Imagine two law firm partners—John and Joe—requiring their wives to sign spousal interest waivers stating that they relinquish any claim to the business in the event of a divorce. Years later, during dissolution proceedings, one spouse challenges the waiver and asserts a community interest in the business. Does that waiver stand up in court?
In California, the answer is often no. While spousal interest waivers are common in business formation documents, they are not always enforceable in family law proceedings unless they meet the strict standards of a valid marital agreement under the Family Code. The protection they offer may be more illusory than actual.
Community Property Presumption in Business Ownership
California is a community property state. All property acquired during marriage—including a business started or developed during the marital period—is presumptively community in nature. See Fam. Code §§ 760, 770. Even when title is held solely in one spouse’s name or when the other spouse has signed a waiver, the presumption may still apply.
The Court of Appeal reaffirmed this principle in In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 850, noting that business ownership interests and their increased value during marriage are typically subject to community property principles, even if only one spouse is formally involved.
Why Operating Agreement Waivers Fall Short
It is common practice in closely held businesses—particularly professional partnerships and LLCs—for spouses of owners to sign waivers or consents, often in the formation documents. These typically state that the spouse agrees not to claim any interest in the business. While these waivers may help preserve continuity in governance and ownership for business purposes, they generally do not override community property rights in a dissolution proceeding.
As the court noted in In re Marriage of Hill & Dittmer (2011) 202 Cal.App.4th 1046, 1050, corporate formalities and waivers do not suffice to alter the character of marital property. Any purported transmutation of community property to separate property must strictly comply with the requirements of Fam. Code § 852, which mandates an express written declaration.
What Does Work: Valid Marital Agreements
To effectively waive a community property interest in a business, the waiver must be embedded in a formal marital agreement. California recognizes three categories:
Premarital Agreements under Fam. Code § 1612; Postnuptial Agreements governed by Fam. Code § 1615; and Marital Settlement Agreements as part of a judgment of dissolution (Fam. Code § 1500 et seq.).
Each of these must be voluntary, fair, and entered into with full disclosure. A waiver is likely unenforceable unless the spouse signing it received adequate financial information and had an opportunity to consult independent legal counsel. These safeguards were emphasized by the California Supreme Court in In re Marriage of Bonds (2000) 24 Cal.4th 1.
Common Challenges in Divorce
Even when a spouse has signed a spousal interest waiver, the family court will allow the following grounds to challenge enforceability:
Courts scrutinize such agreements through the lens of fiduciary duties spouses owe one another under Fam. Code §§ 721 and 1100, which mandate full disclosure and fair dealing.
Valuation Still Applies: Pereira vs. Van Camp
Even if a waiver is enforceable, that does not necessarily insulate the business from all community claims. If the business increased in value during the marriage, courts may still apportion a share to the community based on well-established apportionment formulas:
This means that even if the title to the business remains separate, the appreciation during marriage may still be subject to division.
Best Practices for Business Owners
Don’t rely on business waivers alone. Corporate governance tools don’t defeat Family Code protections. Use valid marital agreements that comply with disclosure and fairness requirements.
Disclose everything. Provide full financials at the time of execution. Encourage independent counsel. Courts favor arms-length transactions between spouses. Address valuation of the business and how appreciation during marriage will be treated.
Conclusion
Spousal interest waivers signed as part of operating agreements may offer a false sense of security to business owners. In California family courts, they will not stand without the backing of a valid and enforceable marital agreement. Courts place a premium on full disclosure, fairness, and voluntariness—particularly in matters affecting community assets. If not done properly, the spouse who “waived” their interest may later assert—and win—a claim to a significant portion of the business.
Citations:
Fam. Code §§ 760, 770, 852, 1612, 1615, 721, 1100
In re Marriage of Dekker (1993) 17 Cal.App.4th 842
In re Marriage of Hill & Dittmer (2011) 202 Cal.App.4th 1046
In re Marriage of Bonds (2000) 24 Cal.4th 1
In re Marriage of Pereira (1909) 156 Cal. 1
In re Marriage of Van Camp (1921) 53 Cal.App. 17
