What is a Premarital Agreement and Why You May Need One
A brief overview of premarital agreements (prenups), what they do, what purpose they serve, and why you might want to consider getting one if you are getting married.
California Community Property - Everything is Everyone's!Let's back up and start with what happens to your income and assets when you get married. California is a community property state, which means that all income, assets, property, and earnings of any kind are considered "community," which means they belong to each spouse equally, regardless of which spouse earned or acquired them. So, your salary after marriage is technically 1/2 your spouse's, and vise versa. If you purchase a home after marriage and use community funds for the down payment, that home belongs to both of you equally. Same with any retirement, IRA, or 401K contributions, earnings from any business ventures, vesting stock options, increase in return on any investments, and a whole host of things that it would be impossible to list here. Should you divorce, all community property is divided 50-50 between you and your spouse, regardless of who earned it, bought it, acquired it, etc. (There are some exceptions to this rule, this is intended to be broad and general information, please contact us for more specific information about community property law.)
What A Premarital Agreement Does (and Doesn't) DoA premarital agreement, in the most simple and broad terms, allows you and your spouse to contract out of default California community property laws should you divorce in the future. A couple can completely customize the division of all community property according to their individual needs, rather than having such a division being determined by California law. California community property law may seem straightforward in theory, but it is anything but when it comes time to actually apply it in a divorce. Any irresolvable dispute over an asset will eventually be settled by a judge, and family law judges are notorious for inconsistent and unpredictable applications of the law. Not to mention the time and expenditure of attorneys fees needed to get even a minor issue before a judge.
Hope for the Best, Plan for the WorstWhen you are in love and getting married, it's easy to take a peek into the future and think that if you were ever to get divorced, it would be easy. Everyone would take what is theirs. Assets and accounts would be amicably split. But when a couple actually gets divorce, nothing is ever this easy. Feelings are hurt and people can act outside of character. I've seen arguments arise over houseplants, coffee mugs, lamps, coffee makers, and any number of mundane things you cannot imagine would cause a conflict. Not to mention the more obvious things like pets, bank accounts, and houses. If it exists, I've seen people fight over it.
When you are getting married it is difficult, if not inconceivable, to think about preparing a contingency plan for splitting up. This is completely understandable. A prenup is not planning for your marriage to fail any more than getting health insurance is planning to get sick. I truly believe that a prenup is less about separation, and more about love and commitment. Making the commitment to each other that should the worst happen, you will not have a nasty, drawn-out battle, costing both of you time, money, and emotional and physical energy. Life is short and divorce can severely impact your life, not to mention take years to complete. Why not do everything possible to make sure that a divorce have as minimal impact on your life and overall happiness as possible?