Should You Have a Prenuptial Agreement?

Norris Family Law

If you are planning to marry, should you have a prenuptial agreement? In most cases we recommend this, so that there will be a clear understanding between the parties of how they intend to order their financial lives. And, in the unfortunate event that the marriage terminates, a prenuptial agreement can save a great deal of expense and possible litigation, as the parties will already have decided issues that they otherwise would be confronting for the first time.

California law says that community (joint) property is anything acquired during marriage through the work effort of either party. This includes such things as salary, bonuses, commissions, stock grants, and options. Premarital property is separate, but if there are increases in its value due to work effort of either party during marriage, there will be a community component based on the increases. The basic concept behind a premarital agreement is that the parties can opt out of these rules and decide for themselves how they want their earnings and assets to be characterized.

A basic question, then, is whether or not you want to create community assets after marriage as a result of your respective work efforts. In a prenuptial agreement, you can define what property or earnings you want to be community, and what property or earnings you want to be separate. For example, some people say in their prenuptial agreement that all earnings and value created from work effort will be community, including increases in the value of premarital assets. Or that employment earnings during marriage will be community, but not increases in value of premarital assets regardless of work effort expended on them during marriage. Or that there will be no community property whatsoever created during the marriage, so that everything, even employment earnings, will be separate. Or that everything will remain separate except income from certain identified assets, or appreciation in certain identified assets, or income from certain identified employment situations. There are lots of possibilities.

You should also think about whether or not you want to have a provision waiving spousal support in the event of a divorce. It used to be that in California parties could not include a waiver in their prenuptial agreement; now they can. However, in the event of a divorce, it may be that a judge has discretion to void the waiver if he or she thinks it’s unjust under the circumstances. The law is not entirely settled in this area.

Do not try to do a prenuptial agreement by yourself (i.e., without an attorney). California has enacted legislation that makes prenuptial agreements unenforceable unless specific statutory requirements are met. These requirements deal with such matters as disclosure of property and financial obligations, representation by counsel, voluntariness of the agreement, absence of undue influence, and minimum time requirements between being presented with the agreement and its signing. Trying to navigate the requirements by yourself is a recipe for later finding out that your agreement is not enforceable; don’t do it.