What to Include in a Prenup?

No one goes into a marriage planning for the relationship to end, but the reality is that around 40% of all marriages end in divorce. Your once-happy union could one day put your business, pension, retirement accounts, or property at risk of division during a divorce. But with so many assets that could be claimed, divided, or forcibly surrendered, it's imperative to know what to include in a prenup.

With a prenuptial agreement in place, both you and your spouse have better protection. To help you get started, our divorce attorneys in Raleigh are sharing the seven things every couple needs to include in a prenup or premarital agreement.

Understanding Marital Property

When a couple divorces in North Carolina without a prenuptial agreement, marital property, including bank accounts, real estate, household goods, and vehicles are divided according to equitable distribution, which is designed to be fair but doesn't necessarily mean equal. 

North Carolina family law does outline that any property obtained before the marriage belongs to the individual and is not part of marital property that is subject to being divided during a divorce. This means that if you own a car before you get married, it remains yours and can't be included in property distribution.

However, if you buy a house before you get married, but your spouse moves in with you and over the course of the marriage, the mortgage is paid, updates are made, and the value of the home increases, the equity accrued can be considered marital property. So, as you can tell, there's gray area. That's why it's so important to clearly understand what to include in a prenup.

What Is a Prenuptial Agreement?

Most people think of marriage prenups as documents to protect high net worth or family fortunes, but in reality, a prenuptial agreement is simply a contract written between two people before marriage, outlining the property and debts owned and what each spouse's property rights will be both during the marriage and in the event of divorce or even if a spouse passes away. That's why it's so important to be detailed when drafting the assets you want to include in a prenup.

For it to be valid, both parties must disclose all of their existing financial and property information, outlining all assets, including real estate, stocks, and retirement accounts, as well as all debts, including student loans, car loans, and credit cards. These are just a few of the items to consider when thinking of what to include in a prenup.

7 Things to Include in Your Prenuptial Agreement

Now that you have a better understanding of marital property and how a premarital agreement can protect you, here's a list of what to include in a prenup.

1. Premarital Assets

In addition to disclosing your premarital assets, it's important to outline whether any property will become marital property. 

Both before entering into the marriage and during the marriage itself, both spouses acquire property and other assets. If that marriage dissolves, suddenly the question arises: What is separate property, and what is marital property? 

Separate property is any that you acquired before getting married, or that you solely inherited or were gifted during the marriage. As long as you have proof that this was obtained before the marriage, a court will likely consider that your own individual asset. 

Marital property, on the other hand, is that which has been accumulated by each spouse while in the marriage. It can also, surprisingly, apply to the amount that separate property or assets (acquired before the marriage) increases in value during the marriage. This includes equity in a home or growth in an investment account.

In a prenup, you can outline your separate property, and you can also determine how marital property will be divided in the event of a divorce. This way you don’t have to leave it up to chance or the courts.

2. Premarital Debts

It’s a good idea to outline how you will handle debt in your marriage. That includes your individual debts and those acquired during the marriage. 

If one spouse has debt going into the marriage, include in a prenup whether both parties are responsible for paying the debt as a part of household bills, or if it's the sole responsibility of the spouse. You can also protect your spouse from being subject to creditors during your marriage or in the event of a divorce.

It may be a tough subject to breach at first, but you’ll be relieved if these circumstances appear later on. This is a particularly important asset to include in a prenup.

3. Spousal Support and Waiving the Right to Alimony

It’s unlikely that both spouses in a marriage will make the exact same amount of money, or have the exact same value and volume of other assets and property. When one party makes significantly more than the other, there is a lot of room for contentious conversations in divorce proceedings. 

Without predetermined spousal support guidelines, the higher-earning spouse may be left feeling like they are being taken advantage of if large spousal support payments are ordered by a judge. Similarly, the lower-earning spouse may feel like they are not getting enough support after the dissolution of a marriage if they have no say in the judges ruling.

A marital prenup can also reduce or waive the spouse's right—though it's important to note that a judge may terminate this provision if it's deemed unfair. 

4. Financial Responsibilities

Who will be responsible for taking care of household expenses? How much is each party expected to contribute toward retirement? Who will be responsible for paying off debts? These questions need to be answered before getting married, and financial obligations can also be outlined in your prenuptial agreement so that both parties are on the same page. 

5. Provisions for Children from Previous Relationships

A prenuptial agreement doesn’t just apply in the case of divorce, it can also outline the allocation of assets after the death of a spouse. Before getting married, it's important to protect your existing children from a previous relationship, ensuring that if you pass away, your child will receive a fair portion of property and inheritance. 

In a prenuptial agreement, you can outline which of your assets from before this marriage you would like to go to your children, as well as how all your assets will be divided between your children and your spouse. If both you and your new spouse have children from previous marriages, you can also make a point to outline a fair allocation of assets between both you and your spouse's families. 

This doesn't take the place of a will, but it does support your estate planning wishes. 

6. Business Earnings

If you or your partner own your own business, you will want to include whether the profits are separate or marital property, especially if there is significant growth in the business. This is crucial information to include in a prenup.

If just one of you owns the business, but during the course of the marriage the other spouse invests in or furthers the success of the business and it increases in value, it could then be considered marital property and subject to the court's definition of equitable distribution. 

Outlining the value of the business at the time of the marriage, if your partner will get a certain percentage and how much, and how you will determine the value of the business moving forward, can all provide protection in the event of a split. 

7. Retirement Accounts

Even if you contribute to a 410(k) or pension through your work, that is considered marital property. If you want these to remain separate, it's important to include this in your prenuptial agreement, especially if you are entering into the marriage with an already hefty retirement savings account. 

Schedule a Consultation to Create a Prenuptial Agreement in Raleigh 

Keep in mind that these are just some of the things to consider when drafting up what to include in a prenup. Having a marital prenup doesn't mean your marriage will end and it doesn't mean you don't love or trust one another. It's simply there to protect both of you and outline your financial agreements both during your marriage and in the event of divorce.

To ensure your prenup will hold up and both of your wishes are respected, it's important to have an experienced divorce lawyer assist you in drafting the contract. If you're still not sure what to include in a prenup, contact our family lawyers. If you or your future spouse are ready to schedule a discussion, call (919) 205-9728 or complete the form below.