As the name implies, a prenuptial agreement is an agreement put into place prior to the marriage. While many couples do not want to “prepare for a divorce,” it is helpful to think of a prenuptial agreement as being an alternative to the one used by the state of California. That's right. You already have a prenuptial agreement in place; it is just one you have no control over. The California Family Code decides how assets are divided, provisions regarding alimony, and how judges make decisions when it comes to divesting the marital estate. In this article, the Sacramento, CA, divorce lawyers at Wagner Family Law will discuss prenuptial agreements, what they can include, and how they work. 

Why Consider a Prenuptial Agreement? 

The current divorce rate in California is 50%. Divorces happen all the time. When they do, it is best to understand what happens to your assets during the divorce process. 

All property acquired during the marriage is considered marital property or part of the marital estate. California is considered a “community property state.” Other states operate on a process known as “equitable distribution.” In a community property state, the process for dividing marital assets is simple. The estate is divided 50/50 between the two spouses.

This does not mean that each spouse gets half of every asset. Instead, the entirety of the marital estate would be appraised, and each spouse would be entitled to half its value. 

However, one spouse may want to protect one or more assets that would otherwise be considered part of the marital estate. For example, if a spouse started a business during the marriage, they may want to keep the entirety of the business in their name. If so, they would have to ensure that it is considered separate property from the marital estate. 

There are numerous reasons why spouses consider getting prenuptial agreements prior to marriage. And it is not just for rich folks attempting to protect vast fortunes. Today, prenuptial agreements are more popular than ever. 

How Do Prenuptial Agreements Work in California?

In California, prenuptial agreements are governed by California's Uniform Premarital Agreement Act (UPAA). Under the act, a prenup is an agreement between two spouses that dictates what happens to their current and future assets after they marry. As a community property state, California typically divides all assets in half and distributes them between the spouses. Every asset that is acquired during the marriage is considered part of the marital estate and subject to distribution.

Without a prenuptial agreement in place, California law determines how the assets are split. A prenuptial agreement allows you to alter the law and establish your own rules. It gives you more control over how assets are distributed and what is considered to be part of the marital estate. A prenuptial agreement allows you to divide assets however you want. This does not necessarily mean equally. 

Couples can include financial interests, income, real estate, or even debts in a prenuptial agreement. For the prenup to be considered valid under the law, the couple is required to provide full disclosure of assets to one another before signing. This includes both property and debts.

California also requires that both spouses have at least seven days to review the final draft of the prenuptial agreement before signing. The state also requires that both parties be represented by their own attorney. Failure to comply with these rules will render the prenup unenforceable. 

Marital Assets and Debts and Your Prenuptial Agreement

In California, prenuptial agreements generally include language concerning the division of finances. Let's say that one spouse owns a home but is still paying the mortgage. Marital funds are going to be used to pay off the mortgage. Which spouse owns the home? 

Under California law, the matter is somewhat complicated. Since marital funds were used to pay off the mortgage, both spouses have equity in the home. Part of the home may be considered a part of the marital estate, while the rest is considered the separate property of one spouse. If that spouse wants to prevent the other spouse from gaining equity in the home, they can do so with a prenuptial agreement. 

Another situation that often finds its way into a prenuptial agreement is when one spouse has children from a previous marriage. This spouse may want to protect their children's rights to inheritance should he die. A prenup is a perfect way to establish the children from a previous marriage have inheritance rights. 

Alimony and Prenuptial Agreements

California law dictates how alimony (spousal support) is determined during a divorce.

Provisions related to alimony can be included in a California prenup. California generally has a formula that it uses to determine the amount and duration of alimony. However, you can include your own rules in a prenuptial agreement. This includes waiving alimony altogether. 

In other words, you can place a provision in your prenuptial agreement that completely takes alimony off the table. That means that neither spouse can request alimony from the court. 

Another way to handle alimony is with an equalization clause. In exchange for a waiver of alimony, one spouse might agree to make a lump sum payment to the other spouse. This can be included as a provision of your prenup.

A prenup can also include caps on the amount or duration of alimony. Typically, the court uses its own formula to determine the amount and duration of alimony. However, you can place a cap on both in a prenuptial agreement. 

Lastly, a prenuptial agreement can limit what sources of income are used to pay alimony. Generally, the court will look at various sources of income to determine alimony. If you want the court to avoid looking at certain sources of income, you can include this provision in your prenup.

What Can't Be Included in a Prenuptial Agreement?

A prenuptial agreement may never include provisions related to child support or custody, however. Such provisions would be deemed unenforceable by the court. The court alone oversees how custody is determined and what a non-custodial parent would have to pay in support. 

Talk to a Sacramento, CA Family Law Attorney Today

Wagner Family Law represents the interests of Sacramento residents who are interested in drafting a prenuptial agreement. Call our office today to schedule an appointment, and we can begin discussing your needs right away.