Here's What Happens When You Get Divorced Without a Prenup

One life event that can have a major impact on your personal finances is getting divorced. Despite what some folks would have you believe, divorce rates have declined since 2000, with the Centers for Disease Control reporting that the rate was 4% per 1,000 members of the population that year. By 2021, the rate had decreased to 2.5% per 1,000.

That said, it's still common enough that whenever anyone ties the knot, they would be wise to consider the potential of divorce and how they would handle it financially. It's also a solid idea to get on the same financial page as a potential spouse BEFORE you get married. Here's how prenuptial agreements work, as well as what could happen to your finances if you get divorced without one.

What's a prenuptial agreement?

A prenuptial agreement, which is also referred to as a prenup, is a written contract created by two people who are getting married. It usually lists property owned and debts owed by each party and states property rights in the event of a divorce. Such an agreement can also be made after the wedding, and in this case would be referred to as a postnuptial agreement.

Prenups can be used by anyone, despite their reputation as being a tool for the rich to protect their assets (like a loaded brokerage account or a vacation home) when they get married. They can ensure that each member of the marriage gets to keep property they brought into it, as well as avoid having to pay for each other's debts in the event of a divorce. If one or both parties have children before marrying the other, a prenup can spell out property inheritances for them.

None of this sounds very romantic, but it is extremely important. No one gets married with the intention to divorce (at least, ideally), but since it's always a possibility, it's best to hash out financial matters ahead of time so everyone is protected. This is especially true if one spouse-to-be has children from a previous relationship or there is a large income/property disparity between both parties.

Without a prenup, the state you live in matters

If you get divorced without a prenup in place, property and debt division will depend on your state's laws. This could mean either equitable distribution or community property distribution.

The majority of states have laws that ensure equitable distribution of property and debts in divorce proceedings. Note that equitable doesn't necessarily mean equal, and the judge overseeing the case will take many factors into consideration when deciding the division, such as length of marriage, financial needs, and child custody (if it applies). The divorcing couple is also allowed to figure out property division, as long as each agrees to the terms.

If you live in a community property state, your finances after divorce will be impacted differently, and perhaps in a bigger way, depending on the assets and debts in the marriage. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, most assets earned or bought (plus debt incurred) during the marriage is considered "community property," and will therefore be split equally between both spouses. This means that if your soon-to-be-ex has a lot of credit card debt, you might end up having to pay half of that back.

Is it worth signing a prenup before getting married?

If you live in a community property state, the reality of potentially having to pay for your ex's financial mishaps likely gives you pause. But I'd argue that even if you live in a state with equitable distribution, a prenup is still worth the time and cost to create.

Speaking from experience, divorce isn't a fun experience to go through, and having a prenup could make the process shorter and more straightforward, especially if you intend to own property and have children together. Think of it as an insurance policy -- ideally, you never need to use it, but if you ever do, you're protected.