What is a Prenuptial Agreement?
A prenuptial agreement is a contract entered into before marriage between you and your intended spouse. The contract sets forth how your property and money will be divided in the event of divorce and upon your death.
While existing state laws stipulate how property is divided in divorce and in death, the courts allow a valid prenuptial agreement to supersede state law, in essence allowing you to replace the states laws with laws that you create to govern the disposition of your properties and assets. In other words you are taking away the state’s power and putting the control of your properties and assets completely in your own hands.
If you do not have a valid prenuptial agreement, state law will determine how your properties and assets are divided in divorce and upon your death. This includes properties and assets acquired during, and in some cases prior to your marriage.
In community property states all properties and assets acquired during the marriage are divided equally at the time of divorce. By way of example; if one spouse has worked during the marriage and the other spouse has not, the non-earning spouse will receive 50% of the total amount earned by the earning spouse at the time of divorce. Community property laws do not take in to consideration monies expended to support the parties’ lifestyle during marriage and deduct these amounts from the 50% that the non-earning spouse is entitled to. As a further example; If a earning spouse earned $100K per year during a five year marriage, 50% is equal to 250K and that is the amount payable to the non-earning spouse at the time of dissolution of marriage.
In equitable distribution states courts divide the marital assets that are in existence at the time of divorce. This distribution of assets need not be divided equally. The amount of assets that each party receives is based on the discretion of the court. It is in equitable distribution states where divorcing parties’ are encouraged to litigate in order to convince the court that a party is entitled to a greater share of the marital assets. As a result, it is in equitable distribution states where legal fees can be substantial.