Reasons to Have a Prenuptial Agreement (Not Related to Divorce)

A prenuptial agreement allows couples to opt out of the California Family Code in part, or in whole, by reaching their own agreement about their financial affairs – during the marriage as well as in the event of a divorce. Most people think that when a person wants a prenuptial agreement, that person is exhibiting little faith in the success of the impending marriage – but, this is not necessarily the reality.  Here are some non-divorce related reasons to have a prenuptial agreement.

Clarify Expectations in the Marriage. Before marrying, many people do not discuss what their financial expectations will be during the marriage, especially if one person owns assets coming into the marriage.  For example, if one person owns a home before marriage, does each person fully understand how that home is treated in the event of a death or divorce?  Does one person believe the home automatically becomes community property to be shared equally following the date of marriage (it does not!)? What about expectations concerning work and children – does one person expect to stay at home full-time raising children, and is this agreed to by the other?  The questions go on and on, and if these issues are not discussed before marriage, I have yet to meet a couple who did not discuss and even disagree about them after marriage.

Create a Customized Marital “Contract.” If both people understand each other’s expectations of themselves and the other person prior to marriage, it will help them decide whether or not to proceed with the marriage. Moreover, this conversation can reduce the financial tensions during the marriage, should the marriage occur.  If it is determined that California law does not align with the couple’s goals and expectations for their marital financial future, then a prenuptial agreement should be prepared to guide their financial lives according to their wishes.   There should then be no or little reason to argue during the marriage about finances and expectations about property because those understandings have been memorialized in writing – just like any contract guiding any significant professional or business relationship.

Answer Key Financial Questions. Here are some more common examples of non-divorce issues related to finance, which can be addressed in a prenuptial agreement:

  1. Whether to file joint or separate income tax returns.
  2. Who will pay the household bills — and how.  Will there be separate bank accounts, joint bank accounts, or both?
  3. If, how and when to make specific purchases or commence certain ventures, such as buying a house together or starting up a business.
  4. How to handle credit card charges — for instance, whether to use different cards for different types of purchases, what kinds of records to keep, and how to make payments.
  5. Agreements to set aside money for savings, including children’s college expenses.
  6. Agreements for putting each other through college or professional school.
  7. Whether and how a spouse will provide for a surviving spouse –  for example, in an estate plan or with life insurance coverage.

Establish Future Protection from Creditors.  Without a prenuptial agreement, the law gives creditors certain rights to pursue certain assets in order to collect debts owed by either spouse, whether those debts were incurred before or during marriage.  Assuming the prenuptial agreement is not being created to avoid a present and existing debt or judgment (which could potentially be considered a fraudulent transfer), a prenuptial agreement can assist in lawful asset protection and financial planning in the event of a future significant liability. Such planning can provide some financial reassurance to the couple, knowing that they have done what they can to ensure financial solvency in the event of a significant liability during the marriage.

Conclusion.  Prenuptial agreements are not only about divorce, they are very much about striving for a healthy and long marriage.  The more a couple understands their mutual expectations, the greater likelihood of a successful marriage.  Why shouldn’t a prenuptial agreement be part of the happy couple’s pre-wedding planning?