By Daniel R. Gold, Certified Family Law Specialist, Managing Partner, Tredway Lumsdaine & Doyle LLP
An engagement is an exciting time in every couple’s life. This time includes wedding planning, life planning and financial planning. Wait…financial planning!? Although this may not be the most blissful part of a couple’s premarital planning, it is nonetheless important to consider finances when creating a long lasting union. This is most applicable to couples where one or both have acquired assets through work, business, gift or inheritance prior to marriage.
Most engaged couples who hear the term “prenuptial agreement” either cringe or nod with recognition of thoughts unsaid. Although it may not be the right decision for every couple, it is always a good idea to broach the topic – to encourage open lines of communication – prior to a walk down the aisle.
Planning for the future is something to be done with honest and open expectations between a couple, and should include a plan for all scenarios. The inclusion of a legally effective premarital agreement will provide an accurate picture of your spouse’s financial standings and expectations for marriage.
While bringing home flowers can be a wonderful surprise, things may not be quite so wonderful when a spouse brings home debt. Many couples either withhold, or are unaware of, their true financial situation. Going through the process of drafting and finalizing a marriage document such as a prenup, will encourage honest sharing of each other’s financial past and future expectations. It also provides couples with a blueprint of important provisions that need to be made in the event of the loss of a spouse, and limit unpleasant future financial discoveries.
Protecting Premarital Assets
There is no way around it. While marriage itself is an equal partnership, there is not always an equal distribution of wealth upon entering it. Whether the discrepancy results from a trust or successful professional ventures, it is important to define and protect your individual prior assets.
Although many couples share everything once married, having a legal document that outlines the property of each person will help with budgeting and distribution during the course of a marriage. Oftentimes, it may also help open the opportunity for a budgeting discussion.
Perhaps more critically, a prenup serves as a valuable blueprint to ensure that both parties have a certain expectations should the marriage end in divorce or legal separation.
Community v. Separate v. Mixed
Although the thought of sharing assets and a “what’s mine is yours” policy in your marriage is enticing, all couples should know there are different types of assets, which can be weighted differently if they ever need to be dissolved.
The three different types of property, or assets, to be considered are: community property, separate property and mixed assets.
• Community property is earnings and accumulation of assets that a couple acquires during the length of a marriage.
• Separate property includes: 1. All property owned by the person before marriage 2. All property acquired by the person during marriage by gift, bequest, devise, or descent
• Mixed assets may include some of each type of property – community and separate. Typically this happens where couples commingle or mix cash from different sources into one account or use separate funds to purchase a residence during the marriage.
A prenup can help determine how each of these assets will be treated during the marriage.
Insight into Personalities of Intended Spouse
Many people have heard the old adage “the first year of marriage is the hardest.” Working together to define assets and marital expectations before walking down the aisle will limit surprises and arguments often experienced during the first year of marriage.
The way prenup negotiations and definitions are dealt with will give a clear picture of how future compromises might be handled. This insight at the start of the marriage can help couples communicate more effectively and also be aware of what the other will value within the marriage.
Under certain financial and lifestyle situations a prenup also can provide protection, peace of mind, and can open important lines of communication. If you are considering a prenup in your marriage, here are three important tips:
1. Don’t do it yourself. Hire competent, experienced counsel.
2. Don’t wait until the last minute. Agreements prepared in a short amount of time are sloppy, rushed, stressful, and subject to more challenges when one spouse wants to enforce them.
3. Don’t try to force a one-sided agreement. Be generous even if it is solely for the purpose of ensuring there is less reason for the other spouse to challenge it should the marriage end in divorce.
About the author:
Daniel R. Gold, CFLS is managing partner at Tredway Lumsdaine & Doyle LLP (TLD), a longstanding Southern California law firm. With more than 20 years of experience, Gold practices family law exclusively and has participated in more than one hundred contested hearings and trials. Gold is certified by the State Bar of California Board of Legal Specialization as a family law specialist and is a member of the Los Angeles and Orange County Bar Association Family Law Sections and the American Bar Association. For more information, call 877-923-0971 or visit www.tldlaw.com.