An engaged couple may enter into an agreement before their marriage that sets out what will happen to their property in the event of their death or divorce. This type of agreement is known as a pre-nuptial ("pre-nupt") or premarital agreement.
A premarital agreement is made between prospective spouses in contemplation of marriage and becomes effective only upon their marriage. In the past, only wealthy couples entered into premarital agreements. Now they are common, especially with couples who are marrying for the second time and who want to preserve their property for the children born to their first marriages.
Prenuptial Agreement Laws in NC
Prenuptial agreements are governed by the Uniform Premarital Agreement Act, Chapter 52B of the North Carolina General Statutes. To be valid, a premarital agreement must be in writing and signed by both parties (the engaged couple). At the time the engaged couple marry, their prenuptial agreement becomes effective, that is to say, their agreement becomes a legal, binding contract between the newlyweds. After marriage, the premarital agreement can be amended or revoked. An amendment to the premarital agreement or its revocation must also be in writing and signed by the married couple.
Each prenuptial agreement should be uniquely tailored to the goals of the engaged couple. An engaged couple should anticipate several weeks of discussions to carefully consider and craft a premarital agreement that is a true reflection of their goals, fair, and fully understood by both. During these discussions, the counsel of a family law attorney, representing each party, is strongly recommended.
Writing a Prenuptial Agreement: What Do They Cover?
In general, premarital agreements determine financial matters between the spouses. Premarital agreements cover the rights and obligations of the spouses to manage and control certain property in all aspects of the sale, use, exchange, lease, consumption, assignment, transfer, mortgage, encumbering, and disposition of property. In particular, a prenuptial agreement outlines what will happen to certain property owned separately by one spouse or jointly by both spouses in the event of a spouse's death or the couples' divorce.
In most cases, prenuptial agreements are executed to insure that the separate property owned by each spouse prior to their marriage remains their separate property under their control during the marriage. Separate property can include assets, debts, personal property, and all forms of income. A premarital agreement may also seek to create joint or marital property during the marriage and how that marital property will be disposed of in the event of one spouse's death or the couple's divorce. For example, the parties may agree that all property purchased from a joint banking account during the marriage shall be classified as marital property and divided equally upon divorce or shall pass to one spouse upon the other spouse's death.
In regard to the purchase of the marital residence, a premarital agreement may set forth how each party is going to contribute to its purchase, how it will be titled, which party or that both parties will be responsible for the indebtedness, and how the residence will be disposed of upon a spouse's death or divorce. If the planned marital residence is the separate property of one spouse, then the prenuptial agreement can protect this asset as the spouse's separate property during the marriage.
A premarital agreement may establish the procedure for payment of joint expenses during the marriage. For example, the parties may agree to set up a joint household account to which each shall contribute a certain amount based on the percentage of his or her earned income to the married couple's combined income, or the parties may agree to pay equally their joint expenses, or one party may agree to pay all of the joint expenses.
Payment of the married couple's health insurance coverage and medical expenses may be carefully mapped out in a prenuptial agreement. The agreement may also spell out how debt shall be incurred during the marriage and how payment on the debt shall be shared by the spouses. The method of filing taxes during the marriage and payment of tax liability or receipt of tax refunds can also covered in a premarital agreement.
The important issue of spousal support upon separation and divorce can be addressed in a prenuptial agreement. The parties to a premarital agreement can totally waive their rights to alimony or set the amount of alimony based upon the duration of the marriage or the need of the dependent spouse. It should be noted, however, that a waiver of alimony, will be dismissed by the court if one spouse is eligible for public assistance as a result of the break-down of the marriage. In that case the court will order the wealthier spouse to pay the amount of spousal support needed to lift the needy spouse out of his or her eligibility for public assistance.
A premarital agreement can also decide issues of inheritance, the making of a will or trust, and the deposition of retirement accounts and life insurance death benefits upon the death of one spouse.
Golden Rules of Writing a Prenuptial Agreement
Premarital agreements can be challenged in court after your marriage and held unenforceable on several grounds. For that reason, it is important to follow certain "golden rules" in negotiating and drafting your prenuptial agreement.
1. Make full disclosure of your financial situation -- all assets, debts and liabilities -- with your fiancé(e) and to demand full disclosure from him (her). If either party fails to make full disclosure, it can be grounds to set aside your prenuptial agreement as unenforceable.
2. Conduct your negotiations over your premarital agreement in such a manner as to preclude any accusation that your fiancé(e) was coerced into signing the agreement, or that he (she) was under duress to sign, or that you exerted "undue influence" to persuade him (her) to sign. The surest way to avoid accusations of coercion, duress, or undue influence is to allow sufficient time -- no less than 30 days -- before your wedding day to discuss and finalize your prenuptial agreement with the advice and counsel of family law attorneys representing you and your fiance(e).
3. Follow in executing your premarital agreement is to make sure that it is fair to you fiancé(e). Any contract, including your prenuptial agreement, can be set aside because it is "unconscionable." The word "unconscionable" is defined as "unreasonable or not guided by conscience." Deal fairly and openly with your fiancé(e) in discussing and finalizing your prenuptial agreement. Anything less will jeopardize the enforceability of your premarital agreement and, in a larger sense, your eventual marriage.