What is a Prenuptial Agreement and Do I Need One?

Couples who are bringing a significant amount of assets and property into a marriage often consider setting up a prenuptial agreement. Also known as premarital agreements, prenuptial agreements are becoming more common in today’s society. While no one enters into a marriage with the intention of getting a divorce, the reality is that a large percentage of marriages do not work out. Prenups provide some predictability, security, and peace of mind for married couples in the event of a worst-case scenario.

How Does a Prenuptial Agreement Work?

A prenup is a contract signed between a couple before getting married that addresses, in advance, most issues that will need to be resolved should the marriage end in divorce. Just about every financial matter can be addressed with a prenuptial agreement. This may include:

Division of Assets

The most common issues that are addressed with a prenup are those involving the assets and debts and how they will be split up if the marriage is dissolved. In general, prenups cover the assets brought into a marriage and usually state that this property will remain with the original owner. The agreement can also cover assets such as the marital home, vehicles, financial investments, and other property.

Alimony/Spousal Support

California law allows prenups to specify how much spousal support will be paid if the couple decides to get divorced, within reason. Generally, the courts will uphold the amount of spousal support that is specified in a prenuptial agreement unless it is deemed “unconscionable” or unreasonably unfair.

Determine what Assets are Community Property

California is a community property state. This means that in the event of a divorce, each spouse is entitled to half of the assets acquired during the marriage, with the exception of gifts and inheritances. This is important, because in many marriages, marital and non-marital assets are co-mingled, and it may require a forensic accountant to untangle the complexities of the couple’s finances and determine which assets are part of the marital estate.

Earnings while the couple is married are generally considered to be marital property as well, so without a prenup, your spouse could be entitled to half your earnings, even if you make $10 million per year and your spouse has no income at all. With a prenuptial agreement, you can determine ahead of time which assets and earnings are community property and which will stay separate. For example, if two independently wealthy individuals get married, they may decide that all of their income, assets, and debts acquired before or during the marriage will remain separate property.

What Are the Limits of Prenuptial Agreements?

While prenups can cover most matters that may come up during a marriage dissolution, there are a couple notable exceptions having to do with child support and custody/parenting. A prenup cannot regulate the amount of child support that is paid if the couple is divorced. Because child support is a child’s right, a contract between parents cannot take away that right. Child custody, parenting plans, visitation, and other parenting-related issues fall into a similar category. These are issues that cannot be settled by a premarital contract; they are decided at the time of a divorce based on the best interests of the child.

Do I Need a Prenuptial Agreement?

Prenups make sense for a lot of couples, depending on their circumstances. In many cases, it is just a matter of getting past the stigma often attached to this type of contract and summoning the courage to discuss it with your fiancé. There are a number of circumstances in which a prenuptial agreement might be a good option. Some of the most common include:

• Individuals with a High Net Worth: As mentioned previously, if both individuals are independently wealthy, they may want a written contract stating that their assets will remain separate regardless of whether or not the marriage works out.
• Significant Financial Differences Between the Spouses: When one individual has a high net worth and the other has more modest means, a prenup can set up fair and appropriate guidelines regarding what would be paid to the recipient spouse if there is a divorce.
• Blended Families: Many individuals bring children into a marriage from prior relationships. A prenup can help protect their children, ensure that their financial interests are protected, and ensure that they receive their rightful inheritance regardless of what happens with the marriage.
• Business Owners: There are many cases when a business belongs entirely to one individual and the other has no interest in it (financial or otherwise). A prenup can ensure that the business remains in the hands of the owner and any appreciation in value and/or property it acquires does not become part of the marital estate. This is especially important if the business has partners outside the family.

What to Do Before Signing a Prenuptial Agreement

Whether you are the one who drafted the prenup or your fiancé presented it to you to sign, make sure you think carefully about it, read it over, and fully understand it before signing. To assist you with this process, it is best to consult with an experienced family law attorney. At Garmo and Garmo, we have helped numerous clients with prenuptial/premarital agreements, and we understand the complexities of these types of documents. We can draft an agreement that fully addresses all your needs and concerns and will be legally enforceable. We can also thoroughly review a prenup that was drafted by someone else.

For skilled guidance with prenuptial agreements and all other family legal matters, contact our El Cajon office today at 619-441-2500.