Prenuptial agreements (prenups) are not always a fun topic of conversation with your soon to be spouse. Discussing divorce before you even get married is not ideal as when you look at your fiancee, the last thing you see is your future ex-spouse.
However, with the current divorce rate in California being above 50%, discussing what happens to your assets in case you do end up divorced should be considered a responsible conversation. It is better to have a financial discussion when you are getting along, rather than during acrimony when feelings are emotional. A prenup can drastically ease your divorce process and save you both a ton of money and time.
To get the most from a prenup you must understand how they work and what is needed for them to be enforceable.
Understanding Prenuptial Agreements: What Are They?
Prenuptial agreements, commonly referred to as prenups, are legal contracts entered into by two individuals before they marry. The key to this is before marriage. These agreements outline division of assets and debts in the event of a divorce, the agreement is only applicable in the event of a divorce. The primary goal of a prenup is to provide clarity and protect both parties’ interests, particularly in the event of a divorce or separation. It allowed the parties to figure out a division before one is needed and when they are not fighting.
Prenups can cover a variety of issues including property division, spousal support, debt allocation, and inheritance rights. They serve to ensure that both individuals fully understand the financial implications of marriage and can protect assets acquired before marriage or planned for separate personal goals.
How Do Prenups Work in California?
Prenups in California are dictated by California’s Uniform Premarital Agreement Act (UPAA). According to this act, a prenup is an agreement between prospective spouses dictating what happens to their present assets and future assets after they become married. California is a community property state, so without a prenup, everything earned during marriage is considered joint and will be split.
A prenup allows you to alter California law and divide your assets as you want, which may mean not equally.
The property included in a prenup may include financial interests, income, real estate or debts. For a prenup to be valid, the parties to the agreement must provide full disclosure of assets to each other. They both must be fully informed about what the other has before signing. This would include all property and all debts, you should be fully aware of the financial situation of your soon to be spouse.
Additionally, each spouse MUST have at least seven days to review the final draft before signing and both parties MUST be represented by their own attorney. If the time period is less than seven days from when the document is received and when it is signed, it can be deemed unenforceable. Both parties must have their own independent counsel so it can be deemed they had full knowledge when signing.
The Legal Framework: How Prenups Are Enforced Across Different Jurisdictions
The enforceability of prenups varies depending on the jurisdiction. In many regions, prenups are recognized and upheld by law, provided they meet certain requirements. These requirements often include full disclosure of assets, lack of coercion, and fair and reasonable terms at the time of signing and enforcement.
Some jurisdictions require that each party has independent legal counsel to advise them before signing a prenup. It’s important to understand local laws and seek specialized legal advice to ensure that a prenup will be enforceable in the event it’s needed.
Your prenup can be upheld in a different state, so long as the document was created properly at the time following the laws where it was created. For example, in California it is required to include a 7 day wait period before signing. If that was not followed and the prenup is sought to be upheld in a different state, it may be invalid as it did not comport with the laws of the state at the time of creation. This of course is up to discretion of the judge, but you can raise the likeliness of enforcement by ensuring the document is properly and legally created.
Key Components of a Prenuptial Agreement
Effective prenups have several requirements to ensure they are clearly drafted with stated intentions. It should clearly identify the parties to the prenup and their statistical information such as their age, salary, any medical conditions, and any information about previous marriages. The intentions of the document should be clearly stated, there should be no ambiguities as to what the parties intentions are. The document should include a comprehensive list of each party’s assets and liabilities, clear definitions of what constitutes marital and separate property, terms for the division of property, and stipulations for alimony or spousal support. They may also outline financial responsibilities during the marriage, such as household expenses and savings contributions.
A key component of a well written prenuptial agreement is the stated intentions of the parties as to what is treated as marital income. Some people choose to completely waive community property so they will not acquire joint assets automatically, they will need to discuss and jointly title assets to have them be deemed community property. It is critical to properly identify how to treat asset acquisition so it is very clear what will be community versus separate property.
What To and Not To Include In a Prenup
A prenup generally includes language about the division of finances. For example, what happens if one owns a house before marriage and they plan on living in the house after marriage and using marital income to pay the mortgage. This is a perfect situation to identify in a prenup. It will also include what happens it debt is accrued during marriage. Some people will include a waiver of inheritance rights if they have children from another marriage. It is truly up to you on what you want the prenup to include.
However, the prenup cannot include any provisions regarding child custody or child support. These would be deemed unenforceable provisions.
What Can Make a Prenup Invalid?
A prenup becomes invalid if it does not follow the requirements of the UPAA. For instance, if one spouse signed the prenup under duress without having full knowledge of the assets and debts of their partner, or being forced to sign an agreement without an attorney, the prenup can be deemed invalid. The prenup can also be deemed invalid if a family law judge finds the agreement is unfair.
When a prenup becomes invalid, it is not enforced by the court during a divorce. Your divorce proceedings continue as they would without a prenup.
Common Misconceptions About Prenuptial Agreements
Many people believe that prenups only serve the wealthier spouse or are indicative of a lack of trust between partners. However, prenups are designed to protect both individuals and can actually strengthen a relationship by promoting open and honest communication about finances.
Another misconception is that prenups are only for the rich. In reality, they can be beneficial for anyone who wants to protect their assets or avoid potential disputes, regardless of their wealth. Prenups also do not predetermine a marriage will fail, but rather provide a precautionary measure for managing assets and responsibilities.
In fact, I have been doing more prenuptial agreements than ever before because it is more common to get married later in life. You do not need to have significant assets for a prenuptial agreement to be worth it. For $5,000 up front, you can save yourself $30,000 later during divorce. Think of it as an insurance policy.
Steps to Creating a Fair and Effective Prenup
To create a fair and effective prenup, both parties should start the process well before the wedding date to allow ample time for discussion and negotiation. The final version of the prenup must be in the parties hands 7 days before the wedding or the document is invalid. Timing of this is crucial to have a binding prenuptial agreement.
It’s crucial to be transparent about finances and to seek the help of experienced attorneys who can represent each party’s interests. Both parties will engage in asset and debt disclosure to ensure nothing is hidden and both parties have full disclosure of the other’s assets.
After drafting the prenup, both parties should thoroughly review the document, potentially with the assistance of a financial advisor, to ensure it’s equitable and aligns with their expectations. Both parties must have attorney’s as it could potentially be deemed invalid if one party is not represented by an attorney. It can be argued the unrepresented party did not have a full understanding of what they signed.
Lastly, executing the prenup with the proper formalities, such as notarization, helps to solidify its legal standing. In California, a notary is required to ensure the identification of the person signing.
Prenuptial agreements are a legally complex document that can prevent a significant amount of liabiltiy. It is crucial they are done properly to avoid liability in the future.
••Get Legal Advice About Your Prenup••
Although you and your fiancee are on the same page on how to go about the prenup, it is always advisable to get legal advice from a reliable lawyer. The lawyer will explain all the legal jargon, helping you avoid mistakes. Additionally, you will weigh all the pros and cons together and come up with the best plans for your future.
If you’re in need of legal advice or consultation, please don’t hesitate to reach out to us at 619.289.7948