Pre/Postnuptial Agreements (1)What is a Prenuptial Agreement and Who Needs It?
What is a Prenuptial Agreement?
From rap songs to chitchat around the water cooler, you may have heard the word “prenup” being thrown around, especially if a wedding is on your horizon. But what exactly is a prenup, and more importantly, do you need one?
A prenuptial agreement (commonly referred to as “prenup”) is a legally binding contract entered into by two people before they are married. The purpose of this contract is to address the separation of property in the event the marriage ends. Per Family Code Section 1610, “property” is defined as an “interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.” So basically, almost anything of value. A prenup sets forth exactly what each spouse will get if the marriage ends, and can be used to protect your assets and other such property.
Who needs a Prenuptial Agreement?
Prenups are not limited to only the rich and famous. In fact, they are recommended for virtually anyone who is planning on getting married. While contracts aren’t exactly the most romantic thing, prenups are a necessary measure to protect yourself against unwanted debt and other financial obligations if your marriage ends.
In California, the community property law states that any property acquired during a valid marriage is community property. This means that any property (including businesses, cash, stocks, and even pets) is to be divided equally by the court. For example, let’s say you own a business prior to your marriage. During the marriage, your business happens to triple in revenue. This increase is considered community property. If you end up divorcing, your spouse will receive a large part of that business equity, even if he or she has no formal ownership of the company.
Some couples might be reluctant to talk about money and contracts before their wedding, but most will find that having a prenup actually gives them some peace of mind before saying “I do.”