Must I Have a Prenup?

Many people believe that a prenuptial agreement is the only way to ensure a simple divorce if wedded bliss turns to dissatisfaction, but such an unromantic legal machination is not always necessary.  A prenuptial agreement might be necessary if either spouse owns a company prior to marriage, but it is not necessary to preserve the intent of the partnership known as marriage.

Most individuals planning to marry would agree that they do not want an interest in the assets their spouse owned prior to marriage, but they do expect their marriage to be a partnership wherein they build a future together.  The concept of marriage is, in fact, a romantic version of a legal partnership.  Both husband and wife bring to the table different qualities, skill sets, and financial resources.  It is possible to ensure that both the intent of the marriage and the spirit of the partnership are preserved. Under Nevada law, the definition of separate property (as opposed to community property) is any property owned by either spouse prior to marriage or received by them during the marriage via gift, inheritance or bequest. Therefore, as with a legal partnership, each spouse comes to the marriage with their own respective assets. Complications in the event of the dissolution of the marriage partnership (divorce) can only come when there has been a commingling of the property each spouse brought to the marriage with property they acquired during the marriage.

The definition of community property under Nevada law is any and all property acquired during the marriage and any earnings from employment during the marriage. It is very easy for a spouse, particularly a spouse who loves their partner, to commingle assets owned prior to marriage with assets earned or acquired during marriage. Nevertheless, strict separation of separate property and community property can be every bit as effective as a premarital agreement. Moreover, merely keeping one’s premarital property separate from community property is far more romantic than asking one’s fiancé to sign a premarital agreement.

Generally, the assets that parties bring to a marriage are in the form of a savings account or retirement account. The simple way to ensure that your separate property assets remain separate in the event of a divorce is to leave the premarital holdings in the accounts in which they originally sat prior to marriage. New accounts can be opened, and any earnings during the marriage should be deposited into those new accounts. Depositing marital earnings into premarital accounts can create difficult tracing issues which could jeopardize the separate property character of premarital assets.

In the event either spouse owns a home which actually has equity, that spouse should be aware that the paydown on the mortgage and improvements on the house paid for with monies earned during the marriage, could create a community property claim on what would otherwise be a separate property asset. As it pertains to such a residence, it is also important to note that even if a refinance is sought during the marriage, any refinance that would obligate a party’s spouse to the mortgage will also require the property be conveyed into joint tenancy.  Most transactions of this sort create a presumption that the transfer was intended to be a gift.  For the most part, any transfer from a separate property account or asset into joint tenancy will be deemed a gift from the transferring spouse to the community.

Absent a premarital agreement, the best way to limit potential claims and litigation in the event of a divorce is to ensure that no commingling occurs and that the entirety of the marital estate is comprised of assets or income acquired during the marriage.  Nothing prevents one spouse from being generous with their separate property by conveying the same into joint tenancy, but it is important for that spouse to know that by doing so, he or she is creating a gift which will likely be enforced in the event of divorce.  By simply leaving premarital assets as they are after marriage, either party can obtain most of the benefits of a premarital agreement without destroying the romance of marriage.

John D. Jones, Esq.

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