A premarital agreement (also known as a prenuptial agreement or “prenup”) is an agreement you and your future spouse enter before marriage that becomes effective upon marriage. There are two types of premarital agreements that couples typically create.
The first type of premarital agreement has a default of no community property. You and your future spouse essentially agree to override California community property law by precluding the creation of community property. Why do this? So your property and earnings (and anything you acquire with your earnings) during marriage and before separation will remain your separate property. Of course, you can agree to add certain property and earnings that you would both like to be considered community property.
The second type of premarital agreement has a default of community property, but lists certain assets as separate property. This type of agreement maintains the character of separate property. Why do this? So separate property owned before marriage remains separate property after marriage, despite any factors that may otherwise cause a community interest to arise in the property. For example, if you own a home before marriage and during the marriage you use community income to add value to the home, a community interest may develop during the marriage under California community property law. However, if you agreed otherwise in your prenup, you would be able to eliminate that community property interest and ensure that the increase in value remains your separate property.
Regardless of which type of prenup works best for you, it is important to have an open, honest, and thoughtful conversation about your assets, debts, and goals before entering into a marriage. Meeting with a mediator to make decisions on what would happen to your property, assets, and debts should the marriage end may seem unromantic, but it is a financial and emotional necessity. Your mediator will help you save time and money by drafting an agreement before you meet with your respective attorneys to have it reviewed. Investing the time to discuss financial issues before entering into a lifetime commitment will create a greater sense of intimacy that you will both appreciate in the long run. Contact us today for a free initial consultation and to learn more about what can and cannot be included in your premarital agreement.
