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Celebrity Prenuptial Agreements: What Is Enforceable and What Is Not.

June 26, 2015/in Family Law /by Mitchell Ehrlich

When celebrity couples get married, celebrity news outlets and magazines are always quick to report on the details of the couples’ prenuptial agreements. More often than not, these reports feature prenuptial agreement clauses that are outlandish and extreme. To some, these celebrity prenuptial agreement clauses seem laughable and ridiculous, but for others, they are right on the money and reflect the types of items we desire in our own prenuptial agreements.  Regardless of which camp you belong to and the validity behind these reports, the clauses in celebrity prenuptial agreements do offer some points to think about. For purposes of this blog, the question is not whether the reports on these prenuptial clauses are true, the question here is whether California courts will actually enforce these types of clauses.

Before we dive into specific celebrity prenuptial clauses/provisions, let’s cover some important implications related prenuptial agreements should be covered:

1. California is a “no-fault” divorce state. Many recognize the phrase “no-fault divorce” by its legal version, “irreconcilable differences.”

2. California is a community property state, meaning that spouses share 50/50 interest in property acquired during their marriage.

3. Courts faced with a prenuptial agreement with unenforceable clauses/provisions will either invalidate the entire prenuptial agreement, or will enforce the valid portions and just sever or ignore the unenforceable parts. Couples can prevent the former from occurring by including a “severability clause” or provision in their prenuptial, which provides that the invalidity of one or more provisions shall not invalidate the remaining provisions and allows the remaining provisions to be severed and enforced according to their terms.

4. Despite California being a community property state, premarital agreements may validly preserve the separate property character of premarital assets and characterize income and property acquired after marriage.

5. In California, premarital agreements that include a waiver or limitation of post-dissolution of spousal support are not per se unenforceable, as long as it was “executed by intelligent, well-educated persons, each of whom appears to be self-sufficient in property and earning ability, and both of whom have the advice of counsel regarding their rights and obligations as marital partners at the time they execute the waiver … .”

Now that we have covered some important aspects of California law as it pertains to premarital agreements, let’s look at some of the most intriguing clauses/provisions of celebrity couples’ prenuptial agreements:

  • Justin Timberlake and Jessica Biel: The “Fidelity Clause,” which states that if Justin cheats, Jessica gets a payout of $500,000.

Enforceable?

In California, this provision is unenforceable as contrary to the public policy underlying no-fault dissolution laws to the extent it imposes a penalty on one of the parties for “fault” during marriage.

  • Facebook mogul, Mark Zuckerberg and wife, Priscilla Chan: The clause that requires Mark to totally unplug and spend quality (non-wired) time with Priscilla at least once a week.

Enforceable?

An article in the ABA Journal from June 2013, refers to this as a “Lifestyle Clause.” The article explains that while most of these types of provisions are unenforceable in court, they are still useful because they help couples discuss goals and make them more likely to stick.

  • Catherine Zeta-Jones and Michael Douglas: Provisions provide that Catherine gets $2.8 million for every year they were married. Plus, another $5 million if Michael cheats.

Enforceable?

The first part may be enforceable. The enforceability of the $2.8 million per year of marriage provision depends on how the court construes the payment amount and structure. CA courts have enforced agreements that include a payment of a specified sum to one spouse when the purpose of such payment was to ensure that, if one spouse died or the marriage was dissolved, the other would be no worse off than he/she would have been had he/she remained single (typically the woman).

The amount “per year” language is also indicative of a pre-determined spousal support amount. California does permit couples to set their own spousal support agreements so long as the amount paid is at or above the state guideline.

However, if the court construes the amount to be “promotive of dissolution” then it will not enforce it. The provision at issue is not technically one lump sum payment in the event of dissolution, but rather is a one lump sum with a total contingent on the number years married. Typically, this could be considered “promotive of dissolution” as it offers Catherine a huge sum of money for dissolution, but-for two things-

(1) Catherine is a high-paid Hollywood actress, making this total amount per year less inducing of dissolution, and

(2) Catherine only stands to gain a large sum of money per this provision because the marriage has lasted over a decade, making this provision arguably more promotive of marriage.

As for the $5 million payout if Michael cheats?

Similar to the “fidelity clause” of Justin Timberlake and Jessica Biel, this is unenforceable in California.

  • Khloe Kardashian and Lamar Odom: Provisions state that in the event of dissolution, Khloe is to receive $500,000 for every year they were married, $25,000 in general support, their house, a new luxury vehicle at the end of every lease cycle, $5,000 per month for shopping, $1,000 a month for beauty care, and Lakers tickets for Kardashian’s friends and family.

Enforceable?

While to some readers these provisions may seem exorbitant, these amounts may reflect Ms. Kardashian’s level of lifestyle during the marriage. CA law recognizes premarital agreements where couples reorder property rights to fit their needs and desires, and participate in realistic planning that takes account of the possibility of dissolution, including provisions for spousal support. Thus, Khloe and Lamar were within the law to contract these post-dissolution lifestyle maintenance amounts.

Today’s review of prenuptial agreements was just an exercise. It was by no means a full review of the law on California prenuptial agreements. Further, the celebrity prenuptial agreement clauses discussed today were only used to illustrate the point of enforceability. This blog does not purport to confirm or deny the existence of the above-mentioned clauses.

If you have any questions about premarital agreements, or any other issue, the Certified Family Law Specialists at Lonich Patton Ehrlich Policastri have decades of experience handling complex family law matters. Please contact the Certified Family Law Specialists at Lonich Patton Ehrlich Policastri for further information.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Mitchell Ehrlich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Mitchell Ehrlich2015-06-26 10:59:262021-12-22 20:31:19Celebrity Prenuptial Agreements: What Is Enforceable and What Is Not.

You Only Die Once: How To Avoid Gandolfini’s Estate Planning Errors

August 8, 2013/8 Comments/in Estate Planning /by Michael Lonich

Poor James Gandolfini. Actually, poor everyone involved in the Gandolfini case. That is, except for the IRS. Due to the fact that Gandolfini (of The Sopranos’ fame) had some major missteps in creating his estate plan, the IRS could easily be the lucky recipient of up to 55% of his $70 million estate, leaving little left for his wife and daughter.

We can’t fault the guy too much—at least he had a will to speak of. However, he is probably the victim of bad advice because his will really is what everyone says—a tax nightmare. His will left 80% of his estate to his sisters and infant daughter, which doesn’t sound terrible, but it actually is. Gandolfini could have left 100% of his estate to his wife tax-free by taking advantage of the marital deduction. Instead, the widowed Mrs. Gandolfini will only be left with something in the neighborhood of $10-14 million. Sadder still is that the federal government will walk away with $30 million of what Gandolfini’s daughter and sisters were promised. The worst is that this could have been easily avoided by putting the proper documents in place.

How exactly, then, does one go about creating an iron-clad estate plan? Foresight is first and foremost, obviously. Beyond that, however, here are some great steps Gandolfini could have taken* that would have saved his family millions:

  1. Use trusts to protect your family and your privacy. Trusts don’t have to be complicated (they can be as simple as a common will), but they can really pay off since trusts are private. By having a will, your family will be forced into Probate Court and your will is going to become a part of the public record. Even if you are not in the public eye, your family will appreciate the simplicity that trusts can offer as they grieve.
  2. Remember that tax implications will make a difference. Even if you are not a Sopranos star, you should have taxes in mind. Otherwise, you may be giving your hard earned money away to the government when you’d really like your family to enjoy it. By setting up various trusts or by leaving the lion’s share of his estate to his wife tax-free, Gandolfini could have instructed either the trustees of his trust or his wife to make small cash gifts to various named individuals over time (the government allows each person to give $14,000 per year per person untaxed). By giving large lump sums of cash to individuals that were not his spouse, Gandolfini opened the door for the devastating 55% death tax.
  3. But Remember, Taxes Aren’t Everything. Like Gandolfini, if you want to give a large sum of money to a non-spouse, taxes might be inevitable. However, by working with a knowledgeable estate planning professional, there are ways to make sure your family will get the best bang for your buck perhaps by moving funds through a trust which will disperse money as necessary for living expenses, education, and travel without the pain of estate taxes.
  4. Take The Age of Your Child Into Consideration. Does your eight-year-old know what to do with $10 million dollars? Of course not, and she probably won’t know how to invest her money or protect her wealth at age 16 or 21, like Gandolfini’s daughter, either. There are ways to set conditions on how and when your beneficiaries can receive their wealth. Perhaps you can add a clause to your will or trust which states your child can receive part of their inheritance for college expenses but will receive the remainder after graduation. With a trust, you can leave the tough decisions and investment strategy up to an experienced trustee who may be able to stretch your child’s inheritance further than you ever imagined.
  5. Foreign Property Can Be Complicated. Gandolfini’s wish was to leave a fifty percent interest in his Italian property to each of his two children. However, Italian inheritance laws may trump American laws in this situation, forcing a share of the property onto his wife. Of course, this outcome could be worse, but it is imperative to get sound local advice so that you cover your bases incase foreign law comes into play.

This abbreviated list highlights the sticky issues that can come about if your estate plan is incomplete. You’ve spent your life working hard for your money; do what you can now to make sure your money is available to provide for your loved when you no longer can.

Estate plans can have a lot of moving parts; make sure you get the best advice possible. The attorneys at Lonich Patton Ehrlich Policastri have decades of experience handling complex estate planning matters including wills and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich Patton Ehrlich Policastri for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

*Originally found on Forbes.com, “6 Estate Planning Lessons From James Gandolfini’s Will,” used with permission by author Robert W. Wood found at:  http://www.forbes.com/sites/robertwood/2013/07/20/key-lessons-from-james-gandolfinis-will/

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Michael Lonich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Michael Lonich2013-08-08 10:15:502021-12-22 21:19:49You Only Die Once: How To Avoid Gandolfini’s Estate Planning Errors
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