What financial disclosure is required?
Disclosure is the part of a premarital agreement most often treated as paperwork and most often litigated later. What each party knew, and when, is frequently the central question.
The statutory standard
Under California Family Code section 1615, an agreement may be unenforceable where the party against whom enforcement is sought did not receive fair, reasonable, and full disclosure of the other party's property and financial obligations, unless that disclosure was expressly waived in writing and the party otherwise had, or reasonably could have had, adequate knowledge.
The standard is not satisfied by a general statement that one party is wealthy. It contemplates specific information about what the property is and what it is worth.
What a schedule should contain
Disclosure is normally made through schedules attached to the agreement. Each party's schedule should identify assets and liabilities with enough specificity that the other party can understand what is being addressed.
- Real property, with location and approximate value
- Business interests, with the form and percentage of ownership
- Bank, brokerage, and retirement accounts
- Stock options, restricted stock, and deferred compensation
- Trust interests and expected inheritances where relevant
- Debts, guarantees, and tax obligations
- Income from all sources
Values should be approximate but honest. A figure that is materially understated is worse than a range, because it suggests the number was chosen rather than estimated.
Foreign and hard-to-value assets
Property held outside the United States is disclosed on the same terms as domestic property. Clients with real estate, accounts, or company interests in another country sometimes assume those assets are outside the agreement's scope. They are not, and omitting them undermines the disclosure the agreement depends on.
Closely held business interests and early-stage equity are difficult to value precisely. The answer is to describe the interest accurately and state the basis of the estimate, not to leave it off the schedule.
Keeping records after signing
Disclosure establishes the starting position. Whether property retains its separate character years later often depends on records — which account received which deposit, which funds paid down which loan.
Agreements frequently include an obligation to maintain the records needed to trace separate property. That provision is easy to sign and easy to forget, and it does substantial work if the marriage later ends.
This article provides general information about California law and does not constitute legal advice. Every matter depends on its own facts. Consult an attorney about your circumstances.