What is a Premarital Agreement

What is a Premarital Agreement, two people holding hands with wedding rings

By Amanda D. Singer, Esq., CDFA®, MDR

You may or may not have heard of a premarital agreement (also referred to commonly as a prenuptial agreement or prenup and I will use them interchangeably throughout this post) but if you haven’t and you’re getting married or thinking about getting married then it’s important for you to understand what they are and how they can benefit both you and your fiancé. As a San Diego prenup lawyer and mediator I have experience negotiating and drafting premarital agreements.

What are the requirements for a valid prenup in California?

There are a few different requirements for a premarital agreement to be valid in California. Now these vary state by state since family law is state specific but many of these are the same no matter what state you’re located in:

  • Prenups must be in writing and signed by both parties.
  • Each party must have consulted with their own independent attorney to have the agreement reviewed and explained to them in detail prior to signing.
  • Both parties must fully disclose their assets, debts, income and expense to each other.
  • There must be at least seven (7) days between when the parties receive the final draft agreement and when it is signed and must be signed before the wedding date.
  • The agreement must be entered into voluntarily.
  • Both parties must have capacity to contract and there must be no duress, fraud or undue influence.

What exactly is a premarital agreement?

Now that you understand the requirements for a valid premarital agreement you may be wondering what exactly it is. A premarital agreement is an agreement between future spouses around how they want to handle certain things, especially financially during their marriage and what would happen if the marriage were to end in divorce or death. Prenuptial agreements do tend to have a negative connotation and a stigma attached to them, which is part of the reason that we like to refer to them as premarital agreements instead. They can be a great way for you and your future spouse to discuss the important financial implications of getting married and put in place certain agreements in the unfortunate case that your marriage ends in divorce.

You might not realize it but if you don’t have a premarital agreement, you do it’s the family code of whatever state you’re in and if you live in a state such as California then it’s the community property laws which means each spouse automatically has a 50% interest in all assets acquired during the marriage. This includes any earned and even some unearned income, business earnings, retirement, and more unless it were separate property (prior to marriage or gift or inheritance during the marriage). For some couples, this is perfectly acceptable. However, for couples that own businesses or have specific financial complications, this may be devastating. Without a prior agreement, you lose a lot of control over your divorce process. Your dissolution could turn into a long and costly battle. Most people would prefer to decide for themselves what would happen to them financially if they were to get divorced and a prenup allows you to do that.

I like to look at a premarital agreement like insurance. Just like nobody plans on getting divorced, nobody plans on getting in an accident and having high medical bills, yet we still have insurance in case we do. I don’t think that my house will burn down, but you sure bet I have homeowners’ insurance in case it does happen, and I know that your financial advisor will always recommend different forms of insurance. A premarital agreement is there IN CASE the marriage doesn’t work, and you end up needing to get divorced. I tell my clients that we’re doing this and then you’re going to put it away and plan on never looking at it again. But if you do need it the agreement details how you want to handle things in the unlikely case that you guys don’t agree and end up in a lengthy court battle. Now I often hear from people “well we wouldn’t be like that if we got divorced” but the truth of the matter is you just don’t know. While you can say that you would never take your spouse to court and would be reasonable you don’t know how you’d feel in that situation, especially if infidelity was involved. Would you still want to be nice and work with them, or would you be focused more on getting back at them?

Like I said before nobody gets married planning to get divorced, but the reality is that while the divorce rate has been slightly decreasing it can still happen. Now the divorce rate varies depending on so many different circumstances, such as where you live (in California, Orange County has one of the highest divorce rates), how old you are when you get married (the younger you are the higher likelihood of divorce) and whether it’s a first, second or even third marriage (the rate increases for each marriage with a whopping 75% of third marriages ending in divorce). Now it might sound crazy but one of the advantages of a premarital agreement is that it precedes happy marriages and people are less likely to get divorced if they have a premarital agreement than if they don’t. You’re establishing a framework for problem-solving that will form a solid and secure basis for your future marriage so you’re less likely to end up divorcing. Working on a premarital agreement with your future spouse, especially through mediation, forces you to communicate about things that you may not have known about the other person.

What can be discussed in a prenup?

One common question many people have is what can be discussed in a prenup, and the basic answer is that almost anything can be! The only things that can’t be in a prenup would be anything that is void of public policy or deals with children, such as limiting spousal support or custody down the road. Here are some of the things that can be discussed:

  • Defining separate and community property assets/debts
  • Premarital assets and debts
  • Marital property
  • Management of assets and income
  • Real Property (current and future)
  • Retirement Assets
  • Investments
  • Credit and Debt
  • Spousal Support (also known as alimony)
  • Gifts from Families
  • Inheritance
  • Taxes
  • Duration of a premarital agreement
  • Business ownership
  • Estate Planning

Top Tips for a Premarital Agreement

Now that you have a better understanding of what a premarital agreement is and what can be discussed here are some top tips I have to share for an agreement.

  • Start early.
  • Think about how you broach the topic with your fiancé.
  • Understand what their interests and concerns might be so you can explain how a prenup will benefit both of you.
  • Understand it can be awkward and uncomfortable to talk about but they’re important conversations you’re having.
  • Make sure you have a good prenup lawyer or mediator who does prenups regularly.
  • Make sure your fiancé has an attorney as well (if there’s an income different you may want to pay for your fiancé’s attorney if that is a concern).
  • Address inheritance issues as well as divorce/separation.
  • Using mediation can help your fiancé be on the same page as you especially if they’re hesitant or don’t understand the process very well.
  • Make sure you both follow ALL requirements.

If you are interested in learning more about a premarital agreement or talking about premarital financial planning, contact us to discuss how we can assist. Also check back next month when I’ll be joined by FlightPath Financial Planning owner Mike Farrow (who just happens to be my Husband) where we will discuss the importance of premarital mediation and premarital financial planning for your marriage. Coming from a couple who has professional experience as a mediator and Certified Financial Planner® as well as the practical experience of having these conversations, drafting a prenuptial agreement, and planning for our own financial future.

Amanda D. Singer, Esq., CDFA®, MDR is professional family mediator and co-owner of West Coast Family Mediation Center, located in San Diego and working with clients all throughout California on divorce, premarital, marital and parenting mediations. She is also a licensed attorney and a Certified Divorce Financial Analyst. Amanda was the past Vice President of the Academy of Professional Family Mediators and was the awardee of the 2022 APFM Outstanding Professional Family Mediator Award.

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