For individuals entering marriage with substantial assets, business interests, real estate, investments, or family wealth, a prenuptial agreement can provide important financial certainty and protection.
A high-net-worth prenuptial agreement requires more than a standard form or basic identification of separate property. Significant wealth often creates complex issues involving asset characterization, appreciation, business interests, investment income, real estate, inheritance, trusts, stock compensation, and future earnings.
At Atighechi Law Group, we represent clients in Los Angeles and throughout California in the preparation and negotiation of sophisticated prenuptial and premarital agreements tailored to their individual financial circumstances.
A high-net-worth prenup is a premarital agreement designed for individuals or couples whose financial circumstances involve substantial or complex assets.
The fundamental California laws governing these agreements are the same laws applicable to other premarital agreements. However, the financial analysis, disclosure, negotiation, and drafting can be considerably more complex.
A high-net-worth prenup may need to address:
The objective is not simply to identify what each party owns on the wedding date. A carefully drafted agreement should also consider how those assets, income streams, and financial interests may evolve throughout the marriage.
California is a community property state. Without a valid agreement providing otherwise, California law generally determines the characterization of property acquired before and during marriage.
Individuals entering marriage with significant separate property may want greater certainty regarding how that property—and potentially the income, proceeds, substitutions, or appreciation associated with it—will be treated during the marriage and in the event of divorce.
A prenuptial agreement can clearly document the parties’ intentions and establish contractual rights concerning specified assets.
This can be especially important where separate and community funds may otherwise become commingled over a lengthy marriage.
Business ownership can present some of the most complicated issues in a high-net-worth divorce.
Even when a business was established before marriage, questions may later arise concerning its appreciation, income, distributions, reinvested earnings, compensation, and the extent to which marital efforts contributed to its increased value.
A carefully drafted California prenup can address how the parties intend to characterize business interests and related financial benefits during the marriage.
Depending upon the circumstances, the agreement may address:
Addressing these issues before marriage can also provide greater certainty for business partners, investors, and family members whose financial interests may be connected to the business.
High-net-worth individuals frequently enter marriage owning one or more residences, rental properties, investment properties, or substantial securities portfolios.
A premarital agreement can address the parties’ respective rights concerning existing assets as well as property acquired during the marriage.
For real estate, this may include issues concerning mortgage payments, improvements, refinancing, title, contributions toward property expenses, and the acquisition of additional properties.
For investment accounts, the parties may wish to address contributions, withdrawals, reinvested earnings, dividends, interest, capital appreciation, and the acquisition of additional investments.
The appropriate provisions depend upon the parties’ financial circumstances and their intentions for the marriage.
Executives and highly compensated professionals may receive a significant portion of their compensation through stock options, restricted stock units, deferred compensation, bonuses, carried interests, or other incentive compensation.
These assets can create complicated characterization issues, particularly when awards are granted before marriage but vest during marriage, or when compensation relates to services performed across different periods.
A sophisticated prenuptial agreement should consider not only a party’s current compensation but also the types of compensation that party may receive in the future.
Individuals from families with substantial wealth may have additional concerns regarding inherited assets, trusts, family businesses, gifts, and future estate planning.
Although California law generally treats property acquired by gift or inheritance as separate property, disputes can arise concerning tracing, commingling, use of inherited funds, appreciation, or transactions involving other marital assets.
A prenup can provide additional clarity concerning the parties’ intentions regarding family wealth and inherited property.
Where significant trusts or estate-planning structures are involved, the family law attorney may also coordinate with estate-planning, tax, or financial professionals as appropriate.
Financial disclosure is particularly important when negotiating a premarital agreement involving substantial assets.
Under California law, the enforceability of a premarital agreement can be affected by issues concerning disclosure and a party’s knowledge of the other party’s property and financial obligations.
For high-net-worth individuals, meaningful disclosure may require considerably more than listing several bank accounts.
Depending upon the circumstances, disclosure may involve real estate, brokerage accounts, retirement assets, business interests, ownership entities, trusts, equity compensation, cryptocurrency, significant liabilities, and other material financial interests.
Careful documentation of the disclosure process can become important if enforceability is ever challenged.
Learn more about the requirements for an enforceable California prenuptial agreement.
Spousal support is frequently an important subject in high-income marriages.
California law permits premarital agreements to address spousal support, but spousal-support provisions are subject to specific statutory requirements and limitations.
In particular, California Family Code § 1612 imposes requirements concerning independent counsel and the enforceability of provisions modifying or eliminating spousal support.
The parties may consider a variety of approaches depending upon their circumstances, including limitations, waivers, predetermined support structures, or provisions that change depending upon the length of the marriage or other agreed-upon circumstances.
Because enforceability is critical, spousal-support provisions should be carefully negotiated and drafted with the assistance of independent counsel.
Each prospective spouse has his or her own financial interests.
Although California law permits waiver of independent counsel in certain circumstances, independent representation can be particularly important in a high-net-worth prenup where substantial property rights are being negotiated.
Independent attorneys allow each party to receive advice regarding the agreement’s legal consequences and negotiate provisions based upon that party’s individual interests.
Independent representation also helps create a stronger record that the parties understood the agreement and entered into it voluntarily.
Spousal-support provisions are subject to additional independent-counsel requirements under California law.
A sophisticated premarital agreement should not be negotiated days before a wedding.
California imposes statutory requirements concerning the timing and voluntary execution of premarital agreements. Complex financial circumstances may also require substantial time for disclosure, drafting, review, negotiation, and revisions.
High-net-worth couples should therefore begin the process well in advance of the wedding.
Starting early allows both parties and their respective attorneys to thoughtfully address financial issues without unnecessary time pressure.
There is no single high-net-worth prenup that works for every couple.
A business owner may be primarily concerned about protecting a company. An investor may be concerned about appreciation and investment income. An executive may need to address equity compensation. Someone with substantial family wealth may be concerned about trusts, inheritance, or preserving assets for children from a prior relationship.
The agreement should reflect the actual financial lives of the individuals entering into it.
That is why sophisticated premarital agreements require both careful legal drafting and an understanding of the financial issues that could otherwise become disputed in a future divorce.
Atighechi Law Group represents individuals in Los Angeles and throughout California in sophisticated prenuptial and premarital agreements involving substantial and complex assets.
Maryam Atighechi is a Certified Family Law Specialist with extensive experience in complex California family law matters involving businesses, real estate, investments, separate property, and significant financial interests.
A carefully prepared prenuptial agreement can provide clarity before marriage and substantially reduce uncertainty regarding financial rights in the future.
If you are considering a high-net-worth prenuptial agreement, contact Atighechi Law Group to schedule a confidential consultation.
This information is provided for general informational purposes and does not constitute legal advice. Reading this page does not create an attorney-client relationship.