Congratulations! You’ve found The One. You’re walking on air, sippin’ on sunshine, setting a date. Then someone asks the question that makes your blood run cold:
“Are you doing a prenup?”
Should You?
Prenuptial agreements are contracts between two people who are planning to be (but are not yet) married to each other. (The same agreement, signed after marriage, is called a postnuptial agreement.) The parties agree to keep certain assets out of the marital estate in the event of a future divorce or the death of one of them.
In order to know whether you need a prenuptial agreement, you need to understand the basics of how assets are split in North Carolina at divorce. [See our Equitable Distribution page.] Young couples in their first marriage usually don’t need a prenup because both parties are starting out with very little, and anything they accumulate during the course of the marriage will be owned by both of them and shared equally. Even in first marriages, though, if one person is coming into the marriage with either a significant amount of wealth or a lot of debt, a prenup is used to make sure those do not become marital property.
Second or Later Marriages
In a second or later marriage, one or both of you usually come into the marriage with assets from your prior lives. Although these are by definition separate property and therefore not subject to equitable distribution at divorce, the growth on the assets that occurs during the marriage due to the efforts of either of you (“active” growth) is marital property, and it will be divided. This situation can become extremely complicated and can add to the cost of divorce; one reason to sign a prenup is to avoid these complicated calculations in the future. In addition, a prenup forces full disclosure of both of your financial situations and makes your financial expectations clear, which can help you avoid money disputes in the future.
Inheritance Considerations
Another reason to sign a prenup is if either of you has children from a prior marriage, and there are assets you want to be sure to pass on to your children, such as a family business, home, or heirloom. This can, of course, be specified in a will, but without a prenuptial agreement, the estate could become contested, and the assets may not pass as you intended.
What a Prenuptial Agreement Can’t Do
There are some things a pre- or postnuptial agreement cannot do, including deciding in advance issues related to child custody or support or waiving either spouse’s right to alimony. If your prenup includes invalid provisions like these, the whole agreement could be declared invalid, so care should be taken in drafting the agreement, which must be in writing and signed by both of you well before the wedding. Obviously, a postnuptial agreement is signed after the wedding; but in either case, it is important that neither of you feels that you have no choice but to sign, since taking advantage of your partner’s emotional vulnerabilities is one way of invalidating a prenup.
Plan Ahead
As with any good contract, this process takes time, so you should talk to your future spouse about the need for a prenuptial agreement long before the wedding date is on the horizon. You will need time to work through the feelings this issue usually arouses, to negotiate the terms of the agreement, to have it drafted, and for your future spouse to have it reviewed by their own lawyer.