A prenuptial agreement, or prenup, is a contract or agreement that is signed prior to marriage addressing the ownership of their respective assets should the marriage fail. This can be difficult to bring up as part of wedding planning given the unromantic nature of the document, but it is important. Many people preparing to marry often wonder if a prenuptial agreement is really necessary. While they’re not right for every couple, they can be extremely helpful for some.
Do I Need a Prenuptial Agreement?
Some questions to ask yourself and your future spouse when deciding whether you need a prenup:
- Do you have children from a prior relationship?
- Do you have property that you are bringing into the marriage; for example, real estate, investment/stock accounts or a retirement accounts (401(k), 403(b) or IRA?
- Do you own a business?
- Are you engaging in an activity such as writing a book or developing a product to be patented that you will continue to be working on during the marriage?
- Will you be supporting your fiancé/fiancée while he or she goes to school or is beginning a new business with funds you had prior to the marriage?
- Is there a concern about the potential risk of spousal support obligations in the event of a divorce?
If you or your spouse answered “yes” to any of the above, a prenup would likely be beneficial for you.
How Does North Carolina View Pre-Marital and Marital Assets?
North Carolina says that property a person owned prior to the marriage is that individual’s separate property and is therefore not subject to distribution as part of a divorce. This law doesn’t protect you 100%, however. There are gray areas.
Below are a few instances in which a prenuptial agreement can address the gray areas in property distribution. This example relates to someone owning real property prior to the marriage:
- Are mortgage payments being made on the property with funds earned during the marriage? This can create a marital interest in the equity accumulated as a result of the income earned during the marriage being used to decrease the principal balance of the mortgage.
- Significant renovations that increase the value of the residence, if paid for by money earned during the marriage, would make the residence marital property. This is referred to as “active appreciation” and makes the residence subject to distribution. Any increase in the value of the residence to due to the real estate market (referred to as “passive appreciation”) is considered separate property, even if it appreciates during the marriage.
Similar issues related to investing funds in retirement, stock accounts, and any increase in businesses that you may have owned prior to the marriage. Prenuptial agreements allow you to specifically contract with your fiancé/fiancée that such increases in value and payments made are your separate property and do not create a marital component.
There are many other issues to consider when deciding whether to move forward with a prenup. An in-depth discussion with a family law attorney can help you and your fiancé/fiancée determine whether it’s right for you.
Below Are a Few Tips to Start the Process of Entering Into a Prenuptial Agreement:
1. Address the issue as soon as possible. We recommend starting the process at least 90 days before the wedding. It is very important that no one feel forced to sign the agreement, as this may be a basis to void the agreement later. The other party must have sufficient time to participate in the drafting and negotiation process as well as allow them time to consult with a family law attorney in Raleigh if they wish to do so.
2. Make a full disclosure of asset and debts. Full disclosure is necessary to ensure the prenuptial agreement is legally enforceable. Failing to make this disclosure can result in the prenuptial agreement being set aside and thus not legally enforceable.
3. A prenuptial agreement as “divorce insurance.” Prenups do more than address the concerns that arise when a couple divorces. When trying to convince a skeptical person to sign a prenup, frame it as a “just in case” document. You don’t plan on using it, and you don’t want to use it, but you will be glad you have it if you ever need it.
Consider car insurance. Everyone is required to have car insurance because car accidents happen, even though we’re careful drivers. A prenup acts the same way in a marriage. In this respect, the discussion of entering into a prenuptial agreement may seem more “practical” and less “unromantic.”
Contact Our Raleigh Family Firm to Learn More About Prenuptial Agreements: (919) 301-8843
If you or your future spouse are considering a prenuptial agreement, you probably have questions. call (919) 301-8843 or complete the form below.
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