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What Are the Effects of Prenuptial Agreements on a Divorce?

Discussing the possibility of divorce with a couple before a divorce is even remotely on the horizon, preferably while the couple is beginning to contemplate marriage is often advisable for high net worth clients. Planning at this stage of the relationship for the eventuality of a possible divorce is commonly believed to be the least stressful time to do so. With a wedding on the near horizon this often leads to a spirit of cooperation and each party is ordinarily more apt to be willing to compromise and negotiate reasonably, where by comparison, the same cannot be said during a subsequent period of marital strife.  The negotiate of a post marital agreement, is often, for this reason, met with antagonism which can be exasperated based on the course of the marital relationship to that point.

Why are Premarital Agreements Necessary?

Premarital agreements are extremely popular as tool to address the inherent financial risks associated with a divorce. The most common scenarios that create the need for a premarital agreement include:  couples that are possess disparate amounts of wealth, (2) one party does not intend to work, (3) the parties bring disparate amounts of debt to the union, (4) children exist from a previous marriage, (5) previous experience with a contentious divorce, (6) one party owns a business before marriage or owns an interest in a family business and (7) there are large anticipated inheritance, (8) one party owns a family home. In any event a premarital agreement is an excellent tool to legally pre define property expectations and rights in the event of a divorce which enables the couple to alter the default community property statutory scheme in the event of a divorce and put in place a specific plan that is appropriate to their customized circumstances.

How Does a Prenuptial Agreement Function?

A premarital agreement functions by enabling the parties to pre-characterize their current and expected future property, and any related income streams, as either non-marital or marital.  In California any non-marital property will not be considered part of the marital estate at divorce and thus will not be subject to a community property interest or allocation in the event of a divorce.

The two most common classes of non-marital property protected via a prenuptial agreement are (I) property acquired by gift or inheritance before and or during the marriage, and (2) property acquired by one of the parties before marriage and the party that owns it does not wish to convert a portion of the property into co-ownership with a new spouse. In the absence of a premarital agreement, marital property is ordinarily defined as all assets owned by either spouse during marriage or at divorce.