Financial disclosure before a California prenuptial agreement

Why disclosure matters, stated accurately

Almost every article on this subject says a California premarital agreement requires full financial disclosure. That is not quite what the position is, and the difference is worth understanding because it changes what a careful couple actually does.

Disclosure is not a freestanding obligation with its own penalty. It is one of several things examined together if somebody later challenges the agreement, and it only does its work in combination with the others.

The practical consequence is the same as if it were a requirement, which is why the shorthand persists. A couple who disclose properly have removed one of the elements somebody would need. A couple who did not have left it available.

An agreement that was unconscionable when it was signed is not enforceable where the party against whom it is asserted was not given disclosure, did not waive disclosure in writing, and did not otherwise have adequate knowledge. Fam. Code, § 1615, subd. (a)(2)

The test it is part of, and why all of it matters together

A challenge has several parts that have to hold together, and the claim below states them. In outline: something about the bargain itself, and then three things about what the party knew and was given before they signed.

Every one of them has to hold together. A perfectly fair bargain is not undone by imperfect paperwork, and thin paperwork does not decide anything on its own where the party already knew or waived in writing.

That is why "you must disclose" is a useful shorthand and a poor description. What a careful agreement does is knock out as many of those elements as it can, and disclosure is the one most within the couple’s control.

And the first part of it is not a matter of impression, or of how a couple felt about the deal at the time. The claim below says who decides it and on what footing.

An agreement that was unconscionable when it was signed is not enforceable where the party against whom it is asserted was not given disclosure, did not waive disclosure in writing, and did not otherwise have adequate knowledge. Fam. Code, § 1615, subd. (a)(2)

Whether a premarital agreement is unconscionable is decided by the court as a matter of law. Fam. Code, § 1615, subd. (b)

Knowledge somebody already had counts

A couple who have lived together for six years, hold a joint account, and file taxes together are not strangers to each other’s finances. What one of them already knew, or reasonably could have known, is part of the picture.

That is a real answer and it protects a great many ordinary couples. It is also the weakest thing to rely on, because it is an argument about someone else’s state of mind years ago.

The reason this office prepares schedules even for couples who plainly know everything is that "we both knew" is impossible to prove and a dated document served on a recorded day is not.

Disclosure can also be satisfied where a party already had, or reasonably could have had, adequate knowledge of the other party’s property and debts. Fam. Code, § 1615, subd. (a)(2)(C)

What this office actually does

Each of you completes a schedule: what you own, what you owe, and what you earn. It is prepared as a document, served on the other party, and the service is recorded with the instant it happened and the hash of the file that was sent.

The schedules are exchanged before the agreement is signed, not alongside it. A disclosure handed over with the signature page has not given anybody time to read it.

This is practice rather than a rule imposed from outside, and it is why the site describes it that way. What the practice is for is removing an element from a future argument, and a record made on the day is worth more than a recollection.

This office prepares a written disclosure of each party’s property and debts and serves it before the agreement is signed. It does that because disclosure is one of the things a court looks at if the agreement is ever challenged as unconscionable, and because an agreement is easier to keep to when neither party is surprised later by what the other owned.

What "fair, reasonable and full" looks like on a page

The wording is general, and the useful test is whether the other party could act on what they were given.

"An interest in a company" fails that test. It names a thing without saying what it is. "A forty per cent membership interest in this company, whose assets are these, whose debts are these, and which distributed this much last year" gives the reader something they could evaluate or take to their own lawyer.

Ranges and approximations are acceptable where precision is genuinely unavailable. A closely held business often cannot be valued without an appraisal nobody has commissioned. Saying so, and giving the underlying figures, is far better than an invented number or a blank.

The failure mode is not usually a lie. It is a schedule so vague that it discloses nothing while appearing to.

Debts, which people leave off

Couples assemble assets diligently and treat debts as an afterthought, and the debts are frequently the more consequential half.

Student loans, business borrowing, personal guarantees given for a company, tax liabilities, money owed to family: all of them shape what the agreement is doing, and a party who did not know about them was not given a fair picture.

A personal guarantee is the one most often omitted, because the person who gave it does not think of it as their debt. It is exactly their debt, and it is the kind of thing a spouse is entitled to know about before agreeing how property is to be held.

Debts that do not exist yet are worth a line too. An agreement can say what happens to borrowing taken during the marriage, and a schedule that captures only today has described half the picture.

Waiving it, which is a real option

A party can voluntarily and expressly waive, in writing, the right to disclosure beyond what they were given. People do, and there are sound reasons: a family business whose numbers are confidential, an asset whose disclosure would breach an obligation to somebody else, or simply a party who does not want to spend a fortnight on schedules.

Two things make a waiver worth having rather than a weak point. It has to be express and in writing, and it has to be a decision the person actually took rather than a paragraph they did not read.

This office prepares a waiver as its own document, not as a clause inside the agreement, so that what was waived is legible on its face.

What a waiver does not do is cure a picture that was actively misleading. Giving somebody wrong figures and a waiver is a different problem from giving them a waiver instead of figures.

An agreement that was unconscionable when it was signed is not enforceable where the party against whom it is asserted was not given disclosure, did not waive disclosure in writing, and did not otherwise have adequate knowledge. Fam. Code, § 1615, subd. (a)(2)

Timing: before the period, not during it

Disclosure has to be complete before the agreement can sensibly be drafted, because the agreement is written against what is there.

That puts it at the beginning of the timetable rather than the end. The signing periods run from service of the final agreement, and everything else has to fit before them: schedules, then drafting, then service, then the periods.

Couples underestimate the schedules more than any other step. A salaried couple with an account each can do it in an evening. A couple with a business, a rental property and a trust interest will take weeks, and the weeks are not optional.

On an agreement signed on or after 1 January 2020, at least seven calendar days must pass between the day a party is first given the final agreement and the day that party signs it, whether or not that party has a lawyer. Fam. Code, § 1615, subd. (c)(2)(B)

If something was left out by accident

Assets get forgotten, and usually the same ones. A dormant account. An old pension from two employers ago. A small interest in a family partnership that nobody has thought about in years.

The answer is to serve a supplementary schedule and record it, rather than to hope. Where the agreement has already been served, a change to its substance restarts the signing period, and whether a corrected schedule has that effect is a judgment made at the time and recorded as it is made.

What does not work is discovering an omission and deciding it was immaterial without telling anybody. The person best placed to judge whether it mattered is the party who did not know about it.

A premarital agreement is not enforceable against a party who did not sign it voluntarily, and the statute sets out what a court must find before it treats a signature as voluntary. Fam. Code, § 1615, subds. (a)(1), (c)

What the other party should do with a schedule

Most of this page is written for the person commissioning the agreement. The other party has a use for it too, and it is simpler than it looks.

Read it for absences rather than for figures. A schedule listing four accounts and no pension, or a company with no debts at all, is telling you something by what it leaves out. Ask about the gap rather than about the numbers.

Ask what each thing is worth and how that was arrived at. "Approximately" is a perfectly good answer when it is followed by a reason; it is a poor one on its own.

And keep it. A schedule is the record of what you were told, and it is worth as much to the person who received it as to the person who served it.

Disclosure is not valuation

The two get conflated and they are different exercises with different costs.

Disclosure is telling the other party what exists and what is known about it. Valuation is establishing what a thing is worth, and for a house, a business or a professional practice it means engaging somebody to say so.

An agreement can be made without a valuation. Plenty are, deliberately: a couple who agree that a business stays with its owner and that the other party is dealt with elsewhere in the document may have no need to know what the business is worth today.

Where a valuation is needed, it is a separate engagement with a separate cost, and this office says so at the point it becomes relevant rather than at the end.

Where disclosure most often fails

The pattern is consistent. It is not dishonesty. It is a private company disclosed as a name, a party who did not ask because they did not know what to ask, and no lawyer on that side to ask for them.

That combination is also the one where the stakes are highest, because a business interest is usually the largest thing in the agreement and the hardest for an outsider to understand.

It is the strongest practical argument for the other party having their own lawyer: not to negotiate, but to know what questions the schedule leaves unanswered.

A premarital agreement is not treated as signed voluntarily unless the party against whom it is later asserted was represented by their own independent lawyer when they signed, or was advised to seek one and expressly waived that right in a separate signed writing. Fam. Code, § 1615, subd. (c)(1)

Between spouses, the position is different

Everything above is about an agreement made before a wedding. For two people who are already married, disclosure is not a practice adopted for prudence: it follows from the duty spouses owe each other.

That duty has specific content about information and about accounting for benefits taken without the other’s consent, and it runs in both directions.

That duty includes giving the other spouse access at all times to any books kept about a transaction, rendering on request true and full information about anything affecting a transaction that concerns community property, and accounting for any benefit one spouse takes from such a transaction without the other’s consent. Fam. Code, § 721, subd. (b)(1)–(3)

What it costs to do properly

Nothing extra. The schedules are inside the flat fee, prepared, served and recorded as part of the matter.

What is not inside the fee is valuing anything. Where an asset needs an appraisal, that is somebody else’s work, and the office says so rather than absorbing it into a fee that did not contemplate it.

What it costs in time is the part worth planning for. Assembling a complete picture of a straightforward financial life is an evening. Assembling one that includes a company, a rental property or a trust interest is a job of weeks, and it sits at the front of the timetable rather than the back, because nothing can be drafted until it is done.

This office quotes a flat fee before any work begins, and the written fee agreement states what it covers, when each part is earned, and your right to a refund of anything not earned.