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Prenuptial/Pre-Registration Agreements: Are They Right for You?

While a prenuptial agreement cannot limit your obligations of mutual respect, fidelity, and support, nor do away with your duty to deal with your spouse with the highest good faith and fair dealing under California law, it can be a useful tool to define your property rights during the marriage/partnership, as well as confirm the separate character of the property holdings you bring into the marriage.

While we tailor each agreement to the particular needs of our clients, here are some of the main issues that we address in our prenuptial agreements:

(1)  Defining your assets before marriage:  each partner may bring assets into the marriage that they want to confirm as their sole and separate property.  California law dictates that property you bring into the marriage remains your separate property, but complete disclosure with your partner from the outset can avoid waste of time and expense should the marriage breakdown.  In every prenuptial agreement, we require a complete disclosure and exchange of both parties’ lists of current assets and liabilities.  The agreement will confirm what is and what should remain as your sole and separate property.

(2)  Defining your assets during marriage: under California law, during registration/marriage, both of your earned incomes and/or jointly acquired assets from that income are community property.  The characterization as community property has special repercussions particularly upon divorce or death.  Upon divorce, your community property will be divided 50/50 between you and your ex-partner; and at death, absent any estate planning, the entirety of your community property passes to your partner upon your death.  A prenuptial agreement, however, can define whether or not you intend to create any community property during your partnership.  You may choose, with your partner, to keep your income, business interests, and retirement accounts, for example, completely separate.  Or, you may choose to have your salaries remain community property, but allow for contributions to your retirement accounts that you intend to be separate property.  A prenuptial agreement can allow flexibility in determining property characterization, and perhaps most importantly, it can set clear guidelines to make any dissolution proceedings simpler.

(3)  Rights to reimbursement: following from numbers (1) and (2), above, prenuptial agreements can also determine whether a partner has a right to reimbursement to any contributions they made throughout the marriage.  For example, if you purchase a house before the marriage with your separate property, but your partner contributes their separate property toward a major renovation of the house, or you are both paying the mortgage with your community property, you can determine, through your prenuptial agreement, what rights, if any, you or your partner has to reimbursement of the amount spent toward the costs of improvement and any appreciation in the value of the house as a result.  California law permits reimbursements of separate and community property, but a prenuptial agreement may contemplate specific probable situations for you and your spouse.

(4)  Spousal support: Under California law, there are numerous factors that a court will consider when determining whether to grant a partner alimony.  Many couples do not like putting their fate in the hands of a third party, and so they draft prenuptial agreements to allow themselves to determine an equitable way to approach spousal support.  Spouses/partners may choose to waive spousal support, provide a lump sum payment to a spouse with less earning potential, or even base any amount paid on the number of years they are married.  Drafting a spousal support provision in a prenuptial agreement is not mandatory, but it is another way that the parties can craft their own property division should their partnership dissolve.

(5)  Child support: whether you have children before marriage or during, a prenuptial agreement cannot serve as a waiver, or determine rights, to child support.  Child support obligations are set by state law, and it is against public policy for spouses to agree to any limits on child support payments.

(6)  Taxes: parties to a prenuptial agreement may also agree to file joint tax returns, even if they agreed to keep all their property separate during marriage.

(7)  Commingling of assets: in reality, during marriage, keeping your assets separate is never black and white.  A prenuptial agreement can serve as a roadmap in a situation where there was unintentional commingling of assets.  For instance, you may inadvertently put separate property money into a joint account or invest separate property in a community asset.  These are, of course, common situations, and your prenuptial agreement can help guide you and your spouse if you sell a commingle asset during marriage, or if you are determining the character of the property on divorce.

(8)  Other provisions: characterization of assets is the primary reason most couples want a prenuptial agreement, but an agreement between spouses can also provide details on, among other things, the character of any debt incurred during the marriage; the division of business interests acquired before and during marriage; and guidance over living and housing expenses.

A prenuptial agreement may not be in everyone’s interest, but, as you can see, it may be a useful tool for couples that recognize their fiduciary duties to each other, but want to craft their own agreement to suit their particular living situation.

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