If you’ve only heard of prenuptial agreements, sometimes called premarital agreements, when a celebrity couple splits, you’re not alone. Most people think of prenups as something for the rich and famous, but that is changing. While a 2003 Harvard Law study found that only 5% of couples had prenups, lawyers report that number has grown rapidly since millennials are marrying later than previous generations, giving them more time to accrue assets.
But what about you and your significant other? Do you need a premarital agreement? What does a prenup do and how can it protect you and your assets if you divorce?
North Carolina divorce law imposes many potential burdens on couples that divorce, so it is important to consider protecting yourself, your assets, and your partner if you find yourself in the middle of a divorce.
What is a Prenuptial Agreement?
A prenuptial agreement is an agreement that couples enter into before marriage. It details what will happen to any assets, property, debt, and income in the event of a divorce or separation. A premarital agreement may include an alimony agreement but may not include anything related to child custody or child support.
Overcome the Challenge of Asking Your Fiance to Sign a Prenuptial Agreement
Asking your fiance to sign a premarital agreement can be awkward, but it doesn’t have to be. While it’s tempting to skip the conversation to avoid the awkwardness, there is a way to approach it while minimizing any uncomfortable feelings.
Discussing a premarital agreement is a little easier when look at it as a financial talk between you and your significant other. Be sure to let them know that you’re not judging them, their habits, or your relationship, but you want to have a practical conversation about the future. Remind them that a prenup protects both of you.
No matter how you discuss a prenup, don’t leave this conversation for the last minute. Discuss it several months before the wedding to allow both of you time to process, plan, and have an agreement drawn up, if you decide one is necessary for you.
Nine Reasons You Need a Prenuptial Agreement
How do you know if you need a premarital agreement? If any of the following apply to you or your fiance/fiancee, it would be wise to discuss a prenup.
1. One Party is High Income
People that make significantly more than their spouse during the marriage may be required to pay support to their estranged spouse under North Carolina alimony law. The circumstances of your marriage and separation will determine whether you pay alimony and if so, how much you will be responsible for (and if you are the lower-earning spouse, how much you will receive.)
In general, the longer you are married, and the more you earn, the higher your risk for significant alimony payments.
If you are what North Carolina divorce law defines as the “supporting spouse,” the only absolute defense to an alimony claim would be if your spouse committed adultery that ended your marriage. Otherwise, you are facing the risk of making alimony payments for a very long time, as alimony awards can be “permanent,” meaning they are paid until you or our spouse enter a court order to stop or change it.
2. Either of You Have Children From Prior Relationship
If either of you have children from a prior marriage or relationship, you should consider a prenuptial agreement.
Why Would You Need a Premarital Agreement if You Have Children?
Prenuptial agreements can be drafted to preserve property and future income for your children. This property or income might otherwise be included in the marital estate and would thereby be subject to division. A premarital agreement helps ensure that children do not have their inheritance or future support caught up in divorce proceedings.
3. If You Plan on Having Children and One Party Plans to Be a Stay-at-Home Parent
When one party pauses or gives up their career to raise their children, it can be difficult or impossible to rebuild their career or financial footing in the event of a divorce. A prenuptial agreement allows stay-at-home parents to protect their interest in the marital assets and ensures there is a court record to document these agreements in the event the marriage ends and their career is still on hold.
4. Either of You Have Significant Assets
If your or your soon to be new spouse have substantial assets (financial assets, like a 401K or investment accounts or physical assets, like cars, boats, or real estate) going into a marriage, it is wise to consider a prenuptial agreement to ensure that those assets and any income derived from those assets remain separate from the marital estate.
While North Carolina’s equitable distribution law recognizes that premarital assets are separate in most cases, it is very easy to commingle these assets and/or the income from them. When they are mixed, a judge is allowed to include them in the marital estate and divide it.
5. You or Your Spouse Have Significant Stock Holdings
While stocks are financial assets, they are worth mentioning on their own. If you or your spouse have significant holdings, it is possible that in the event of a divorce, the other party may have a claim to all or part of your stocks and/or the income they generate.
A prenup is necessary to protect your stocks/investments and any income from being taken or divided during a divorce. Without one, you risk losing a significant amount of money and future income.
6. You or Your Spouse Are Business Owners
You may not think of your business having much to do with your marriage but in the event of a divorce, they can quickly become tangled. Even if you started your business before you got married, your spouse is entitled to at least half of any appreciation in value your company experiences during your marriage.
For example, if you started a company before your marriage, grew it into a $1 million company, and over the course of your marriage, grew it into a $2 million company, your spouse would be eligible for at least $1 million if you were to divorce. A loss of 50% can devastate a business, which will ripple out to impact your employees and your personal finances. And if it’s a family business, you risk hurting family members financially. Don’t put your business, your financial future, or your family’s and employees’ finances on the line.
7. Your Spouse Has Significant Debt
If your soon-to-be husband or wife is in debt, a prenuptial agreement is necessary.
While it is true that debt that existed before your marriage typically remains separate after the marriage, problems often arise as the resources shift around. Paying off your spouse’s student loans with an equity line or a loan from your retirement may make perfect financial sense at the time, it can cause your finances to suffer greatly and you’ll be left feeling cheated. And in the event that debts taken out during the marriage aren’t paid during the marriage, debtors may seek payment from you, even if the debts were taken out by the other person, in their name.
Clarifying the existence, nature, and future responsibilities of debt in a premarital agreement is a great way to protect yourself.
8. If You Have a Pet/Pets
Yes, it’s common to include pets in your prenuptial agreement, especially if the pets are expensive. Doing this can ensure that if the marriage ends in divorce, any pets or animals you own with your spouse are given to the rightful owner. Although people rarely fight it out in court over their pets, some do use pet ownership as a bargaining chip in divorce proceedings (e.g. give me X or I’m taking the dog.)
9. Your Future Spouse is Strong-Willed
It’s easy to fall in love with a strong-willed person, but it can very hard to fight with them.
If your soon to be spouse is stubborn, vengeful, or difficult, you should strongly consider handling these touchy financial issues in a prenuptial agreement. Be honest with yourself and consider how your new love has treated exes in previous relationships or marriages.
If you can see yourself spending your married years trying to avoid your beloved’s bad side, you know you will have a difficult time in the event of a divorce. Trust your instincts and have a premarital agreement drafted.
Doyle Law Group focuses on divorce and family law. We have handled hundreds of cases where a couple would have benefited from a premarital agreement. If you have something to lose in the event of a divorce, act to protect yourself before it is too late.
Contact a Raleigh Family Lawyer to Draft a Prenuptial Agreement
Before your marriage, contact our Raleigh law firm to help you draft a prenuptial agreement. We can guide you to make practical decisions that are both good for your and your partner. Call us at (919) 301-8843 or complete the online contact form below to discuss your options and schedule a consultation.
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