Drafting and negotiating premarital agreements (also known as prenuptial agreements) run contrary to the romantic ideal of marriage because premarital agreements contemplate dissolution. In fact, it was not until the late 1980’s that North Carolina courts began enforcing prenuptial agreements for this reason. However, having a premarital agreement is a prudent decision, both establishing and protecting your property rights before marriage. While it can be difficult to broach with your future spouse, a valid premarital/prenuptial agreement is a smart tool for financial and legal planning.
Marriage is not only an emotional and physical union but also a financial union. A well-drafted premarital agreement takes out the emotion inherently involved in divorce or death. At its most basic, a premarital agreement is a contract between two people providing how assets and liabilities will be distributed in the event of divorce or death.
A properly executed premarital agreement is as important as a last will and testament. By deciding against having a will in place, a person agrees to be bound by the State’s laws governing how an estate will be administered. Similarly, when couples decide to marry without a premarital agreement, they are allowing the State to write their agreement for them. The family laws, trust laws, and estate laws existing at the time of marriage, divorce, or death will have the final determination. And these laws are constantly changing and may negatively affect the husband and/or wife.
Having ultimate control over the rules governing your marriage is something to be desired. Historically, premarital agreements have been executed in one of three circumstances:
- The parties are older or have children from a previous marriage and want to ensure the inheritance rights of the children;
- One spouse has greater income or a large estate that they want to protect from equitable distribution; and
- The parties have been through the litigation process before and want to avoid another such experience.
While these are the main reasons premarital/prenuptial are entered into, these are not the only reasons. A common misperception is that premarital agreements are only for the rich. A person who has managed to save up a smaller sum of money or assets may be more protective of that amount than those having millions.
A premarital agreement should be considered for couples in a wide variety of financial categories. Anyone with assets such as a home, stock, or retirement benefits should consider protecting those assets. If a person owns part or all of a business, divorce or death can cause complete upheaval to the business operation. With the increased frequency of large student loan debts, many couples prefer that debt to remain the sole debt of the party who incurred the debt. Similarly, if a spouse plans on supporting the other through college or grad school a premarital agreement can protect the supportee. Additionally, a premarital agreement is important for those couples where one or both parties are pursuing a degree or license in a potentially lucrative profession where an increase in income is expected.
A premarital agreement is an opportunity to opt out of the arcane and often harsh rules imposed on married people by North Carolina family laws. If premarital or prenuptial agreements are not properly drafted or fail to take into account the unique circumstances of each couple, they can be rendered unenforceable. Because of the importance a properly executed and enforceable premarital agreement has on families for years to come, it is vital to find an attorney who will spend the time getting to know you and your individual circumstances.