Many couples sign contracts after they marry to show who owns what property. This document is called a marital or postnuptial agreement.

It might say certain property belongs to just one spouse (separate property). Or, that property is owned by both spouses as marital or community property.

Some experts say these agreements promote marital harmony by clarifying the couple's property ownership. Be very, very careful though if you sign a postnuptial. As the McCourt case shows, one wrong word can be a very costly mistake.

Major League Mistake

Frank and Jamie McCourt were married for almost 30 years. Since there was a large amount of property involved - the Los Angeles Dodgers baseball team - they signed a postnuptial agreement in 2004. The couple signed multiple copies.

Unfortunately, there was a drafting error. Some of the copies used the word "inclusive." This word treated the team as Frank McCourt's separate property. Other copies used the word "exclusive." This word excluded the team from his separate property.

When the couple sought a divorce, the court tossed out their postnuptial agreement. The couple then spent the next two years in court battling over the team's ownership. They racked up over $20 million in legal bills and put the Dodgers in bankruptcy before reaching a divorce settlement.

In the end, Jamie agreed to take about $130 million and give up her claim in the Dodgers. This example shows how one small error in a marital agreement can cost a spouse big money. The McCourts' postnuptial error led to the costliest divorce in California history.

What's a Community Property State?

Community property states divide property gained during marriage equally between the two spouses. It doesn't matter which spouse specifically earned the property. The marital property is considered owned by the family unit.

There are nine community property states:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Not all property is divided equally. Property owned by one spouse before marriage is usually considered separate property. Gifts or inheritances to a spouse are also separate property. However, this property may convert to community property if it's mixed with other marital property.

Marital Agreements

Many divorce rights can be modified by a marital agreement between the two spouses. This agreement can be created before the marriage (prenuptial) or during the marriage (postnuptial).

Some purposes for a marital agreement include:

  • Preventing a spouse from gaining a large "windfall" at the expensive of the other spouse
  • Protecting certain family property
  • Protecting the inheritance of children from a previous marriage
  • Reducing uncertainty and expenses involved in a contested divorce

Writing a Marital Agreement in a Community Property State

Unless you want all marital property split evenly, you must create a marital agreement. In this agreement, you and your spouse can choose what property is considered separate. Any property left out of the agreement is community property.

The specific wording in a marital agreement is very important. One word can determine whether property is considered separate or community.

The perfect example of this is the dispute over the ownership of the Los Angeles Dodgers baseball team. Be very careful when drafting or signing your own marital agreement.

Questions for Your Attorney

  • Does child custody affect the division of marital debts?
  • Can my spouse and I divide our debts without the family court's involvement?
  • If I file for bankruptcy, how will that affect the division of my marital debts?

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