Getting a Prenup vs. Community Property Laws

Jul 26, 2023 | Prenuptial Agreements

If you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) you may be wondering whether the community property laws are better for your situation than getting a prenup would be. Valid question! Below we will discuss the good, the bad, 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. 

 

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 for 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 in the way 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 of 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 refers to a legal framework that governs the ownership and division of assets and debts acquired during a marriage WITHOUT A PRENUP. So the laws of a community property framework would only apply if you do not have a prenup.

In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), all property acquired by either spouse during the marriage is considered jointly owned (50/50 split). There are very few exceptions to this rule. 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 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 utilizing your state’s default laws of community property is knowing that all of the assets and debts earned during the marriage will be split 50/50. This can bring you a sense of clarity in knowing what will happen. 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. 

Utilizing 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 is exactly 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 “splittable” (a.k.a. What is community property). If something is SEPARATE property, then it is not “splittable.” 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 “splittable” may actually be community property and split 50/50 because of commingling. 

 

Key Differences: 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 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. 

 

Conclusion

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. Ultimately, you and your partner need to introspect on your own personal and couple goals, finances, and expectations and make this decision for yourselves! 

 

 

You are writing your life story. Get on the same page with a prenup. For love that lasts a lifetime, preparation is key. Safeguard your shared tomorrows, starting today.
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