If you’re engaged to be married, you may be wondering, “Is a prenup right for me?” No one gets married with the plan to later divorce, but statistics show that almost half of marriages end in divorce. Even if your marriage lasts well into old age, in many circumstances securing a prenuptial agreement is well worth taking the time for.
Think of a prenuptial agreement like automobile or other like insurance. No one ever plans or intends to get in a car accident, but we all purchase car insurance just in case because the odds are such that if you’re driving in the metropolitan Phoenix area, you’re likely to get in an accident one day—even if it’s not your fault.
If you are involved in a crash, your auto insurance will ensure that your liability to the other driver (if the accident was your fault), damage to your vehicle, and medical bills for any injuries will be covered.
Prenuptial agreements operate in much the same way: no one ever gets married intending on getting divorced, but, statistically speaking, the odds are that you might be one of the unlucky nearly half of married couples who do divorce – and if so, don’t you want an agreement that protects you and your assets and limits your liability to your soon-to-be ex-spouse? Similar to insurance, a prenuptial agreement protects you just in case.
What is a Prenuptial Agreement?
A prenuptial agreement is a binding document that is signed by you and your fiancé prior to marriage that determines how you will handle the division of assets and debts, spousal maintenance, and other matters, should you choose to divorce someday. To ensure that the agreement will be upheld and in line with best practices, each party must disclose their respective assets and liabilities that they are coming into the marriage with and each should retain their own attorney to represent them during the process.
Typically, one attorney will draft the agreement, while the other party’s attorney will help them review the agreement and negotiate terms. Once terms are agreed and the agreement is finalized, each party will sign it in the presence of a notary and an abstract or other notification of the existence of a prenuptial agreement (not the agreement itself for privacy reasons) will be recorded with the County Recorder’s office; this notification puts creditors and other third parties on notice that your finances may be legally separate from your spouse.
Arizona is a Community Property State
In Arizona, all property acquired and debts incurred during the marriage, regardless of which one of you obtained or incurred it, is presumed to be “community property”. According to the law, community property means that each spouse has an equal interest in such property or asset and equal responsibility for such debt incurred.
It also defines that any income, wages, commissions, or other monies (including contributions to your retirement plan or deferred compensation) earned during the marriage are considered community funds that you each have equal rights and use of.
With few exceptions, all community property is divided 50/50 during divorce—that means that your income earned, property acquired, and debts incurred, from the date of marriage to the date divorce papers are served, will be divided between you and your spouse.
With a Prenuptial Agreement, you have the option to waive, or even partially waive certain provisions of, Arizona community property law as it pertains to your marriage. You can opt-out totally, or just carve out an exception for certain assets, income or property to ensure those assets are protected from claims from the other spouse.
What is covered under a prenuptial agreement?
A prenuptial agreement can cover a multitude of issues concerning assets that you may want to protect in the event of a divorce. If you’re entering a marriage with any significant personal property, financial accounts, or a business, you will want to consider protecting those with a prenuptial agreement. Below is an overview of some of the items you can secure with a prenup:
- Real property and other personal property, such as your home or rental property; cars, boats, and other luxury items; extensive collections, such as coins, guns, or art; and priceless family heirlooms, such as jewelry, furniture, etc.
- Financial accounts and assets like bank accounts, stocks, security, brokerage accounts, savings accounts, retirement accounts, trusts, and inheritances.
- Businesses owned by you outright or in which you have an interest in.
Prenups and Spousal Maintenance
A prenuptial agreement can also how you and your spouse would like to handle spousal maintenance, also known as alimony, after a potential divorce. To avoid the uncertainty and expense of time-consuming litigation during the divorce, the parties may agree in their prenuptial agreement to waive any claims for spousal maintenance or specifically set and agree on the amount and duration of any spousal maintenance to be paid in the event of a divorce.
Prenups and Debts
Another issue that you can delineate in your prenuptial agreement is how you will handle debts incurred during your marriage. As stated above, Arizona community property law states that generally any and all debt incurred during a marriage is divided equally between spouses during a divorce regardless of which spouse incurred the debt or whose name it is in.
This can have significant ramifications such as if one spouse owns and operates their own business, it fails or runs into significant financial trouble, and the other spouse is now equally on the hook for these business debts. Or if one spouse has a spending issue racking up thousands of dollars in credit card debt, unbeknownst to the other, and now is being allocated half that debt in their divorce.
Situations like this can be financially devastating, particularly if you now have only 50% of the assets you used to have while you were married. Many couples opt to waive such provisions of Arizona community property law to avoid be liable for such debts in a prenuptial agreement.
Should I get a Prenuptial Agreement?
Prenuptial agreements can prove to be invaluable during a divorce or separation, both from a protection standpoint as well as limiting the contested issues to be litigated.
Although couples engaged to be married never plan to divorce, we never know what the future holds. If you have any assets or property that you want to protect and ensure that they remain yours and yours alone no matter what happens, it would be very valuable to secure a Prenuptial Agreement between you and your soon-to-be-spouse.
It can prevent future arguments and time-consuming and expensive litigation. Acquiring a prenuptial agreement is a relatively simple process, one that spending the time and money now could save you tens of thousands of dollars and significant mental and financial stress later.
To find out whether you’d benefit from a prenuptial agreement, or to begin the process of creating one, contact the attorneys at OWENS & PERKINS by calling our office at 480.994.8824 or click here to schedule your FREE 30-minute legal consultation.