If you divorce without a prenup, your state laws determine how your assets are divided — and it might be less than ideal for both you and your spouse. Plus, you set the stage for what can be a lengthy and contentious court battle with your ex.
Here’s how divorcing without a prenup plays out.
What Happens If You Divorce Without a Prenup
Your Assets Are Divided By The Court
Without a prenuptial agreement, your state law determines the division of your marital property. States are divided into two categories: community property states and equitable distribution states.
In community property states like California, the presumption is that the court will divide your marital assets (any assets acquired or earned during marriage) right down the middle. In addition, the community can also gain an interest in premarital assets as well under certain circumstances. This means that if you bought a boat with money you earned during the marriage, your spouse is still entitled to half of the boat’s value. And if you used money you had prior to marriage to purchase the boat during marriage, the burden is on you to show that you entirely used premarital funds to purchase the boat. Conversely, in equitable distribution states, a judge will determine the “fairest” division of marital assets.
During the divorce, your attorneys will evaluate the value of assets accrued during the marriage and the community interest in those assets. This can include a time-consuming and expensive parade of real estate appraisals, forensic accounting, depositions, business appraisals, and tracing analysis of bank and financial statements. The judge uses this information to decide which person will take ownership of certain assets and responsibility for debts.
And if you don’t have a prenup with spousal support provisions, your state’s default family code may kick in. For example, in California, Family Code 4320 dictates the amount of spousal support that may be granted based on a number of factors. This can prove unfavorable for one partner and lead to further animosity.
On the other hand, prenuptial agreements effectively and efficiently determines how your assets are divided between you and your spouse if you are to divorce. Without these instructions, the court will have to step in, or you may incur thousands of dollars of attorneys’ fees to figure it out.
When you put the control in the hands of the court or battling attorneys, things can go south quickly. This could mean losing your house or paying off your partner’s debt — all because of the laws of your state.
BEFORE getting married, what conversations about MONEY should you have with your partner?
Use this guide to discuss budgets, assets, debts, goals, joints bank accounts and more.Get the guide
You Face a Longer, More Stressful Proceeding
Disagreements during divorce open the door for animosity and “he said, she said” arguments. You may not even realize you felt a particular attachment to your things until you lose ownership of them.
The point is: you never know when things might get ugly in a divorce. You can waste considerable time and money arguing over something that could have been avoided if they were outlined in a prenuptial agreement beforehand.
There are a myriad of hypotheticals here, but that’s the power of the prenup. It eliminates most of the gray area and reduces the risk of falling into financial ruin over an upended relationship.
How A Prenup Can Help
Crafting a prenup agreement with your spouse-to-be will protect your assets and spark meaningful dialogue with your partner.
Who will get the dog if you divorce?
Will you keep your new car as separate property and pay for it with your individual account?
Who takes the vacation rental?
What will be your and your spouse’s contributions to a joint account?
Answering these questions in advance sets a clear line of communication and prevents potential stress and heartache.
Most importantly, creating a prenup is a secure way to facilitate the money conversation. Financial woes are common contributors to divorce. A prenup sets you up for success by forcing these conversations early on.
A Prenup Establishes Expectations, Roles, and Responsibilities
Start your marriage on the right foot by discussing your income and how spending and saving will be handled.
If your spouse makes more money than you, consider asking them to contribute more to your joint account. Or, if you make a significant purchase (e.g., a house) with your own earnings, you can include a clause that grants you complete ownership of the house in the event of a divorce.
Similarly, your spouse may be more liberal with the credit card, or perhaps you’re bringing a considerable amount of college debt into the relationship. A prenuptial agreement can state that each of you will be responsible for the debts you each incur during marriage. Whatever your situation, understanding your existing debts and respective spending habits establishes a roadmap for how to move forward.
These conversations clear the smokescreen around your financial standing and expectations.
Remember – it’s not spending that causes divorce – it’s not talking about it that does.
Nip financial disagreements in the bud by establishing a prenup and laying out your collective expectations around spending and saving.
What If You’re Already Married?
You’re already married and don’t have a prenup. Does this mean you’re destined for financial ruin if you divorce?
Absolutely not! Under the proper circumstances, a postnuptial agreement operates similarly to a prenup but occurs after you say, “I do.”
Whether everything is rosy with your partner or you’re concerned about their financial habits, you can still establish legally-binding parameters around spending and saving after marriage.
A postnup ensures it’s never too late to have meaningful, and sometimes marriage-saving, conversations around money – and avoid all the hassle of drawn out, and sometimes ugly, conflict during divorce.
Prenups Strengthen Marriages
Prenups may not be required for marriage, but they do save considerable time, money, and stress in the event of a divorce.
More than this, prenuptial and postnuptial agreements are conduits for productive conversations with your spouse. They eliminate ambiguity around your finances and allow you to enter the marriage with extra care and respect.
Schedule a consultation with me today to discuss how a prenup or postnup can strengthen your marriage, avoid future conflict, and pave the path to long-term marital success.