What is a Prenup?
What is a prenuptial agreement? At its most basic, a "prenuptial agreement is a contract between two people planning to get married." Prabel and Schlaier, North Carolina Family Law. A prenup is also referred to as a "premarital agreement" or "premarital contract." An agreement generally is used to formalize what will happen in the event of a specific situation, such as death, disability, or divorce. In the case of a prenup, however, the contract covers the very delicate topic of divorce in advance. Among other issues, a prenuptial agreement can cover the following: The parties can further address things that may be specific to them in other areas of the agreement. Some people consider prenups in bad taste because they are associated with the ugly topic of divorce , which no one likes to think about. However, for others, prenuptial agreements are a way to protect both parties from financial injustice in the event of a divorce. For couples with business interests, children, or great-wealth assets, it may be essential to complete a prenuptial agreement in order to protect those assets. Even if a couple has few assets, it can make sense to complete a prenuptial agreement to protect future earnings or inheritances. There are other reasons as well why a couple would choose to complete a prenuptial agreement, which we break down further in the next section of this blog.
Legal Formalities of a Prenuptial Agreement in NC
Prenuptial (or antenuptial) agreements in North Carolina are governed by Article 2 of North Carolina General Statutes Chapter 52, which is entitled "Contracts", and is as follows:
§ 52-10. Contracts between husband and wife.
Contracts between persons contemplating marriage, or between husband and wife during coverture, shall be valid and enforceable as to all property, whether real, personal or mixed, and whether in possession, reversion or remainder, and as to any right, title or claim therein, except as hereinafter provided.
Any contract between persons contemplating marriage, or between husband and wife during coverture, shall be null and void as to any property, whether real, personal or mixed, and whether in possession, reversion or remainder, if such contract is not signed by the parties thereto:
(a) After full and fair disclosure to each of the parties of the income, property and financial obligations of the other; or
(b) By instruments in writing signed by the parties; or
(c) By a written waiver signed by the parties of any such disclosure: Provided, however, that such waiver shall not be given until the parties have had an opportunity to consult legal counsel of their own choice concerning the proposed contract and any disposition of their property which might result therein.
Any provision in a contract made void by the provisions of this section may be enforced by way of a separate action at law, except any such provision which is in violation of law or public policy. All such provisions in a contract made void by the provisions of this section shall be deemed separable unless the contract expressly provides otherwise.
For purposes of subsection (b) of this section, "instruments in writing signed by the parties" means:
(1) One document signed by both parties or two documents signed by both parties wherein the contemplated marriage is the consideration for the contractor promise therein; or
(2) A deed, mortgage or other document signed by both parties relating to the interest in or right to any real property held in common by them where such instrument specifically states on its face one of the following:
a. "This instrument is made pursuant to an Antenuptial Contract between the parties made on the —- day of —-, 20-";
b. "This instrument is executed in compliance with a separation agreement between the parties made on the —- day of —-, 20-";
c. "This instrument is executed in compliance with a decree of a court of competent jurisdiction made on the —- day of —-, 20-"; or
d. "This instrument is executed in compliance with the laws of the State of North Carolina concerning spousal rights upon the death of a spouse"; or
e. "This instrument is made pursuant to Article 2 of Chapter 52 of the General Statutes of North Carolina by persons contemplating marriage" or "by married persons" as the case may be.
There is no bright-line test when it comes to the disclosure aspect of a prenuptial agreement and the practitioner must make a determination on a case-by-case basis whether the disclosure is "full and fair". As a general rule, it is important for the attorney to obtain client documentation of the disclosure.
The Benefits of a Prenuptial Agreement
A prenuptial agreement can take varying forms, but the bottom line is that it is essentially an insurance policy, allowing you to protect your interests. Some key advantages to having one in place include:
Protection of assets – those coming into a marriage who already have property or assets that they have built up over the years may want a prenuptial agreement in order to clarify that the assets still belong to the person who owns them and that they do not form part of the marital estate. Similarly, if either person has ended a previous marriage and has assets that are technically outside of the marital estate of their first marriage, they may want a prenup in order to ensure that no claim of marital property is made if the relationship ends again.
Both parties have clear expectations – having a written prenuptial agreement is a good way for both parties to know what the expectations are for the marriage. This can include how property is going to be handled, how finances are going to serve the household, and other particulars that may help mitigate discord in the relationship. It’s also the opportunity to clarify how property will be divided if the relationship comes to an end.
The divorce process can be simplified – if a prenuptial agreement covers all the issues properly such as property division, spousal support and debts, it makes the divorce process much simpler than if the parties had not arrived at some consensus beforehand. Items such as whether or not alimony should be awarded, how property should be divided and how to handle business assets can be items of contention—but if both parties already understand how the division will be handled, there is less chance for a drawn-out, acrimonious process.
Praenups benefit North Carolina residents because the state is one of only a handful of states with specific laws regarding these agreements. Under North Carolina General Statute § 52-10, the law supports the idea that premarital agreements are valid and enforceable. But these contracts cannot violate the law or public policy. If a court finds that the agreement is unfair or unreasonable, then it may rule it invalid. Pay attention to this clause when developing your prenuptial agreement with your attorney. However, if you and your partner are in agreement about the terms of your prenuptial agreement, it can offer a great deal of protection and peace of mind.
Common Myths About Prenuptial Agreements
There are many myths surrounding prenuptial agreements. These myths are not only wrong, but they can also keep people from having an important document that protects them. One common misconception is that a prenuptial agreement is only for the rich. In North Carolina, as in most states, there are no minimum income or asset requirements for creating a prenuptial agreement. While many people sign these deals at the beginning of their marriage to protect their assets, it’s important to remember that other types of prenuptial agreements are for everyone. For example, many couples sign these before remarrying to protect their children from previous marriages. Some people believe that signing a prenuptial agreement means that they don’t have full faith in the marriage and they expect it to end in divorce. In fact, a prenuptial agreement does the opposite. It allows you to tell your spouse about your assets and family estate. You will also have the opportunity, with the help of an attorney, to work through what you both believe is fair in the event of a divorce. In fact, many couples find that discussing a prenuptial agreement helps them open up about their finances and prepares them for the marriage ahead. Another myth is that all prenups are unfair to one spouse over the other. If this is true, then couples should seek the help of an attorney. It is also important that both parties have independent legal counsel during the creation of a prenuptial agreement. This means that each party will have an attorney reviewing the agreement. The attorneys will be able to discuss the fairness of the agreement and suggest fair alternatives. Understand that what you both feel is fair is subjective, so this practice is the only way to know whether the agreement truly feels fair to both of you. Another misconception about prenuptial agreements is that they are difficult to get changed once signed. In fact, prenuptial agreements in North Carolina are merely contracts, which means that they can be amended just like any other contract. If you both agree that amendments must be done in writing and signed by both of you, they can be done without any court approval.
How to Prepare a Prenup in North Carolina
The process of developing a prenuptial agreement in North Carolina typically begins with a consultation between you and your fiancé and your respective counsel to discuss whether a prenuptial agreement makes sense for your situation. During this time, some information will need to be disclosed to the other side. A full disclosure of each party’s assets and liabilities is necessary to ensure a valid prenuptial agreement that can be enforced down the road. To that end, if you or your fiancé has any business interests, or a retirement account, even if only a few hundred dollars exist, they should be disclosed to the other side. If there have been significant changes to the finances of either party during the planning of the wedding – for example , the sale of real property or receipt of a sizable gift – such changes should be disclosed as soon as possible as well. If you and your fiancé agree that a prenuptial agreement is appropriate to protect certain assets and liabilities, a prenuptial agreement conference with both of your lawyers can then be arranged. At this conference, one of your lawyers will draft the prenuptial agreement while the parties and their attorneys negotiate terms. Negotiation should be open and honest, with no reluctance on either side in expressing thoughts and concerns about the terms of the prenuptial agreement.
How to Enforce a Prenup in NC Courts
Prenuptial agreements are enforceable in North Carolina unless they have been set aside by agreement of the parties, or in very limited circumstances such as if the agreement was unconscionable at the time it was executed. N.C.G.S. Section 52-10 gives full legal authority to parties to enter into a prenuptial agreement "with respect to their property and financial affairs." These documents simply cannot be ignored by the court unless they have been amended or set aside by the parties themselves, by agreement of the parties. The most common basis for setting aside a contract in North Carolina is failure of consideration, fraud or unconscionability. In this context, the courts will look at whether fairness and justice were done, and whether one party overreached in drafting the document. When a party to a prenuptial agreement has concerns about a possible litigation, he or she might consider enforcement of the document through a request for specific performance. This means that a party would ask the court to enforce the agreement as the parties intended. It need not be invoked simply to obtain money, but also to prevent property that could have been distributed in the marriage from being given to a spouse in the event the marriage does not work out. Specific performance is a remedy that asks that the parties do what they agreed to do, and can be enforceable even if it means that a party may not have what he or she otherwise might have had rightfully following the dissolution of the marriage. If the parties are represented by counsel, usually they can get together and work out an arrangement that both will follow in the event that the marriage does not last. The lawyers and parties then prepare a settlement agreement or marital agreement. That agreement contains a provision where they attach the prenuptial agreement as an attachment to the agreement signed by them, and affirm the validity of the prenuptial agreement-further evidencing the intent of the parties to the court. Even if a prenuptial agreement is filed by only one party, the court will be bound by its terms. It is a statement to the court that there was a prior agreement signed by both parties, and the court essentially incorporates that agreement into the settlement agreement or marital agreement entered into by the parties. In the event that a party does not know what to do before or during enforcement or litigation, or how to proceed after the dissolution of the marriage, a family law lawyer can be of assistance.
Prenuptial Agreement Alternatives
As with marriage itself, prenuptial agreements aren’t right for everyone. For some, the thought of having to discuss the events of the marriage that could lead to divorce seems counterintuitive to the purpose of marriage itself. Thankfully, there are some other avenues for consideration if coverage for your post-marriage events is what you’re after.
A postnuptial agreement is one of these alternatives. It serves the same basic purpose as a prenup, but it’s entered into during the marriage rather than before it. Beyond coverage for post-nuptial events, if you have circumstances that you feel are critical to address, like a substantial inheritance, huge debt load, or significant spousal support from a previous marriage, you can utilize a post up agreement. The downside is that, similar to a prenup , it does need to be entered into voluntarily and with total transparency in a non-coerced way, so don’t think you’ll be able to slap one on your partner and call it a day.
There’s also the option of a trust. Marital trusts can come installed with many of the benefits of a prenup but are generally more difficult and expensive to create. A good prenuptial lawyer can help you determine if it’s a good fit.
Finally, any property acquired during the marriage actually belongs to both legal parties. There’s no need for an outside agreement to ensure coverage for each partner’s interests in this property. North Carolina is an equitable distribution state, which means that the state will contract your marital property based on several different factors and how they’ve contributed to the marriage. However, keep in mind that outside agreements can also often be used to sway these results.