Whether you are wealthy, your fiancé is in debt, or you simply see value in planning ahead, there are numerous reasons to consider entering into a prenuptial agreement in California. From addressing financial planning and tax considerations to the practicalities of married life, prenuptial agreements can serve a wide range of purposes, and soon-to-be spouses have broad flexibility in crafting contract provisions that are suitable to their unique personal, family, and business circumstances.
Typical Issues Addressed in California Prenuptial Agreements
While everyone’s circumstances are unique, there are a number of types of provisions that commonly appear in California prenuptial agreements. These include provisions that address the following topics:
- Ownership of Separate Property – Generally speaking, assets that one spouse owns prior to the marriage will remain that spouse’s “separate property.” This means that they are not subject to division in a divorce. However, complicated issues can arise when separate assets are used to acquire new property during the marriage (for example, if one spouse’s savings are used for a down payment on the family home), or when separate assets (such as privately-held business interests) grow in value between the time of marriage and divorce. In certain circumstances, spouses may agree that separate property shoul d be treated as community property as well.
- Pre-Marital Debts – If you or your spouse will carry a debt load into the marriage, will the indebted spouse remain solely responsible for repayment? Or, will both spouses contribute to satisfying the outstanding obligation? If both contribute, will the non-debtor spouse’s contributions be considered a gift; or, will the debtor be responsible to repay them in the event of a divorce?
- Accumulation of New Debt – If you and your spouse accumulate debt during your marriage, will you take on joint responsibility, or will the spouse with better credit carry the load? Will your spouse be obligated to pledge his or her separate property to help secure a loan? Will you have the option not to pledge yours?
- Education and Career Goals – Prenuptial agreements can address a variety of issues related to the spouses’ respective educational goals and career ambitions. For example, one spouse could agree to support the family financially while the other pursues an undergraduate or graduate degree. A prenuptial agreement could also dictate what happens if one spouse receives an out-of-state job offer, or the circumstances under which one spouse will agree to take on primary responsibility for raising the couple’s children.
- Businesses and Professional Practices – If you own a business or professional practice, do you want (or are you willing) to have your fiancé to play a role in the company? If you jointly start a family-owned business during the marriage, which spouse will get to keep the business in a divorce? For professionals, business owners, and entrepreneurs, these are often among the top considerations that support entering into a prenuptial agreement.
- Taxes – As a single filer, you have probably never given much thought to the “Married Filing Separately” and “Married Filing Jointly” check-boxes on your tax returns. But, now you will need to choose between the two. Your tax elections can have significant ramifications for your overall tax liability, and making decisions up front can help you avoid challenging tax-related issues down the line.
Along with these types of substantive issues, prenuptial agreements will typically address a number of procedural and practical considerations as well. For example, would you want the terms of your agreement to change (or become void) in the event of a material change in circumstances? Do you want the option to renegotiate the terms of your agreement after a certain period of time? Will certain financial or education-related conditions lapse after a specified number of years? These are just a small sampling of the many different options you will want to consider when putting together your prenuptial agreement.
North County, CA Family Law Attorney and Certified Family Law Specialist
If you would like more information about your options with regard to pursuing a prenuptial agreement, contact the Law Office of Renkin & Associates for a confidential initial case evaluation. To request an appointment, please call 619-299-7100 or submit our online case evaluation form