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A Premarital Agreement that Provides for Payment of $100,000 Upon Dissolution is Reasonable Considering the Parties’ Circumstances

Husband and Wife married in September 1997.  Husband was 71 and a multi-millionaire.  Wife, 48, had a net worth of $60,000 and earned $12 per hour.  She received $933 in spousal support from a former spouse following a 24-year marriage.

In August 1997 Husband asked Wife to execute a premarital agreement, which provided that the parties’ separate property would remain separate property, and that earnings and accumulations during marriage would be held as separate property.

Wife concluded that the terms of the agreement would mean that she could not afford to marry the individual, and that she would be left in a precarious economic position if the marriage ended in divorce or if her husband died.  Her spousal support from her previous relationship would terminate if she re-married, and she could barely make ends meet with her current earnings.  To compensate for the loss of her $933 in monthly support, Wife’s divorce lawyer insisted that Husband modify the proposed agreement to provide that, if the marriage ended or Husband died, Wife would receive $100,000 from Husband’s estate.  Husband modified the agreement as requested and the parties signed under the advice of counsel.

The parties separated in November, 1998.  One month later, Wife’s divorce attorney filed for divorce and sought to enforce the $100,000 payment provision.

The divorce court agreed with Husband’s divorce lawyer’s position and did not enforce the provision for the payment because it “unquestionably encourage[d]” Wife to get a divorce and therefore violated public policy.  On the other hand, the divorce court found the $100,000 payment provision was reasonable considering the parties’ circumstances.  The divorce court stated the agreement’s “main purposes and objectives were to insulate Husband’s accumulated assets and to provide Wife with a necessary level of immediate financial security upon the termination of the marriage.”  “But for ‘the public policy limitation,’ . . . those purposes and objectives are neither inappropriate nor illicit.”  Wife’s divorce lawyer appealed.

The Appellate Court sided with Wife’s divorce lawyer and reversed and remanded the matter to the divorce court to enforce the prenuptial agreement.  The $100,000 payment provision did not threaten the marriage relationship; it was more the product of realistic planning that accounted for the possibility of divorce that fit the needs and desires of the parties respectively.

Wife’s need for the $100,000 payment arose from her dependence upon the monthly $933 support from her former spouse, which she would lose if she re-married.  The $100,000 provision was intended to compensate Wife for the loss of support and was aimed to ensure that, if Husband died or the parties divorced, Wife would be no worse off than she would have been had she remained single.  This provision could not be reasonably construed as a threat to induce the destruction of a marriage that might otherwise last.  Rather, the provision made it economically feasible for Wife to marry Husband.

In re Marriage of Bellio (2003) 105 Cal. App. 4th 630