Should I Make a Prenuptial Agreement?

Prenuptial agreements are less talked about than they should be. The decision to draft one is beneficial to both spouses involved, and it could help to set the grounds for important discussions about marital property and finances. Keep reading our blog post to learn about important assets that a prenup may address.

Should I Have a Prenuptial in California?

Many couples worry that drafting a prenup might signify a lack of trust in the foundation of their marriage. However, the benefits of having a prenup in place far outweigh these anxieties, as they could guide couples in having important conversations about their finances and establish a cushion for the future. Even though only one in ten couples enter into some kind of prenuptial or premarital agreement, a prenup can provide couples peace of mind, and they are meant to protect both spouses involved.

Is Spousal Support Factored In?

California law allows individuals to waive or limit spousal support as long as the provision is not deemed unreasonably unfair, or unconscionable. For example, consider a prenup that contains a complete prohibition on spousal support, and one spouse in the contract has substantially more assets and income. If that spouse tries to enforce the spousal support waiver after a long-term marriage, and the provision would leave the other spouse destitute, a judge may reconsider upholding that element of the agreement.

Note that if there is a significant disparity in the amount of wealth between the two spouses, instead of completely waiving spousal support, a judge may alternatively place limits on the amount and duration of support. The specific amount and duration will be based on the income of the parties and the duration of their marriage.

Community Property and Separate Property

Community property is any property acquired during the marriage that is not a gift or an inheritance. In the absence of a prenup, California community property law provides that all community property is divided equally upon divorce. Be aware that in most cases it doesn’t matter if the property is under one party’s name; if the property is acquired during marriage, with some exceptions, it is considered community property. Be aware that earnings during marriage are also considered community property. If an individual married without a prenup and earned $1,000,000 during their marriage, that entire sum would be community property, which means the spouse would own half of that property and anything purchased with that property.

Note that separate property is property that was owned before the marriage or acquired by gift or inheritance. Separate property belongs exclusively to the spouse that acquired it and doesn’t fall under the 50/50 community property division rule mentioned above. However, if any efforts were made during the marriage to improve, enhance, or contribute to the separate property, this could create a community property interest in that separate property. This is a situation when a prenup agreement will be useful, as it could establish that the other spouse never acquires a community interest in separate property.

The absence of a prenup often requires the use of forensic accountants that can trace dates of purchase, purchase prices, contributions, and increases or decreases in value over time. In high-asset cases, the accounting and legal fees over these matters can cost up to hundreds of thousands, or even millions, of dollars. So, it is in an individual’s best interests to create a prenup to address a potentially high-risk and drawn-out financial complication.

A prenup can regulate how separate and community property assets and liabilities are treated. In the case of a financially independent couple with their own resources, a prenup can establish ahead of time that all income, assets, and debts acquired or incurred remain separate property. On the other hand, a couple might agree that all property accumulated during the marriage remain community property, but that certain property brought into the marriage, such as family businesses or funds, will remain separate. Each situation for every couple will be different, so when drafting a prenuptial agreement, it is important to address any specific circumstances that may arise during or after the marriage.

Limitations of Prenups

There is an important limitation on what a prenup can do. California prenups cannot regulate child custody or child support. These are areas that are left to the court’s authority based on what is in the child’s best interests and the California child support guidelines. California considers child support a child’s right, not a parent’s, so parents cannot contract away a child’s right to support in a prenuptial agreement.

Seek a California Family Lawyer Today

If you have recently entered into a marriage or plan to, it is worthwhile to consider drafting a prenuptial agreement. The benefits for doing so that we’ve discussed in this blog, such as property and financial assets, are significant for moving forward in or after a marriage. If you have questions about creating a prenup or want to further discuss with a legal professional about your agreement, speak with the family lawyers at Claery & Hammond, LLP.

Let our firm help you! Schedule a free consultation with Claery & Hammond, LLP today.

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