Prenuptial agreements go by many names. They are called marital contracts, premarital agreements, prenuptial contracts, and so on. There are different agreements, depending on when you create them. A prenuptial agreement takes place before the wedding. A postnuptial agreement happens when the couple is already married.
Often, people believe that these contracts are solely for the rich, but people of modest means can benefit from them.
The Stigma Around Marital Contracts
The 2003 comedy Intolerable Cruelty is almost entirely focused on prenuptial contracts. In the film, the Coen brothers create a world where marriages are used to rob people of their wealth. The film’s MacGuffin, the Massy contract, is an impenetrable prenuptial agreement that the characters use, abuse, and avoid.
While funny, the premise of this film helps enhance the stigma surrounding premarital contracts. People believe these documents serve only the wealthiest spouses. To be fair, this notion is not without merit. Certainly, a contract can protect a wealthy spouse, leaving the other with much less money after a divorce. (However, it should be noted that prenuptial agreements can be voided if one spouse is left completely destitute.)
There are, however, many other uses for these documents. Regular people with normal jobs can use them, too.
California operates on a “community property division” model. Put simply, when a couple is married, they share all property equally. Anything purchased during the marriage is considered a “marital asset.” The name on the lease and the property’s user don’t matter. “Separate property” is anything that was brought into the marriage. If you already owned your home, you can probably keep it after the divorce. Separate property also includes anything you inherit and gifts from people outside the marriage.
In a divorce, California courts attempt to split all assets equally, leaving each person with 50% of the marital property. Courts can order you to sell property and split the profits. Sometimes it hands physical property to one party, demanding they pay the other half the value of the asset. Other times, it achieves an equal split by making couples trade physical property until they reach an equal value.
A prenuptial contract can bypass this trading of assets. You can determine beforehand exactly who will own what. Let’s say you have a passion that your spouse doesn’t share, and vise versa. They collect antique dolls, and you treasure your vintage vinyl collection. Before the marriage begins, you can solidify the fact that the dolls will always belong to them, and the records will always belong to you.
This is just a minor example, of course. You can also make such decisions about cars, houses, and bank accounts. You can decide to share some things – making them marital property – and keep others – making them separate property. The combinations are limitless, and the choices are yours. With a marital agreement, you can have agency over what belongs to you.
Managing the Marriage
Often, people fall in love and marry, figuring out how to make it work as they go along. Love is powerful and wonderful, but it is often impractical. Marriage, ultimately, is a pragmatic partnership. There are many couples who, after their whirlwind romance, realize they don’t know how to live together. Creating rules and agreements as you go often causes strife, especially when trial-and-error causes those rules to change.
Through a marital contract, you can decide how to manage your union. Anything that is important to you can be included. You could, for instance, designate job roles. One partner hates vacuuming, and the other hates washing dishes. Consider that in your contract. It may sound insignificant now, but squabbles over house chores can turn into big fights. If it’s relevant enough to cause a fight, it’s relevant enough to put in writing. Making these decisions now can help you focus on what’s important, your relationship.
Deciding How Money Is Spent
Money is important to a marriage. Couples must make and spend it, a reality that never disappears. According to the University of Madison-Wisconsin’s School of Human Ecology, money is the 4th leading source of arguments in a marriage.
A premarital contract can create a system for spending and saving money. Married couples can create guides for spending. Some, for instance, use a percentage model. Totaling the income of both parties, they calculate who contributes what percent to that figure. Jim, for instance, brings in 45% of the household income, and Sarah is responsible for the remaining 55%. Using that calculation, they split all shared expenses accordingly. Jim pays for 45% of the light bill, water, groceries, etc., and Sarah pays the rest. If that model doesn’t work for you, you can make a cleaner, more obvious one. Each person pays for 50% of shared expenses, and they keep whatever else they make.
Whatever works for you, put it in your contract. Everyone will know exactly how the money is managed, and you won’t need to worry about it.
Raising the Children
You probably never considered creating a legally binding contract on how to raise your children. With a prenuptial agreement, you can do just that.
When making custody decisions, many states use parenting plans that give parents authority over certain decisions. For example, one parent has authority over healthcare, and the other makes decisions about education. A marital contract can do the same thing. Perhaps one spouse is a teacher, and the other is a nurse. You can designate decision-making power accordingly. In matters of discipline, you can designate one parent to be the one who “talks it out” with the kids, and the other creates and enforces penalties.
Setting Aside Money
Thus far, we’ve focused on how a contract protects and controls money. It can also be used to plan your savings. You can set money aside for college, retirement, investments, and so on. A prenuptial agreement can keep both parties financially focused. Neither will be able to touch the designated savings, allowing it to grow unhindered.
Planning for Dissolution
Creating this portion of a contract is uncomfortable. You want your marriage to last forever. Otherwise, you wouldn’t do it. Planning for a potential divorce certainly isn’t romantic, but it is practical. The divorce rate in the U.S. is currently falling. Recent statistics show that only 13% of marriages are ending in divorce. That’s an encouraging number, but it fluctuates. In the recent past, the divorce rate was as high as 50%.
Sometimes things just don’t work out, and you can plan for that possibility now. With a prenuptial contract, you can make the decisions that normally take place in divorce court. You can draft a plan for support, both child and spouse. You can decide how to divide property, debt, savings, etc. You can even draft a parenting plan that outlines custody, visitation, etc.
Making these decisions doesn’t have to be bleak. In fact, it can be comforting. Knowing exactly what will happen if you must end the marriage can save a lot of doubt and worry. It could even give you more freedom to end a bad relationship. Many people stay in unhealthy marriages out of fear of the unknown.
One of the best parts of a marital agreement is that it can be changed. Maybe your parenting plan isn’t working. You have discovered strengths and weaknesses in child-rearing that make the agreement hard to follow. You can write up a new contract, and go with that.
Earlier in the article, we criticized “making it up as you go.” Altering your contract may sound like the same thing. However, consider this. You and your spouse are about to change a legal document that, until this point, you’ve faithfully followed. Chances are, you won’t be flippant about altering it. You will have to renegotiate. This will probably take time, and you’ll want to get it right. You don’t want to keep redrafting the contract over and over. Writing a new contract is not the same as having an inconsistent, fluctuating home environment.
Contact our firm today for a consultation. We may be able to help you draft a prenuptial or postnuptial contract. Our number is (949) 565-4158, and you can reach us online.