A prenuptial agreement is a legal contract between you and your fiancée. This agreement allows you and your future spouse to deviate from the default state laws that will dictate your property rights, support, and finances once you are married. For many couples, these default state laws don’t really work for them. With or without a prenup, you will be entering into a legally binding agreement with your spouse that will affect every aspect of your financial future. A prenup is a great way to take back control and create certainty for both parties.
Why should I get a prenup in California?
Having a prenup is like having a financial safety net for both partners in a marriage. These agreements can not only safeguard individual property interests but can also shield you from taking on your partner’s credit card, school, personal, or mortgage debts if things don’t go as planned. Plus, they’re a helpful tool for addressing concerns about spousal support/alimony, business ownership, and overall financial responsibilities during the marriage. Ultimately, having a prenup can help you avoid long, expensive, and emotionally draining disputes in the unfortunate event of a divorce.
Without a prenup, if you and your spouse get divorced, the laws of the state you reside in will determine the ownership of your property, who is liable for joint and separate debt, and whether one spouse must pay to support the other. For couples who live in California, their divorce will be subject to the concept of Community Property. In Community Property states, any property you acquire and any money you earn during the marriage is owned equally by you and your spouse. This also applies to any debts taken out during marriage – regardless of whose name it is under.
Community Property laws tend to render title irrelevant – so, for example, even if your bank account is only in your name, if it’s Community Property, you’ll split it 50/50 with your spouse in a divorce. In Community Property states, the court will allow you to keep any assets you can prove that you owned before the marriage – a concept called “separate property.” However, Community Property rights may still attach to your separate property assets, like in cases where you continue to pay down the mortgage on your separate property home post-marriage or where separate and community funds are “commingled” into one bank account.
Many people find the laws of their state to be unfair when they start the divorce process; many more are surprised when they learn that their spouse owns half of the assets that are only in their name. The benefit of a prenup is that it allows you and your spouse to dictate exactly who will own what before either of you establish community property rights.
What is in a prenuptial agreement?
- Characterization of Property: A prenuptial agreement can classify which property is “separate property” and what will be considered “marital property.” This allows you to avoid the state’s default laws that would otherwise apply in the event of divorce. For example, you and your fiancé could decide to keep each of your income and earnings separate, which in turn would mean anything either of you buy with those earnings will remain a separate asset. In a Community Property state, this deviates from the default rule, which would characterize both spouse’s earnings as joint funds, regardless of who earned it.
- Limitation of Joint Debt Liability: A prenup can specify that each spouse is only responsible for his or her own debts. This is helpful in a situation where one spouse may enter into the marriage with significant credit card debt and can shield their future partner from future poor financial decisions they may make.
- Planning for Shared Finances: A prenup can help you and your future spouse figure out how household expenses will be shared once you’re married. Do you plan to split everything down the middle? Will you each pay your share in proportion to your respective incomes? If one of you has children from another relationship, how will their expenses be covered? In a prenuptial agreement, you may decide to keep certain finances separate during the marriage or keep separate bank accounts entirely.
- Estate Planning: Prenups are great companions to an estate plan, especially for those who are entering into a 2nd, 3rd, or even 4th marriage. If you have assets that you plan to leave to your children or grandchildren, your prenup can protect your kids’ property rights in case you pass away. You can also specify in your prenup what kind of estate plan you and your spouse plan to create post-marriage and how each of you would like to handle the division of your joint and separate assets at death.
What can’t be in a prenup?
The two main restrictions apply to children that you and your spouse have together (whether now or after you’re married). In California, and in most states, a prenuptial agreement cannot waive or set the amount of child support to be paid. You also cannot include any terms that place restrictions on either spouse’s parental rights to the children – such as pre-determined custody and parenting time orders.
You also cannot include terms that would require you or your partner to commit an illegal act, obligate someone to provide sexual services, or incentivize divorce.
When should we start the prenup process?
The sooner, the better! We get it – talking about prenups can be a bit stressful for some couples, but it doesn’t have to be. Ideally, give yourselves a good few months before the wedding to discuss it. If you haven’t brought it up with your fiancé yet, plan to have that initial conversation about 2-3 months before the big day.
You will want to sign your prenup as far in advance of your wedding day as possible. In many states, if your prenup was signed the day before your wedding, it could be argued that you or your spouse weren’t given enough time to fully review the agreement, consult with an attorney, and that they felt rushed or pressured into signing. These issues may result in a prenup being invalidated years later by a divorce court. In California, the law requires at least 7 days between the presentation of the final draft of the prenup and the signing date, to ensure you both have enough time to obtain legal advice and to think carefully about whether to enter into the agreement.
Remember, a prenuptial agreement needs to be signed before you tie the knot!