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The Impact of Prenuptial Agreements on the Division of Assets in a Divorce

by | Jan 30, 2024 | Property Division

In a California divorce, assets are split based on state law. California is a community property state, which is not the norm. Most states use equitable distribution laws, meaning that assets are split fairly but not necessarily 50/50. In California, all marital assets and debts belong to both parties, so they are split 50/50 in a divorce. 

However, it does not necessarily have to be this way. Many people, particularly those with a significant amount of assets, use prenuptial agreements to guide them through the asset division process in the event of a divorce. Prenuptial agreements are drafted before marriage and are a couple’s opportunity to decide what will happen should a marriage end rather than relying on state law.

In the past, prenuptial agreements were seen as cold and controlling. How can someone plan for divorce before they are even married?

It’s called being smart with your money. Many celebrities and other wealthy people have lost tens of millions of dollars in divorces by not having a prenuptial agreement in place. 

However, prenuptial agreements are not just for the wealthy. Even if you’re not a millionaire, you could benefit from having this document in place. Prenups can do the following:

  • Keep family wealth within the family and protect it for many generations. 
  • Establish a set of rules governing the disposition of wealth upon the dissolution of a marriage (Keep in mind that all marriages end at some point, whether it be by divorce or the death of a spouse). 
  • Provide an opportunity for a couple to discuss finances in a productive way and to create a joint philosophy regarding wealth. 

What You Need to Know About Prenuptial Agreements and Division of Property

While prenuptial agreements cannot enforce anything related to children (such as child support and custody matters), they can be used to manage who pays various bills, expenses, and debts. They can be used to determine who pays off the student loan and other educational expenses. Prenuptial agreements can also be used to determine whether or not alimony will be allowed in a divorce, and if so, how much.

Most commonly, though, prenups are used to enforce property division. In community property states like California, assets acquired after marriage are owned by each spouse equally, regardless of title. Assets acquired before the marriage, on the other hand, are usually characterized as separate property. Assets considered marital property are typically subject to division in a divorce, while assets considered separate property are generally not subject to division. 

A prenuptial agreement is useful because it can change the rules of state law with respect to the division of property. The agreement can do the following:

  • Define which assets are separate property not subject to division
  • Limit what property (or how much value) may be allocated to a spouse
  • Include a sliding scale, with more property being allocated to a spouse in a longer marriage
  • Provide some other division unique to the couple and their assets. 

Considerations

You can use a prenup to divide property how you see fit, as long as you and your partner are both on the same page. However, the prenuptial agreement needs to be fair to some degree. For example, you cannot have a prenup that states that one person gets 100% of the assets while the other gets nothing. A prenup cannot leave someone homeless or destitute. The goal of most divorce settlements is to ensure nobody has to use government benefits. That is why alimony is often a factor.

It is possible for a prenup to be thrown out of court. The following can make this document more likely to be enforced in court. 

  • Disclosure. Failure to fully disclose assets when preparing a prenuptial agreement may jeopardize the validity of the agreement. 
  • Timing. A court is more likely to uphold a prenuptial agreement when the parties have had adequate time to review the terms of the agreement. When a prenup is executed just days before a wedding, it is more likely to be deemed invalid.
  • Counsel. Each person entering into a prenuptial agreement should be represented by their own attorney. It is unethical for a lawyer to represent both parties. 

Contact Us Today

Prenuptial agreements are often seen as cold and unromantic, but marriage is like a business transaction. In the event of a divorce, things can go sour quickly. Without a prenuptial agreement in place, conflicts are sure to arise over property division.

Divorce is complex. The Law Offices of David M. Lederman is here to help. We understand the law and the complexities inherent in the process. We are happy to discuss divorce-related issues in California. To schedule a consultation, give us a call at (925) 522-8889 or fill out the online form

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