A story you may have seen in the news these past few months is that of Frank and Jaime McCourt; their very public divorce and their battle over ownership of the Los Angeles Dodgers baseball team. The couple, who had been married since 1979, bought the Dodgers franchise in early 2004, and shortly thereafter signed a postnuptial agreement stating that Frank McCourt would have sole ownership over the franchise. Now, however, according to the LA Times, Jaime McCourt claims that “she was the team’s co-owner and would never have signed away her purported stake in the Dodgers had she known the agreement took it away from her.”
A postnuptial agreement is very similar to a prenuptial agreement in that it is a contract between a husband and wife, and includes descriptions of separate property as well as provisions for division of property in the event of divorce. As with a prenuptial agreement, a couple executing a postnuptial agreement should each have their own separate legal counsel to represent their client’s interests, and each party must be aware of what they are signing and must execute the agreement voluntarily.
Unfortunately, according to Judge Scott Gordon, the judge who recently ruled on the McCourt case, the postnuptial agreement between Frank and Jaime McCourt was invalid because both parties seemed to have had “no involvement in the drafting or execution of the (agreement) and related documents and further that they so entrusted all matters regarding the (agreement) to their lawyers, that they did not closely read or did not read at all, the drafts or final copies of the various (agreements) involved in this case.”
It doesn’t surprise me that the McCourts are facing so many challenges in this matter. Although they have become more and more common in recent years, post- and pre- nuptial agreements can be tricky and sensitive documents. The most important part of executing a pre- or post- nuptial agreement is the characterization of separate or community property. As a community property state, California rules that most property acquired during a marriage is owned jointly by both spouses. Property owned separately before marriage does not usually become community property; however, if the separate property is mingled during a marriage it will often be considered to have been transmuted into community property. All of this should be considered when your agreement is drafted.
Additionally, any time you transfer property from one person to another you are likely to have tax consequences. This may not be a particular worry during the initial signing of the pre- or post- nuptial agreement, but it is definitely something you will want to have your attorney look into regarding pre-marital transfers or should your agreement ever have to come into play.
So, what’s in store for the McCourts? According to their lawyers the ownership dispute could take anywhere from a few months to a few years to settle. This is time that could have been cut in half if their agreement had been drafted to properly address the couple’s financial concerns in the first place. For more information about pre- or post- nuptial agreements, call our office.