How Does a Prenuptial Agreement Work? – Ultimate Guide 2021

Understanding the Limits and Benefits of a Prenuptial Agreement

Getting married is supposed to be happily ever after, and for many, it is. However, many also choose to dissolve their marriage for a variety of reasons. Thinking about divorce while planning a marriage is not anyone’s idea of a good time, but planning for the worst-case scenario is a must.

Today’s couples are waiting to get married, and some get married a second time after accumulating some assets. Many older couples also have children from previous relationships or marriages. One of the best ways to ensure property gets divided fairly in the event of a divorce is to enter into a prenuptial agreement. Prenups also provide the chance to protect family assets and property and distribute assets and property to unrelated children or other family members.

California prenuptial agreements cover various aspects of wealth protection and distribution in the event of separation or divorce. Below we take a closer look at requirements for a California prenup, issues that spouses might include in their California prenup, and other considerations surrounding California prenuptial agreements.

California Prenuptial Agreement Requirements

The Uniform Premarital Agreement Act (UPAA) governs California prenups. The law states that written prenups automatically become effective when a couple gets married as long as both parties sign the agreement. Additionally, anyone who enters a prenup must be able to consent, and their consent cannot occur because of errors, coercion, or fraud.

In 2002, California amended the UPAA to include additional requirements. The state will only enforce a prenuptial agreement under the following conditions:

• Both spouses received complete information about each other’s assets and property before signing the prenup.
• Both spouses had at least seven days to review the agreement after receiving it.
• Each spouse had a separate attorney to represent them when signing the agreement.

A spouse does not need a separate lawyer to sign a California prenup if they received the complete terms of the agreement, including rights and obligations the agreement nullified. Additionally, the spouse has to sign a separate document acknowledging they received complete information, who provided the information and waiving their right to a lawyer.

Common Issues Addressed in California Prenuptial Agreements

Under California law, couples can include a wide range of issues in their premarital agreements. They include:

• Property division. The agreement typically specifies how property should be divided in the event of divorce, delineating what community property is and what is separate property. This is the part of most prenups that designates that a spouse keeps any assets acquired prior to marriage in the event of divorce.
• Property rights. Couples include who has the right to buy, sell, and encumber specific property listed in the agreement.
• Spousal support. Many California prenups include the terms of spousal support in the event of a divorce. If the terms are unfair, the court might not enforce this part of a prenup. Additionally, both parties MUST have an attorney when signing the prenup or any agreements about alimony or waiving one’s right to alimony is unenforceable.
• Division of retirement accounts. California prenups typically include how 401(K)’s, IRA’s, and other retirement accounts should be divided upon separation.
• Ownership of life insurance policies. Couples who have life insurance policies or intend to buy them when married can stipulate who owns the policy if they divorce. They must also decide how to divide any life insurance policies for their children.
• Beneficiary rights. For older couples, especially those who have children from previous relationships, including beneficiary rights in a prenup are crucial to ensuring family members get the assets and property a spouse wants them to have.
• Real estate. Most prenuptial agreements include stipulations concerning who gets the residence where a couple lives in the event of a divorce. Similarly, prenups include the division of other real estate, such as vacation homes or rental properties.
• Division of debt. Married couples accumulate debt such as car notes, credit card debt, student loans, and more. In a prenup, a couple can decide how to divide any liabilities they have if they get a divorce.
• Division of business interests. Sometimes couples start a business together, or one spouse starts a business on their own. In either case, couples can decide what happens to a business during a divorce. This might include a provision that forces one to buy out the other or to share a portion of profits for a specified period.

California is a community property state. In the absence of a prenup, couples must divide everything equally in a divorce. Anytime you want the outcome of a divorce to divert from what would happen under community property rules, you need to include that issue in a prenuptial agreement.

Items You Cannot Include in a California Prenup

Prenuptial agreements are created with the hope that divorce never happens but protect both parties if it does. Some assume that you can put any aspect of your marriage into a prenuptial agreement. This is not true. Some things are off-limits. Items you cannot include in your California prenup include:

• Waiver of rights for an ERISA-governed employee retirement benefit plan. Under federal law, only current spouses can waive rights, so you must make this agreement after you marry.
• Any illegal activity or stipulations that go against California or federal law.
• Child custody arrangements or any child support agreements that fall below the minimum amount required by law
• Stipulations that penalize one spouse for actions within the marriage, such as agreeing that if one spouse cheats, he or she gets no alimony or property.

Consult an Experienced Family Law Attorney to Draft Your California Prenup

Prenuptial agreements are a necessary evil that protects spouses who get divorced. You cannot put just anything in a prenup; it needs to be drafted with care and with regard to the law to ensure it’s enforceable. If you are considering a prenuptial agreement, the experienced attorneys at Pedrick Law Group, APC, can help your draft your initial document. We can also review a document presented to you by your fiancé and negotiate terms. Contact us online or at 818-325-3934 to discuss your needs.