When you’re beginning your wedding planning, it is important to discuss financial issues with your future spouse. Especially if you have substantial assets, investments, net worth, or if you own a business, you may want to consider a prenuptial agreement to help protect your financial interests. California’s divorce laws typically require you to split assets 50/50 upon divorce, so it is important to consider putting a prenuptial agreement or postnuptial agreement in place to avoid losing ownership of important assets.
What Does a Prenuptial or Postnuptial Agreement Do Under California Law?
Under California law, a divorce usually means dividing joint property 50/50. Unlike some states which allow assets to be divided “equitably” or fairly, California is a “community property state.” This means that all property acquired during the marriage is automatically owned jointly by the spouses, so all property is divided in half during the divorce. In determining what makes up each half of the property, the court totals the value of all community property and gives half to each spouse. This means that the parties do not need to divide each asset, but they can divide things up so that each person walks away with assets that total to the same value. If the parties cannot decide how to divide some items, they can be sold, and the proceeds can be divided in half instead.
Any assets you bring to the marriage are retained as “separate” or “individual” property. This property is always yours and is not divided with your spouse upon divorce. However, your spouse may still be entitled to share in the profits of any increase in value your individual property accumulates during the marriage. Additionally, any property or money that is intermingled with your spouse’s could become marital property, especially if you officially put your spouse’s name on it. This is common for joint bank accounts, investment portfolios, and property. Sometimes, property can even become intermingled by accident if you treat it as joint property.
A prenuptial agreement allows you to set solid boundaries as to what is individual property and what is community property. This can help you set aside things like investments, trusts, business dealings, and important high-value assets so you can keep them separate from your spouse’s property. You can also agree to intentionally share assets, like a house, guaranteeing your spouse a share in it if you get divorced. Premarital agreements can also allow spouses to agree to terms for spousal support and other factors. If you cannot agree on the terms of a premarital agreement, a postnuptial or postmarital agreement can do many of the same things, but it is signed after the marriage takes place.
