What is a Prenuptial Agreement?
A prenuptial agreement is a contract between two persons that are engaged to be married. In coming to an agreement, the couple discusses and decides on separate ownership of assets and division of property in the event of divorce, separation or death. Prenuptial agreements are useful for many couples to ensure they, not the court, are the ones to decide which property belongs to the other. Prenuptial agreements are particularly useful for second marriages, marriages with outside children as well as marriages for individuals with substantial assets.
California recognizes community property. Thus, each spouse owns half of all assets and debt attained during the marriage. Each individual spouse has the power to dispose of his or her half of the assets as the spouse wishes. In the event of divorce, community property will be divided between the two spouses. The main exception to community property is separate property, such as inherited, gifted, or previously acquired assets. For this exception, ownership remains separate throughout the marriage unless merged into the couple’s community property. For example, if one spouse had a bank savings account with a balance before marriage but added the other spouse’s name to the account after marriage, both spouses then own the savings account as community property even though part of the balance was acquired by one spouse before marriage. Through a prenuptial agreement, the couple can agree on classifying any of their community property as separate property, so courts would not decide who owns the property.
Why Should I Make a Prenuptial Agreement?
Prenuptial Agreements, like other planning tools, save time and money over time. Although couples do not enter marriage with the expectation of divorce or a misunderstanding at death, prenuptial agreements can serve to give the couple peace of mind and a sense of financial security. Divorce many times leads to court and causes severe financial hardship; attorney fees alone are around $200 per hour. Because California is a community property state, the relatively quick and inexpensive process of creating a prenuptial agreement before marriage saves the couple the expensive long process of trying to divide property once it has been completely joined.
Do California Courts Honor Prenuptial Agreements?
Yes, a properly written prenuptial agreement that discloses assets accurately will normally be upheld in court. The major exceptions are if the court finds the prenuptial agreement was:
- written in a way that promotes divorce
- created and executed with the intent of divorcing
- signed by someone who was forced to sign
- unbalanced to the point it was unfair.
In addition, the prenuptial agreement may not be honored if one or both of the creators did not make a full disclosure of assets.
What Can be Included in a Prenuptial Agreement?
Virtually all property can be accounted for in a prenuptial agreement. Examples of property are bank accounts, vehicles, investments, debt, real estate, etc. In addition, California allows spousal support agreements once certain requirements have been met, such as proper counsel. Child support cannot be part of a prenuptial agreement because it is guided by state law.
