Prenuptial agreements (often referred to as premarital agreements, or prenups) may not be at the top of your mind when you decide to get married. You are caught up in the joy of having found someone to spend the rest of your life with, and it can be hard to think about contracts and finances when you want to plan the wedding and start building your life with your future spouse. Additionally, many believe that prenups only apply if you get divorced, so considering one means you think your marriage may fail.
However, a prenup, or at least considering one, should be at the top of your and your future spouse’s priorities. These contracts can be invaluable for helping you organize your new life and protect yourself and the person you love. Discussing how you will address future purchases, assets, and your shared financial goals as a couple can lay a foundation for an open dialogue when you are married.
Additionally, a prenup can offer couples comfort and greater certainty, especially if income and assets aren’t equal between both parties. For example, a couple can decide how a home will be purchased and how title will be held. If one party wants to purchase a house as separate property, a couple can use the prenup to address that, providing the parties security while allowing them to pursue their shared goals.
What Is a Prenuptial Agreement?
A “pre”-“nuptial” agreement is a contract you and your partner sign before you get married. The agreement lays out terms and conditions for your legal partnership beyond what state law provides. Absent a prenup, you and your spouse are bound by the Family Code as drafted, without even understanding what this means. A prenup allows you to set up conditions about things like property ownership if you do not want to follow default law. For example, all property acquired during marriage is community property with certain exceptions. If a couple prefers, they can use a prenup to keep finances separate, so each person retains the money he or she earns during marriage.
Although prenups can be a useful tool in planning your marriage, they are particularly valuable if you get divorced. A prenup can include the terms that could be subject to dispute in a divorce, such as spousal support and how property will be divided. A good prenup can significantly reduce the hassle and expense of splitting up. While no one wants to think about their marriage ending before it’s even begun, considering a prenup is still important. The agreement is a way to protect the people you love from the risks of the future. It is also important to consider your marriage ending in the death of you or your partner, and prenups can address estate planning considerations as well.
When a Prenup Matters
In the modern world, prenups are helpful in marriages of many kinds. Everyone from new college graduates to retirees finding love for the second time can benefit from implementing a solid prenup. Here’s a small selection of reasons why you might benefit from having a prenup before you get married.
Young Couples with Established Careers/Businesses
More young people are becoming engaged after spending years developing a successful career or business. The wealth accumulated prior to marriage is separate property by default law, but a prenup can spell out how those assets will (or won’t) remain separate property going forward. It is helpful to determine how a couple will address potential financial situations such as one party creating a business, earning significant income, receiving an inheritance, etc. If California law does not align with your preferences on these financial events, then it is important to implement an agreement that states your expectations.
Second Marriages
If you are considering getting married for the second time, a prenup can be essential. The agreement can be used to help you organize your finances, which are likely more complicated if you were previously divorced or widowed. For example, one party may bring significantly more assets into the marriage and rather than keeping these assets separate, the couple may decide to use them to fund the marital lifestyle. Since the marital standard of living is considered when determining spousal support in a divorce proceeding, the couple may want a prenup to limit how much separate spending impacts the spousal support calculation.
Additionally, a prenup can help you protect your children from a previous relationship or another family member through estate planning. You can use the agreement to ensure your kids are guaranteed an inheritance, or college funds are set aside for a niece or nephew no matter what happens during your subsequent marriage.
Inheritances and Family Wealth
Individuals with family wealth who are expecting a significant inheritance should also consider a prenup. If you want to ensure that certain items or assets stay in your bloodline, you can sign a prenup that specifies they will remain your sole property even if used to support your spouse during marriage. Addressing an inheritance in a prenup can allow you to use this money to fund your marital lifestyle while excluding it from consideration when determining spousal support if you ever divorce.
A prenup can also be a comfort to the rest of your family. A grandparent or parent may feel more comfortable leaving you an inheritance, knowing that you have an agreement in place to protect their assets in the case of your divorce.
Business Ownership
Individuals who own a business before marriage or intend to create one during marriage should consider a prenup. An agreement can identify whether the community is going to have an interest in the business. Should your marriage end in divorce, a prenup can assign each party a set ownership percentage, including sole ownership to one party. This way, business partners and employees won’t have to worry about a significant change in ownership should the marital status of the owner change. A prenup can be invaluable for keeping a business running smoothly during and after a divorce.
If you would like to discuss how a prenup would benefit you and your relationship, contact the experts at Flicker, Kerin, Kruger & Bissada LLP. Their specialized attorneys can help you understand if a prenup is necessary and if so, help you navigate the process. Schedule a consultation today to get started.