What is a Prenuptial Agreement?

A prenuptial agreement (also known as antenuptial agreement) is a contract between prospective spouses made in contemplation of marriage, to be effective upon marriage. Prenuptial agreements are generally entered into by people about to be married in an attempt to resolve issues of spousal support, distribution of wealth and division of property in the event the marriage ends in separation and divorce.

May we use the same attorney?

Even if the prospective spouses are in agreement about the terms they want included in an agreement, they cannot be represented by the same attorney. From a legal perspective this is an adversarial process, even if you are in agreement and not feeling adversarial. The Rules of Professional Conduct governing lawyers prohibits attorneys from representing both parties. Representation includes explaining the law and providing general information and advice.

What happens upon separation and divorce without a prenuptial agreement?

The answer to this question is state specific and can vary considerably from one state to another. In North Carolina, without a prenuptial agreement, your property rights upon divorce would be determined under North Carolina’s Equitable Distribution Laws, which are comprised of a statute (North Carolina General Statutes § 50-20) and numerous appellate court opinions.

The equitable distribution law is complex and nuanced and this post is not intended to substitute for individual advice from a family law attorney regarding how the law would apply to your particular situation.

In general, upon separation, the marital estate is divided in an equitable way. Generally, we start with the idea that an equitable division would be something close to an equal division of the marital estate. However, under some circumstances, a court could reasonably determine that an equitable outcome would be to award one spouse more than half of the marital estate.

North Carolina has no alimony formula or guidelines. Regardless of what you might read on the internet, or hear from people who have been through a divorce, the amount and duration of alimony is the amount agreed upon between the spouses – or the amount the trial court judge determines to be appropriate for this particular couple’s situation.

Why have a prenuptial agreement?

There are as many reasons for having a prenuptial agreement as there are couples getting married. Prenuptial agreements are no longer limited to the rich and famous. In my practice, the most common reasons for wanting a prenuptial agreement are: (1) preserving inherited family wealth; (2) sheltering wealth for children from a previous marriage to inherit upon a spouse’s death; and (3) sheltering retirement assets.

A prenuptial agreement can remove the risk and uncertainty surrounding alimony.

What can be included in a prenuptial agreement?

A prenuptial agreement can define marital property and separate property in ways that differ from the statutory definition. A prenuptial agreement can include a detailed plan for division of real estate assets, retirement assets, investment accounts and tangible personal property. It can also provide a plan for calculating alimony – or it can waive alimony altogether.

What cannot be included in a prenuptial agreement?

A prenuptial agreement may not deprive a child of the right to financial support and may not predetermine child custody arrangements. If an agreement includes such provisions, the court will not enforce them.

Are prenuptial agreements enforceable?

In general, in North Carolina, prenuptial agreements are enforceable, so long as they are in writing, signed by both parties, with a full disclosure of all assets and debts. A full disclosure of each party’s assets and debts is essential to the future enforceability of the contract. Most agreements have the assets and debts listed as an attachment to the agreement, although the list may be included in the body of the agreement.

There must not be any fraud or misrepresentation.

Both parties must enter into the agreement voluntarily. This means that there must be no coercion or duress.

Although the parties are free to negotiate terms that they mutually agree to, the agreement should not be so one-sided that a judge would find it offensive and look for reasons not to enforce it.

What can be done to bolster the enforceability of my agreement?

Encourage your fiancé to be represented by independent legal counsel. This is the single most effective way to prevent an agreement from being set aside. It is hard to argue that a party did not understand what he/she was signing when he/she was represented at every phase of the negotiation by an attorney of his/her choice. At a minimum, an unrepresented party should take the proposed agreement to an attorney of his/her choice for independent legal advice prior to signing the agreement.

Do not present your finance with a proposed agreement after the invitations have gone out, the venue reserve, and florist and caterers paid. Allow sufficient time to discuss options and negotiate terms. Allow at least two months, preferably longer, to work through this process.

Consult and estate planning attorney during the negotiation process to insure that nothing in your prenuptial agreement conflicts with your estate plan.

Can the Collaborative process be used to negotiate our prenuptial agreement?

Absolutely! Even though the Collaborative process was designed for divorcing couples, the process is perfect for negotiating a prenuptial agreement. The non-adversarial structure is ideal for working through the premarital issues in a way that encourages transparency and builds trust. The prospective spouses meet face to face, along with their attorneys and a neutral financial advisor, in a series of sessions until all terms have been agreed upon. The attorneys will draft the prenuptial agreement, which the prospective spouses will sign at the final session.

Parting thoughts . . .

The leading cause of divorce in the United States is money fights. Prenuptial negotiations provide a forum for those hard conversations insuring that you are starting your marriage on the same page financially. Most couples at the beginning of their prenuptial negotiations have not had an honest and thorough discussion about each person’s attitude towards money, savings and debt tolerance. This is an opportunity to come to an understanding and agreement about savings, investments and debt and how those financial issues impact your hopes and dreams for the future. If you are committed to living debt free and planning for a comfortable retirement and your fiancé sees debt as an acceptable way of living beyond his/her means, you might want to consider pre-marriage counseling before entering into a prenuptial agreement.