If you are a high earner or if you have valuable assets, or even if in the future it is highly likely that you will become a high earner or accumulate lots of assets, it is critical that you require your spouse-to-be to sign a prenuptial agreement, or what we now call a premarital agreement. A prenuptial agreement can protect you in many ways. Before you can appreciate the significance of a prenuptial agreement, first consider how Arizona community property law works. In Arizona, all income and assets received during the marriage are presumed to be community property.
In a divorce, community property is usually divided equally. The same principle applies to debt: if it was accumulated during the marriage, it is presumed to be community debt, and community debt is usually divided equally between the spouses regardless of which spouse incurred the debt or whose name that debt is in.
Here is just one sad example to drive home the point of what can happen to you if you don’t get a prenuptial agreement.
David marries Susan. David owned a house and a business. David is a hard-working, honest guy. Susan appears to be sweet and nice but little does David know – she’s had quite the past and is a bit of a party animal.
During the marriage, both the business and the house increased substantially because of David’s hard work. David spent many hours away from home building his business, and in his little free time, he made many important improvements to the residence using his own labor. He and Susan were married for 10 years. During the ten year period, Susan made little or no money. She enjoyed being a housewife, or so she says or so David thought. In fact, it turns out that Susan was cheating on David, having multiple lovers over the many years of their marriage. She was partying and he was working to support her secret lifestyle.
David eventually decides to divorce Susan, or even worse, Susan decides to divorce David – it doesn’t matter who initiates the divorce for purposes of this example. During the divorce case, it is determined that through David’s hard work and many hours of valuable time spent on his business and the home, the business increased in value from $100,000, to $1,000,000. Also, the increase in the home’s value directly attributable to David’s hard labor was $200,000. Poor David; I’d hate to have to break the news to him, but the reality is that Susan, the woman he loved and trusted but who slept with countless lovers behind his back and laughed at him for being so naive, is most likely going to get a court order requiring David to pay her a total of $550,000. Even worse, he may have to pay her spousal maintenance (alimony) of $3,000 (based on his income) per month for five years, during which time Susan is free to continue partying on David’s dime. David is not going to be a happy guy for a very long time. He will be an economic slave to his partying ex-wife.
What could David have done to prevent this problem? Other than having a crystal ball and therefore knowing that Susan would turn out to be quite the slut, he could have simply required her to sign a prenuptial agreement before marriage. In the prenuptial agreement it would state (and there is great flexibility in what a prenuptial can state, depending on the client’s objectives) that any money earned during the marriage, any asset purchased with it or before marriage, and any increase in its value, remains the sole and separate property of that spouse and shall not be divided in a divorce case. This would have saved David well over a half-million dollars (not even counting the likelihood that David may have to pay both his own attorney’s fees AND Susan’s attorney’s fees – over $30,000 combined)! David could have obtained a prenuptial agreement for the price of approximately $2,500 or less and having to deal with some initial emotional resistance from Susan, who probably knew very well from the beginning that she would be using this poor fellow for his ability to produce income. Even if Susan would have left him because of her “moral” opposition to the concept of prenuptial agreements, David would have been far better off without her.
Don’t get victimized! Instead, get yourself a prenuptial agreement before you marry someone. Many marriages end in divorce, sooner or later, no matter how much you may love your sweetie before marriage. Don’t become another victim of the family courts! Call us today for your prenuptial agreement, and warn all your friends to do the same. There are many victims like Dave every day in Arizona courts who could have avoided victimization with the simple use of prenuptial agreement.
But if you are facing a divorce and don’t have a prenuptial agreement, there is still hope for you. Come in and let’s roll up our sleeves and see what we can do to minimize the damage you may be facing.