Q: My husband just brought up that he wants a prenup. I have always said I would never sign a prenup and I feel like I am planning for my marriage to fail before it starts. It just feels icky. What should I do about the prenup?
Let me address this by sharing some of the things I heard from my clients when I was a divorce attorney:
"I feel like I am divorcing a completely different person than I married."
"I feel like I don't even know this person at all."
"I wish we had a prenup." (Yes I really heard this - often!!!)
The consistent theme that was echoed by nearly all my divorce clients was that the person they fell in love with and married was not the same person they were divorcing. This can be troubling and disorienting when someone you love and trust turns into a stranger and starts behaving in ways that are completely incomprehensible to you. Money makes people insane. The emotional pain of conflict, or infidelity, or any other situation that could lead to a divorce, also makes people behave in previously unimaginable ways. The bottom line is that you can know someone inside out and trust them completely today, but to say that you will absolutely know someone 20 years from now, or know how they will behave in all situations in the future, is to turn a blind eye to human nature. People change. People grow apart. People can be unpredictable. It happens, and it is perfectly normal. There is a reason that 50% of marriages end in divorce! (If you live in Los Angeles, that statistic is closer to 75%.)
Absolutely no one enters a marriage planning to get divorced, and people who choose to get prenuptial agreements are not planning to divorce any more than anyone else. The only different between people with prenups and people without prenups is that the people with prenups will have a significantly easier, more amicable, and inexpensive process should they divorce.
Takeaway: Get a prenuptial agreement now, when everyone is happy and in love, and it will makes it a lot easier if things get ugly in a divorce.
Q: My spouse will be punished by the courts in our divorce if they cheat or do something else that causes our divorce, right?
Many people assume that if a marriage ends because one person "wrongs" the other, i.e., cheats, that can be taken into consideration in a divorce when dividing up assets, and making other decisions, like when it comes to custody of children. This is not the case in California. California is a no-fault state, which means that you do not need a reason or any wrongdoing in order to get a divorce, and one spouse's bad behavior is irrelevant when it comes to dividing assets. So, do not assume that if your marriage ends because someone does something awful, that awful person won’t still get half of everything – without a prenup, they will. (Note - the only exception to "fault" is that custody may be influenced by one spouse's domestic violence against the other.)
Q: My husband and I do not have any assets, so why would we need a prenup?
A prenup has very little to do with the assets you come into the marriage with. In California, all of your earnings and assets from before the marriage are considered separate property, and would remain yours if you should divorce. Each of your premarital assets do not magically transform into community property just because you get married. Now, keep in mind, is that it is very easy for separate property from before the marriage to become community property during the marriage through what is called "commingling." Commingling happens when you mix separate and community property (i.e., using a bank account with funds from before the marriage to pay for community expenses like rent and groceries, and depositing community funds like your paycheck, into it), such that the asset transforms into community property. While it may be able to separate out separate from community property through what is called "tracing", it is difficult and expensive, usually requiring a forensic accountant (depending on the extent of the commingling and length of marriage).
To summarize, everything you come into the marriage with is yours, and is separate property, period. However, it is very easy to accidentally commingle separate property with community property. A prenup will protect your separate property from becoming community through commingling.
And finally, you may not have assets now, but unless you have a crystal ball, you have no idea how much money you or your spouse will end up earning, or what kind of assets you may acquire in the future while you are married. Do you both plan on never having anything of value? Life can be unpredictable, and that is the fun part! Here are some examples of what could become community property in the future:
- Your pensions, retirement accounts, 401K, any stocks, interest on accounts, etc.
- Lottery or any other winnings - hey, who knows!
- Proceeds from a lawsuit settlement.
- surprise inheritance from long-lost family member (by default inheritance is separate property even if received during a marriage, however, it is subject to the same risks of commingling, outlined above).
Takeaway: Life is long, and hopefully so will be your marriage, and it is impossible to predict the future. Ask yourself if you could have predicted everything that has happened in your life so far. If the answer is yes, then maybe you can predict the future! For everyone else, consider a prenup to make sure you protect not just your current but future assets.
Bonus info: Debts are also community property and I have done divorces where the only thing to divide was debt. Even if you did not rack up the debt, you're responsible for it if your spouse did. And if the community debt outweighs the assets, you could leave the marriage owing money rather than having any to start your new life. Prenups can, and commonly do, prevent your spouse's debt from becoming your own. So even if you are 100% sure you will never be rich (and I hope this isn't true!), can you truly be 100% sure you and/or your spouse will never go into debt? Medical expenses, home market crashing, economy troubles, and many factors entirely outside your control can lead to significant debt.
Q: We have no plans to ever divorce/ divorce is not an option for us/ we do not believe in divorce, so why would we get a prenup?
I have heard these various sentiments a lot, and it always blows my mind. Who in the world plans to divorce? I hate to break it to you, but not planning to get a divorce does not make you special - it makes you normal! No one plans for a tree to fall on their home, to get in a car accident, or to get sick - yet we don't bat an eye at buying homeowners insurance, car insurance, and health insurance. Think of a prenup as marriage insurance, and it is no more planning for your marriage to fail than health insurance is planning to get sick. It is just acknowledging that life is unpredictable, and sometimes out of our control, and about minimizing the impact an unexpected event (like an accident, or a divorce) will have on your life and finances.
Also remember that when it comes to divorce in California, it is not always up to you. Unfortunately (or fortunately, depending on which side you are on), one spouse can divorce the other without their consent, or even participation in the process. Unlike some states, California is a "no-fault" state, which means you do not need a reason to get a divorce.
Takeaway: A prenup is insurance for your marriage. And remember, if you never divorce, your prenup will never see the light of day and is irrelevant anyway. Better to have one and not need it, then need one and not have it.