Frequently Asked Questions
Should I enter into a prenuptial agreement?
Prenuptial agreements are no longer the exclusive province of the rich and famous.
Increasingly, and for a variety of valid reasons, people from all different walks of life in
California are opting to take control of their own fates by entering into prenuptial agreements.
If you are getting married or entering into a registered domestic partnership, one of the
most important decisions you will ever make is whether to enter into a prenuptial agreement.
By default, the California Family Code and developed case law provides a person contemplating
marriage, or entering into a registered domestic partnership (RDP), with a fundamental choice to
make. Either he may take his destiny into his own hands by entering into a prenuptial
agreement that is tailor made to suit his own needs, or he may by default allow California law to
govern what can or will happen to his property in the event of separation, divorce or death.
Everyone who gets married hopes for the best, but not everyone plans for the worst
notwithstanding that over half of all first time marriages fail. Those who have not entered into a
premarital agreement will be governed by the arbitrary, and often times, harsh rules set in the
Family Code. Thus, if someone doesn't enter into a prenuptial agreement, the Family Code will
dictate how and when her community and separate property assets will be divided upon
divorce, and how much she will be required to pay in alimony (spousal support). In short, a
prenuptial agreement enables the parties to negotiate an agreement that enables them to "opt
out" of the law and regulations under the Family Code, and take matters into their own hands.
There are several reasons why people decide to enter into premarital agreements. The
following is a summary of some of the frequently cited reasons why people have decided to
enter into a premarital agreement:
Preserving Inheritances: With more and more older folks entering into second and third
marriages, it is common to have children from a prior relationship. If you have children
from a prior marriage or grandchildren who you desire to inherit most or all of your
assets, a prenuptial agreement is an essential tool to assure that your intentions are
honored. If you don’t enter a prenuptial agreement your children may lose substantial
property which you intend for them to inherit or obtain in the event of your demise.
Asset Preservation and Protection: If one or both parties come to the marriage with
significant assets or income streams, one or both of the parties may wish to clarify what
will happen to those assets and income streams in the event of separation, divorce or
death. A prenuptial agreement may specify what will happen to your property, either
community or separate. For example, real estate, antiques, jewelry, stock options, and
accident settlements may all be the subject of a prenuptial agreement.
Dealing with Debt: A prenuptial agreement can and should address how all of your and
your fiancee’s debts will be handled. This includes debts incurred before you are married
and those incurred after you are married. Although assets or debts acquired prior to
marriage are generally separate property, if the parties use their earnings during marriage
to pay the mortgage on a separate property asset, under the principles of California
community property law, the community acquires an interest in the home which will need
to be accounted for upon divorce.
Preserving And Protecting The Interests in Family and Other Closely-Held Businesses:
There are many different types of assets that people seek to protect through the use of a
prenuptial agreement. For example, people who have ownership interests in businesses
may wish to ensure that in the event of divorce, that they will not have their interests
impacted. A divorce can strip a company of assets when one party claims a stake in a
spouse's family business or a closely held company. Even if such a claim is unsuccessful,
hotly contested litigation can expose your business to incredible intrusion including
burdensome discovery. A prenuptial agreement can help protect you and your fellow
stakeholders in the business against such risks. If you die without a prenuptial agreement
or get divorced, your new spouse might share in the family business, which could
dramatically alter the family interaction in the business and cause serious problems.
Limiting or Waiving Alimony (Spousal Support): Some people, especially those who have
already been through a prior divorce, are nervous about the possibility of having to pay
considerable future spousal support payments. A prenuptial agreement may limit or waive
future spousal support obligation by the parties.
Preserving and Protecting Separate Property Acquired Before Marriage: A prenuptial
agreement may ensure that a spouse's property owned before marriage remains separate
property after marriage. In other words, the property will remain separate regardless of
any new developments that might otherwise make the property community property. In
particular, when one spouse owns a business, he or she may wish to avoid the difficulties
involved in apportioning the business in the event of divorce. A prenuptial agreement can
be used to ensure that a business will remain entirely the separate property of the owning
spouse, regardless of any actions taken after marriage.
Preventing creation of community property: California is a community property state,
meaning all assets acquired during the marriage, including increased value of assets
owned before the marriage, may be included in the “marital pot.” A prenuptial agreement
may prevent the creation of community property during the marriage. The parties may
agree that each of their respective earnings during marriage and before separation, and
any items acquired by the party with those earnings, will be his or her separate property.
For example, should a spouse get a loan during marriage to fund a separate property
business, under current law, the loan proceeds will be community property. This means
that the business will have both separate and community property interests unless a
prenuptial agreement is entered into by the parties that provides otherwise. Prenuptial
agreements may also be used to clarify whether a contemplated gift or bequest, either
before or after marriage has any community property component. For example, a
prenuptial agreement can specify whether a gift by one spouse's parents of a down
payment on a house is a gift to the couple (i.e., community property) or just to their child
(i.e., separate property).
Disposition Of Marital Residence: A prenuptial agreement may address who will be
entitled to keep possession of the family residence in the event of divorce or death.
Keeping a Cherished Pet: While child support and custody issues may not be included in
prenuptial agreements under California law, who gets to keep a cherished pet is fair game.
In fact, prenuptial agreements are used to steer a more rational course for those who have
pets dear to their hearts. If you want to make sure that your pet will stay with you, make
sure to include a clause governing this matter in your premarital agreement.