I am remiss in posting my analysis/summary of the Gruffudd-Evans prenup, so while it’s fairly quiet (except for Alice talking to herself on the internet) I thought I’d post it. I’ve tried not to nerd out on various provisions that have nothing to do with this particular marriage but some nerdiness may get through—sorry!
- First of all, a couple of definitions. In California, “separate property” is property that belongs to one spouse only, and the other spouse has no claim on it. “Community property” is property acquired during marriage that is considered owned by both spouses equally (50/50). In the absence of a prenup, all assets acquired during a marriage in California are considered to be community property, except assets received by gift or inheritance.
- There are a few notes of Alice’s grift here: Ioan had to maintain a $1 million life insurance policy naming Alice as the beneficiary if he were to die; before marriage, Ioan was required to pay all house expenses by himself, even though Alice also lived there; and if Alice makes more than $50,000 before separation, that reduces her spousal support (no wonder she didn’t work).
- Both Ioan and Alice were required to be represented by separate, unaffiliated attorneys per California law. It appears these were good and experienced attorneys based on the quality of the prenup and the way the prenup was signed (initialed on every page, notarized, etc.). Ioan was represented by Forrest Mosten (a name we have all heard before) and Alice was represented by Michelle Katz (who appears to have had nearly 30 years of legal experience at the time this prenup was drafted).
- It appears that this prenup will not be challenged despite Alice’s online comments (see Bernal’s statements in the August 10 hearing).
- In California, prenups are required to be signed no less than 7 days before the wedding. Since this prenup was signed April 16, 2007, it was signed well before the wedding, so no problems at all there. In fact, Alice was given the first draft of the agreement on November 1, 2006 (see page 5).
- Alice represented that she was in “good health” (see page 1), so she didn’t claim any health issues back in 2007.
- Ioan, of course, paid for the legal fees Alice incurred in having this prenup prepared (the beginning of a pattern, it seems).
- Interestingly, the prenup contains a provision that each attorney can represent his or her respective client in a divorce or support proceeding—I guess that’s why Forrest Mosten was initially involved in the divorce and I don’t recall Alice challenging it.
- Both Ioan and Alice agreed that each of them made a “reasonable disclosure” of all of their income, property, and financial obligations. Alice’s are attached as Exhibit B (erroneously stated as Exhibit A in the agreement), and Ioan’s are attached as Exhibit A (erroneously stated as Exhibit B in the agreement). Both parties waived their right to further disclosure beyond what was provided in the agreement (this is a standard provision).
- Since Alice and Ioan lived together before marriage, they each waived any other rights they may have had due to the cohabitation. This is less important in California than other states, since California doesn’t recognize common-law marriage (where two people living together for a long time may be considered “married” in the eyes of the law for certain matters). However, it is important since neither of them can claim any rights to the other’s property acquired before marriage, or a right to support beyond what is in the agreement, even if they were living together.
- All of Alice’s assets at the start of the marriage (including those on Exhibit A) are deemed to be Alice’s separate property. This includes any appreciation in value during the term of the marriage, or any funds received from the property during marriage. The exact same is true for Ioan’s property on Exhibit B (see pages 8-9).
- Normally, in the absence of a prenup, any expenditure of a spouse (time, money, effort) on the other spouse’s separate property would give rise to a community property interest in the separate property. For example, if one spouse owned a separate property house, and the other spouse spent their own money to remodel the house, a community property interest would be created that would be reimbursed upon divorce. This agreement prevents that, and all assets that are separate property remain separate property regardless of whether the other spouse contributed to them or not. This is also a standard provision in prenups with higher-net-worth clients.
- Each spouse has “unfettered discretion”—in other words, sole control—over the investments they make with their own separate property.
- Notably, each spouse has sole ownership over his or her goodwill, including “celebrity goodwill,” meaning that one spouse can’t claim “credit” or “reimbursement” for the success or popularity of the other spouse.
- The La Jolla family home, and all of its contents, were entirely Ioan’s separate property at the start of the marriage (see page 12).
- Within 60 days of the marriage, Ioan was to transfer title to the house from himself, individually, to himself and Alice as community property with right of survivorship. (This means that if one spouse dies the other spouse automatically inherits the property without the need for probate.) However, we know that the property was eventually placed into a trust, so Alice would have had to sign off on that transfer (see page 13). These provisions would apply to any new home that was purchased during the marriage if they sold the La Jolla home to buy a different house.
- The personal property in the home, except each spouse’s jewelry, clothing, and personal effects, was changed to community property upon marriage (see page 14).
- Upon separation, Ioan had the right to buy Alice out of her interest in the La Jolla home within 90 days of the date of separation.
- Upon sale of the home, the proceeds of sale were to be divided equally after adjustments were made. The adjustments are: payoff of any mortgages; payoff of real estate agent commissions and closing costs of sale; capital gains taxes; any reimbursements agreed to in writing; and $750,000 to Ioan, representing Ioan’s purchase price plus appreciation in value from the date of purchase to the date of the property’s sale; plus 5% interest per year from the date of marriage to the date of sale. Any remainder is split equally between Alice and Ioan.
- Ioan is required to maintain a $1 million life insurance policy on his life, naming Alice as beneficiary, until the date of separation. So Alice will miss out on $1 million if Ioan passes away.
- While married and living in the La Jolla home, all expenses were to be paid with community property funds, and any separate property used for house expenses was considered a gift and not reimbursable. Interestingly, before marrying, the agreement provides that Ioan shall pay all house expenses, even though Alice was living there too.
- The only community property created during the marriage was in the form of salary and bonuses. Business entities, stock options, and the like were to remain separate property.
- Alice specifically waives her right to compensation that may be earned but not actually received during the marriage (see page 19).
- Gifts to either spouse are considered the donee’s separate property.
- Any liabilities listed on Exhibits A and B are the sole responsibility of the respective spouse. So Ioan isn’t responsible for Alice’s debts coming into the marriage, and vice versa.
- Any income taxes are to be paid with community property funds, not separate property. If separate property funds are used to pay taxes for marital assets, they are considered a gift.
- Each party waived their right to spousal support other than what is described in the agreement, despite any future change in circumstances, catastrophic illness, or disability.
- There are support provisions in the event that the parties don’t have children when they separate, which I won’t cover here since it doesn’t apply (if interested, see pages 27-28).
- Spousal support from Ioan to Alice: 10% of Ioan’s adjusted gross earnings, based on the average of the three previous calendar years prior to separation. However, income from Ioan and Alice’s separate property, or passive income, is not considered in determining the amount of spousal support. If Alice’s earnings are $50,000 or more per year, in the 3 years before separation, then her spousal support is deducted by 10% of Alice’s average adjusted gross income over $50,000 for the prior 3 calendar years. If the duration of the marriage is more than 10 years, then spousal support from Ioan will continue until any of the following occurs: Alice remarries, lives with a romantic partner for a period of 6 months, death of either Ioan or Alice, the parties agree otherwise, or the court orders otherwise. If either party’s income increases or decreases more than 20% from average, the amount of support is modified. Based on this, the projected annual spousal support Ioan must pay Alice is $58,313 (see Exhibit 4).
- This same formula applies if Alice had to pay Ioan support if she were the higher earner.
- Alice must pay taxes on the spousal support she receives, and Ioan can claim the support on his taxes as a deduction from income.
- Note that both Alice and Ioan “each assume the risk for himself or herself that he or she may not remain financially self-sufficient in the future.” So Alice can’t modify the spousal support provisions based on her circumstances.
- Finally, both parties agree to engage in mediation before filing any court action, and Ioan agrees to pay for the entire mediation cost (see page 39).
- Ioan’s net worth as of April 16, 2007, was $2,084,970.67; Alice’s net worth was $94,458.51.
