Should Your Prenup Have a Sunset Clause?

Prenuptial agreements have become increasingly common among couples in California — they’re no longer considered something for high net-worth individuals or the ultra-wealthy. Also referred to as “prenups,” these types of contracts set forth the guidelines as to how property should be distributed in the event of divorce. However, you might be wondering whether a prenup can expire after you’ve been married for a certain amount of time. With a sunset clause, a prenup can become void on a specific date.

What is a Prenup?

A prenup is an agreement made between future spouses before the date of the marriage. It typically lists all the property owned by each person and specifies what should happen to it in the event the marriage does not work out. Importantly, it also gives the parties an opportunity to understand each other’s financial situation and the chance for the couple to work together to create an economic plan for their marriage.

Not only can a carefully crafted prenup help to avoid lengthy and costly litigation should the couple decide to part ways — but it can also build trust and establish expectations. By compelling soon-to-be spouses to have a financial discussion, prenups can open the lines of communication and ensure that both parties are on the same page. Prenups can also be used to provide for children from prior relationships, keep a family business separate from the couple’s shared estate, and determine how debts brought into the marriage will be handled.

What is a Prenup Sunset Clause?

A sunset clause in a prenup defines the date or occurrence upon which a prenup should be rendered void. Sunset clauses can be arranged in any way in which the couple wishes. For instance, the terms of a prenup might specify that it will expire after the couple has been married for more than 20 years or after the birth of their first child. After the couple has been married for so long, the assumption is that the prenup is no longer needed or can be accurately applied to the circumstances surrounding the marriage.

While a basic sunset clause stipulates that it will be invalid after a period of time, a phased sunset clause can outline how property division should be determined after specific milestones have been reached. It can have specific allowances for asset distribution after 10, 15, and 20 years of marriage. In other words, as each milestone is passed, more of the prenup becomes nullified — making the assets become community property over time.

Once a prenup expires with a sunset clause, it might make sense to consider a post-nup that reflects the current financial situation. This type of agreement is similar to a prenup, only it is entered into during the marriage rather than before.

Reasons to Consider a Sunset Clause

A sunset clause isn’t required in a prenup agreement — and there are many factors that come into play when determining whether you should have one. In some cases, the party entering the marriage with fewer assets might be more willing to sign a prenup if the agreement contains one. In other situations, the party with more assets might want to make sure the marriage works out.

You should consider the following when deciding whether to include a sunset clause in your prenup:

• Will you want to change the agreement if you have a child?
• Will it make a difference who decides to end the marriage in the event of divorce?
• Do you want to include specific landmarks at which time the prenup can be renegotiated?
• Do you expect your financial situation to even out as the years go by?

If you do choose to include a sunset clause in your prenup, it’s crucial to ensure the document is drafted meticulously. All or part of a prenup can be invalidated when the sunset clause goes into effect. The language used in these agreements matters significantly — wording that is ambiguous or imprecise can pose a potential legal problem later. It’s best to have a skilled attorney draft your prenup and discuss the pros and cons of including a sunset clause.

Contact an Experienced Fresno Divorce and Family Law Attorney

Including a sunset clause in your prenup is a decision that should be carefully weighed. A knowledgeable divorce attorney can discuss your specific situation and whether a sunset clause is a good idea. Providing compassionate counsel and aggressive advocacy, The Law Offices of Rick D. Banks has been assisting clients throughout Fresno and the surrounding area with their divorce and family law matters for over 20 years. To schedule a no obligation consultation, call (559)222-4891.