there’s no particular red flag and the document is very basic. But you cannot be a lawyer and there is only so much work you can do before legal assistance is required to produce a legally binding contract. Going all the way to hiring multiple attorneys to hammer out every last detail with you can get pricey. It can also lead to added complications or legal tangles with your fiancé. Since each spouse will want an attorney to review the document once it is drafted, you’re looking at anywhere from $600 to $2,500 in addition to the cost of the marriage licenses and counselors. If you opt for expert legal help, you’re going to spend at least $1,200 on the lower end and probably more like $3,600 on the upper end and can even hit $5,000 or more. Alternatively, if you try doing the same work you’ve hired a prenup attorney to do, you could mess up the agreement in a way that makes it unenforceable, or which carries other, unintended consequences. As the California Family Code 1614 demonstrates, a spousal signature is not a magic ink that guarantees a pet agreement is enforceable: The sad fact is that many of the DIY prenuptial agreements we see, complete with do-it-yourself couple illustrations, have critical missing components or are otherwise invalid. That’s why we strongly recommend working with an expert on this one.
Expenditures in the Process of Getting a Prenup
In addition to the potential legal fees associated with creating a prenuptial agreement, other costs may arise. An initial consultation with your attorney is likely the first expense you’ll face. This may or may not be covered by any initial retainers you might pay to your attorney when you first engage his or her services. It’s also possible your consultation will exceed the allotted time under your retainer agreement, in which case you’d have to pay for the additional time. Once your attorney understands the details of your and your fiancé’s situation, he or she will present to you the expected costs that will be involved to prepare an initial draft of the agreement, as well as the costs associated with revisions and finalization of the document. If during the negotiation process you decide to change attorneys , you’ll have to cover the fees for your new attorney to become familiar with your case all over again.
There are additional costs associated with the preparation of a prenuptial agreement. Your attorney may ask for a retainer for a number of iterations necessary to agree on the final version of your agreement that meets the criteria established in your initial consultation. He or she may also require that a copy be filed at the courthouse (which usually requires a small filing fee). In addition, there may be other unexpected costs that arise such as if there’s a fair amount of negotiation between you and your fiancé that requires your attorney to spend more time on the case than was originally anticipated or if you and your fiancé decide to drop the prenuptial process after incurring significant fees and a great deal of time spent.
How to Keep Costs to a Minimum
As in most legal endeavors, cost concerns often arise during the process of creating a prenuptial agreement. Some easy ways that you can save money on this process include: Over the life of an agreement, the cost of an hourly attorney relationship is likely to be greater than the cost of a fixed fee. It is important to gauge for yourself the cost of an attorney relationship based on your requirements, such as the complexity and potential scope of your agreement, as well as your own personality and negotiation style. When discussing cost details with your attorney, make sure to clarify whether costs will be based on an hourly or flat fee. If the cost is flat, be sure to ask about any future changes in the fee, such as if the parameters of the agreement change. Similar to hiring an attorney, consider the cost of hiring a Court-approved mediator to handle negotiations. A mediator can save you both time and money by keeping negotiations more amicable so that they are likely to complete faster and with fewer attorney costs. Prior to the initial meeting with your attorney, make an outline of items either of you would like to include in the agreement. Arrive to the meeting prepared with questions so that you can complete the first meeting quickly and efficiently, saving both you and your attorney time and money. In some cases where there are few terms to negotiate, it may be more efficient to engage with your attorney only after the terms of your agreement have been reached.
What Will it Cost? Is It Worth the Money?
The value of a prenuptial agreement often depends on the specific financial and personal circumstances of the parties. For some couples, discussing these issues and having the document drafted and executed can be done relatively quickly and inexpensively. For others, especially those with larger or greater numbers of assets, along with more complex financial and other arrangements (like a closely-held business), negotiating a prenuptial agreement can be long and tedious, and the related legal fees can be substantial . These couples have to weigh whether they want the document and are willing to pay for it.
In the end, the decision boils down to the circumstances and goals of the couple. For the right couple, a prenuptial agreement can be an important investment in the future.