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Prenuptial agreements in community property states

On Behalf of | May 4, 2020 | Firm News

In community property states like Washington, assets acquired by either party during marriage are generally considered to be community property, meaning they must be split 50-50 in a divorce. Not all property has to be subject to an equal split. Before marriage, couples can choose to sign a prenuptial agreement that explicitly states which spouse will be entitled to certain assets upon separation.

If a person establishes a business before marriage, it is a good idea to discuss how the value of that business will be divided in a divorce whether it appreciates or depreciates. If the other spouse does not plan to work for the business or do anything to help maintain the business, the titled spouse will probably not want to give up 50% of the business in a divorce.

If, by contrast, the couple plans for the non-titled spouse to work for the business or to put his or her own money into the business, they should discuss how they would divide the business or the value in the business if they were to separate. Parties should also consider indirect contributions, such as staying home with children so that the other spouse can freely run the business. It is also a good idea to assess the value of separate property before marriage if two partners believe that it could later become co-mingled with community property funds.

Though some couples may not like the idea of “planning for a divorce,” preparing a prenuptial agreement together is a good way to set expectations early on, such as deciding how much a non-titled spouse should contribute to the other spouse’s pre-existing business. A Washington-licensed family law attorney may help by drafting the agreement and ensuring that the agreement is fair to both parties.