Here’s a hot take: prenuptial agreements are an undervalued and underestimated tool that can actually increase the likelihood of a happy and successful marriage. Most people tend to think prenups are unromantic, and in a sense they are not wrong. Planning for the demise of a marriage before it even begins can be a little bit uncomfortable, but it also forces couples to have those often avoided and difficult conversations about finances and expectations before walking down the aisle, and in turn, start their marriage on the same page when it comes to one of the leadings causes of divorce. Differing opinions and expectations when it comes to money and financial management is one of the most common contributors to divorce, and also one of the most avoidable. While money comes and goes and the future is unpredictable, couples who take the time to clearly communicate their financial expectations to one another before exchanging vows have a much higher chance of surviving hard times and making things work in the long term.

If you are one of those people that feels like it’s just too uncomfortable to talk to your prospective spouse about their assets, debts and financial expectations, I caution you to consider that you may not be ready for marriage. That may seem harsh, but the reality is that 50% of marriages in the US end in divorce. In Orange County, California, the divorce rate is 72%, one of the highest in the nation. When statistically half of all marriages end in divorce, you are doing yourself and your future spouse a major disservice by failing to take advantage of a tool that greatly increases the likelihood of a long and successful marriage.

A prenuptial agreement is a legally binding document that details how you and your spouse will divide your assets and debts in the event you decide to divorce. Divorce is often an expensive and long drawn-out process due to the fact that it is a highly emotional and deeply personal area of litigation where one or both parties are making decisions from a place of anger and resentment. Unfortunately, once the relationship is approaching the end and emotions are high, it is much more unlikely that both parties are going to agree on a fair and amicable settlement, which can result in a drawn out, painful and expensive divorce process. This can easily be mitigated by signing a prenuptial agreement and addressing all of the important issues while you are still in the premarital love bubble and still very capable of seeing eye to eye.

Once you’ve worked out the details of your prenuptial agreement with your future spouse, make sure to take the steps necessary to ensure that your prenup is valid and enforceable. The Golden State’s Uniform Premarital Agreement Act (UPAA) dictates the requirements for prenups in California. The UPAA states that a prenuptial agreement requires a written contract, legal terms within the prenup and the voluntary signatures of both parties. Each party must also have received complete disclosure regarding the other’s assets, debts and income prior to signing. It is important that both parties are forthcoming regarding their finances as lack of complete disclosure from either party can be grounds to set the prenuptial agreement aside.

Additionally, once the prenup is drafted, each party must have at least one week to review and seek independent legal counsel before signing. This seven (7) day “cooling” period is designed to ensure that all parties enter into a prenuptial agreement voluntarily and neither is pressured or coerced into hastily signing without ample time to review, negotiate, and/or have an attorney review the  agreement. Lastly, to ensure a prenuptial agreement is enforceable, both parties must sign the prenup and have it notarized to ensure it is fully valid.

Prenups are not just for the rich and famous. Whether you realize it or not, everyone has something to protect. Many young couples make the mistake of thinking they don’t need a prenup because they have minimal assets at the time of marriage without considering that their circumstances will likely change in the future when it matters most. Some of the most common topics that are addressed in a prenuptial agreement are the allocation of current and future earnings, the allocation of assets and debts, the characterization of property and the duration/amount of alimony.

Here are some commonly overlooked but practical things to consider when drafting your prenup:

Income Allocation

In California, all income during the marriage is considered community property. If one party anticipates making substantially more or less money during the marriage, it can be beneficial to agree in advance regarding what portion of each person’s income will be considered community property.

Separate Property Interests

In California, any assets owned by an individual prior to marriage are considered their separate property and will be awarded to them in the event of divorce. This widely known rule of law can often lead people to believe they don’t need a prenup to protect their separate property assets but it’s actually not that simple. Often times the assets worth protecting, such as a home or even a vehicle, are not owned outright and are encumbered by a loan. As a result, once you get married and your income becomes community property, you begin creating a community interest in your separate property asset as soon as you start paying down the balance of any outstanding loan with community funds. As a result, your spouse will develop an interest in your separate property home or car over the course of the marriage and will be even be entitled to a portion of the appreciation realized over the length of the marriage. If these interests are not waived or predetermined by way of a prenuptial agreement, you will likely have a complicated and costly accounting nightmare on your hands as you will need to hire an expert to do a proper calculation of the community property interest and appreciation your spouse has developed in addition to having to find and produce documents from what could be many years ago to prove your own separate property rights and interests.

Another consideration is when a party is contributing more to the purchase of a community property home with during the marriage with their separate property or a separate property gift from family. A prenup is a great way to ensure reimbursement of these funds upon divorce or sale of the home.

Student Loan Payment Reimbursements

While student loans themselves are generally assigned to the party who incurred them, the community may have a right to be reimbursed for contributions to the education or training of the other. This means that if you paydown your student loans during the marriage with your community property income, you may have to reimburse your spouse for half of what you paid down. There are exceptions to this rule that require costly and complicated financial tracings. Discuss waiving this reimbursement if you are coming into the marriage with substantial debt to avoid a large financial obligation in the end.

Spousal Support

In California, spousal support is based on a multitude of factors but varies when it comes to the length of time that it is owed. For a short term marriage, the supporting spouse pays provides support for an amount equal to about half the length of the marriage, but in a long term marriage, of ten (10) years or more, the amount of time the supporting party pays is indefinite. A prenup can be used to predetermine both the length of time and the amount of time which spousal support will be paid.

Utilizing the services of a qualified family law attorney is the best way to ensure that your prenuptial agreement is valid and enforceable. If you believe a prenuptial agreement could benefit you, contact TALG to prepare an agreement and start your marriage with clear financial expectations that will actually increase the likelihood of living happily ever after.