We get the question all the time: “Do I really need a prenup if I live in a community property state?” People in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) often ask us this question because they believe that the default laws of a community property state are just as good as a prenup. It’s a valid question! Below, we will discuss the good, the bad, and the ugly of both prenups and community property laws so you can make the call as to whether or not you should get a prenup in a community property state. Let’s dive in.
First, what is a prenuptial agreement?
A prenuptial agreement, commonly known as a prenup, is a legally binding contract entered into by a couple before their wedding day. It outlines the division of assets, debts, and other financial matters in case of divorce, separation, and sometimes the death of one spouse. Prenups can provide clarity and protection for both parties, ensuring that each individual’s rights and responsibilities are defined in advance. Not only that, but there are also emotional benefits to getting a prenup, such as facilitating in-depth communication about tough topics, aligning on financial goals, and setting expectations for each other in the marriage.
Benefits and drawbacks of a prenup
Prenuptial agreements offer several benefits. They allow couples to set their own rules and protect their finances as they see fit. This includes asset and debt division and spousal support. Prenups can also establish guidelines for other non-financial topics like pet custody, confidentiality, social media, and more. Not only that, but prenups also streamline a divorce, if you ever have to get one. Most of the divorce matters are already decided in the prenup, so you don’t have to spend time in the courtroom arguing about who gets what. Less time in the courtroom = less legal fees! Win-win!
However, there are also drawbacks to consider. Prenuptial agreements can sometimes elicit negative feelings from some people. Whether they think prenups come from a place of mistrust or uncertainty in the relationship, some folks simply want nothing to do with them. This can cause a rift in the relationship if there are some hard feelings about prenups. While many of the beliefs about prenups are unfounded, everyone has their own opinions on certain matters, and this may become a relationship issue you have to work out together. Additionally, prenups cannot address child custody or support issues since these matters are typically determined by the court based on the best interests of the child.
Understanding community property
Community property commonly refers to the legal framework that determines how property is divided in a divorce. The general framework is that assets and debts accumulated during the marriage are split 50-50, regardless of whose name is on it. There are very few exceptions to this rule, but it can vary from state to state. Each spouse has an equal share of the community property, regardless of who earned the income or made the purchase. For example, if one person worked 80-hour weeks while the other person stayed home and took up video gaming for fun, both people would generally still get a 50/50 share. This may be problematic to some folks, or it could be super beneficial–totally depends on your personal preferences and situation.
Pros and cons of community property
The pros of relying on community property laws (i.e., no prenup) are knowing that all of the assets and debts earned during the marriage will be split 50/50. However, beware that there are some exceptions to the 50/50 rule. For example, in California, there is an exception for student loans, and if they are taken out during the marriage, there are some cases where it may not be split 50/50. In addition, relying on the community property 50/50 rule may only be advantageous to some people, such as the lower earner. The 50/50 rule may actually be a “con” in some people’s eyes if they were the ones accumulating all of the assets during the marriage.
A con of community property laws is that it can be somewhat unclear what exactly constitutes community property that needs to be split. In other words, before the court can split your stuff 50/50, they first need to determine what is divisible (a.k.a. What is community property). If something is separate property, then it is not divisible. However, what the court deems to be separate property can be trickier. Things like commingling can derail your separate property. What you thought was your separate property and not divisible may actually be community property and split 50/50 because of commingling.
Getting a prenup vs. no prenup in a community property state
If you get an enforceable prenuptial agreement, you can override the laws of community property states. That means you do not have to abide by the 50/50 rule–you can make your own rules. Maybe you want to include in your prenup that anything you owned prior to marriage and anything you acquire in your name remains your property, defying the community property default rules. Or maybe you want to ensure all debt acquired during the marriage stays separate. Whatever the case, you can use a prenup to deviate from community property laws. Without a prenup, however, the court will likely apply default community property rules, meaning that most assets and debts acquired during the marriage will be split 50/50 regardless of who earned or incurred them.
Key difference: Prenup vs. community property
The main difference between getting a prenuptial agreement and utilizing your state’s community property laws lies in how you want your assets and debts to be divided.
It all boils down to one question: Are you okay with all property acquired during the marriage being split 50/50, or do you want to set your own rules?
A prenup allows couples to define their own terms, regardless of whether they live in a community property state or not. It can override the default community property rules, allowing for a more personalized approach to asset division. In contrast, community property laws automatically dictate an equal split of assets acquired during the marriage.
Factors to consider when deciding whether to get a prenup in a community property state
When deciding between a prenup and community property, several factors come into play. These include the financial situation of each spouse, the presence of significant assets or debts, the desire to maintain separate property, and the level of control both parties want over their finances. It is important for the couple to discuss their concerns, goals, and expectations openly to make the best decision for both parties.
Frequently Asked Questions (FAQs) about getting a prenup vs. community property laws
Q: Can a prenuptial agreement override community property laws?
A: Yes, with a prenuptial agreement, you can actually override community property laws, allowing you and your partner to define your own terms for asset division.
Q: Is a prenuptial agreement necessary for everyone?
A: A prenup is not LEGALLY required, but it is a personal choice. If you are totally okay with utilizing the community property laws, and leaving some uncertainty to the courts, then that is your right to choose (as long as your partner agrees).
Q: Can a prenuptial agreement address child custody or support?
A: No, nearly all states do not allow for child custody and support matters to be included in prenups. This is because the child’s best interest should (and does) take precedence over what the parents want.
Q: Are community property laws the same in all states?
A: No, even if you’re in a community property state, say, Texas, the laws can still be slightly different than the laws in California. However, the overall theme is that property acquired during marriage is 50/50. There just may be different exceptions or stipulations to this rule.
The bottom line on prenups vs. community property laws
Choosing whether to get a prenup or go with your default state laws is a personal preference. It all comes down to one question: Are you okay with a 50/50 split (with a few exceptions) or do you want to make your own rules? With a prenup, you can actually override the community property laws and set your own fate. For example, you can ensure any debt taken on by either spouse remains their separate debt instead of becoming community debt. Ultimately, you and your partner need to introspect on your own personal and couple goals, finances, and expectations, and make this decision for yourselves. Happy planning!
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
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