California is a community property state. This means that, by default, most property and income acquired during marriage belongs equally to both spouses, regardless of who earned the money, paid for the asset, or whose name appears on an account or title. Each spouse has a fifty-percent ownership interest in community property and equal rights of management and control during the marriage.
If a couple divorces without a prenuptial agreement, all community property must be divided equally, fifty-fifty. This rule applies even if one spouse was the sole wage earner, purchased the asset, or managed the finances. A prenuptial agreement allows couples to opt out of these default rules and decide in advance how certain assets, income, and debts will be treated. Through a prenup, couples may choose to keep some or all property as separate rather than community, meaning it will not be divided in the event of divorce.
Without a prenuptial agreement, California law generally treats as community property all earnings and savings accumulated during marriage, the increase in value during marriage of retirement accounts, investment accounts, stock options, and employment benefits, property purchased during marriage, real estate acquired during marriage, increases in equity of real property owned before marriage, increases in value of a premarital business, and debts incurred by either spouse during the marriage. How property is titled does not control how it is classified, and steps such as keeping separate bank accounts or placing assets in one spouse’s name do not, by themselves, prevent property from being considered community.
Certain categories of property are considered separate property under California law even without a prenuptial agreement. These generally include property owned before marriage, gifts received by one spouse during marriage, inheritances received during marriage, and income or profits derived from a spouse’s separate property. However, separate property can easily become commingled with community property during marriage, which may give the community an interest in what was originally separate.
For example, using marital earnings to pay down the mortgage on a home owned before marriage can create a community interest in the increased equity of that home. Similarly, depositing an inheritance into a joint or community account may cause those funds to lose their separate character. Because commingling often occurs unintentionally, a prenuptial agreement can be an important tool to preserve separate property and reduce uncertainty later.
A prenuptial agreement allows couples to modify or entirely opt out of California’s default community property laws. Through a properly drafted prenup, spouses may agree that certain property, income, or debts will remain the separate property of one spouse, even if they would otherwise be treated as community property under California law. This can include earnings during marriage, appreciation of premarital assets, business interests, real estate, and retirement benefits.
A prenup can also define in advance how property will be characterized and divided if the marriage ends. Rather than being subject to an automatic fifty-fifty division, spouses may agree to a different allocation of assets and debts, or designate specific property to remain with one spouse regardless of marital duration or contributions made during the marriage. These agreements can significantly reduce uncertainty, conflict, and litigation in the event of divorce.
Importantly, a prenuptial agreement can be used to preserve the separate character of assets that are especially vulnerable to commingling. For example, spouses may agree that a home owned before marriage will remain separate property even if marital income is used to pay expenses or improve the property, or that a premarital business and its growth during marriage will remain the owning spouse’s separate property. Without a prenup, these situations often result in complex reimbursement claims or shared ownership interests under California law.
A prenup can also address future income and acquisitions, allowing spouses to agree that earnings during marriage will be treated as separate rather than community property, or that certain accounts will remain individually owned. This level of advance planning gives couples clarity about their financial expectations and allows them to structure their marriage in a way that aligns with their personal, professional, or family circumstances.
When drafted correctly and entered into voluntarily with full financial disclosure, a prenuptial agreement is a powerful planning tool that allows couples to define their own financial rules rather than relying solely on California’s default marital property system.
