Planning Ahead with a Premarital Agreement
What is a premarital agreement?
A premarital agreement, commonly referred to as a prenuptial agreement or “prenup”, is a contract executed by two individuals in anticipation of their marriage. Historically premarital agreements have been viewed as controversial, as they are often used to prevent one spouse from gaining access to the property and/or wealth of the other upon divorce. However in reality, a premarital agreement can be a highly effective tool for you and your future spouse regardless of the ultimate success or failure of your marriage.
What is the purpose of a premarital agreement?
A premarital agreement can be used to address a wide variety of issues and achieve almost any legal objective. A valid premarital agreement allows you and your prospective spouse to decide the classification of your property, which may otherwise change upon marriage.
Though a common misunderstanding is that a premarital agreement is only relevant should the marriage not last, a premarital agreement can determine much more than which spouse receives the silver collection. For example, a premarital agreement may detail to what extent a former spouse’s designation as an insurance beneficiary will be affected and whether a former spouse will cover the cost of career and/or educational training that may have been on hold for the benefit of the marriage.
In California, premarital agreements are often used to alter the default community property/separate property characterizations that have been established by the legislature. The state generally presumes that all property obtained before the marriage is separate property, and all property acquired during the marriage, including wages and business appreciation, is community property. A valid premarital agreement can rebut this presumption in accordance to its terms; for example, classifying a percentage of both spouses’ wages as separate property. A premarital agreement is also helpful if at least one of the two parties to a marriage has children from a previous relationship, for it can be used to preserve the children’s property interests as heirs and/or beneficiaries.
Up Next: Premarital Agreements (Part 2): Requirements and Limitations