An engagement is a happy occasion. In the excitement about their wedding, people sometimes overlook the fact that marriage automatically changes your legal rights. These rights include inheritance rights, marital asset and debt rights, and alimony. In legal terms, these rights and responsibilities are called incidents of marriage, meaning the burdens or benefits of marriage.
What is a Pre-nuptial Agreement?
A pre-marital agreement, sometimes called a pre-nuptial agreement, is a contract between two unmarried individuals. It only becomes effective if there is a marriage. Otherwise, these contracts have no legal effect. Some people think it is unpleasant to discuss the subject of pre-marital agreements. But it is worse to wait, perhaps decades, to find out your gamble to roll the dice and see if you can avoid dealing with a pre-nup was unsuccessful? I tell clients a pre-marital agreement is like home owners insurance; you hope that you never need it, but after a fire (or in this case divorce/death) burns your house to the ground, you sure are glad you have it.
What Topics Does a Pre-nup Cover?
The statute clearly says “[t]he right of a child to support may not be adversely affected.” Otherwise, couples are free to contract about alimony, property and debt, and even inheritance rights. These agreements are popular among people who have been married before, or people who have property, such as a home, when they get married. When people marry later in life, they usually want to protect their adult children in the event of their death or divorce.
A pre-nup can be as simple or complex as is necessary. These agreements are not usually boiler plate documents. Sometimes people merely want to clearly identify their separate property before they marry. Other times, someone may have substantial debts, such as huge on-going medical bills, and want to shield the other person from them. A common circumstance is when a wealthy person (sometimes at the request of his or her parents) marrying a person of modest means.
Why Have a Pre-nup?
Protecting property (i.e., their separate assets) is the most common reason for having a pre-nuptial agreement. Property you bring to the marriage may grow in value, such as retirement investments or a pension. Do you understand the impact of marriage is on these assets or debts? Most people don’t realize it, but property may be mixed, meaning separate property someone brings to the marriage may become partly marital. No widow or widower wants to own property with their spouse, only to find out after his or her death, the property is now owned 50/50 with the adult children of the late husband or wife. This can be an unintended consequence of failing to properly plan events before marriage.
Estate rights may also be included in a pre-nup. If someone does not have a will, the state will determine who inherits the estate, and in what percentage. Having a will generally gives you the flexibility to name anyone you choose to inherit from, but without a prenuptial agreement, you cannot “disinherit” your spouse. Otherwise, without a pre-nuptial agreement, by law, a spouse cannot be ignored or left out. A pre-nup can set out the wishes of the parties in the event of their deaths, in any way they choose.
Alimony is another reason pre-marital agreements can be useful. There is no formula or guideline for determining the proper award of alimony a dependent spouse will receive in North Carolina. However, parties may choose to do so in a pre-marital agreement. For example, the amount of alimony may be awarded based on the number of years they remain married.
One spouse may want to avoid alimony altogether, and the other may want to be sure it is specifically included. For example, if you are young and anticipate being a stay at home mother (or father), think about the financial impact that would have on you. After being out of the workforce for what may be years, it may be difficult to get back into the workforce, especially if you separated suddenly, or your spouse leaves you. Every year a spouse is not employed outside the home is another year he or she is not contributing to their social security retirement. One spouse may be giving up a career to move frequently if the other spouse is in the military or has other employment that requires frequent relocation. Think of your life 20 or 25 years from now, when you don’t necessarily have your whole life ahead of you.
The BIG Mistake
The biggest mistake I see people make is making this decision to have a pre-marital agreement prepared largely as an afterthought. It seems some people spend more time choosing the flowers for the wedding ceremony than thinking about their rights and how they are impacted the day that wedding ceremony takes place. This type of contract will have a major impact on your life, not only if you divorce or die, but even for a spouse who wants to get a mortgage in his or her sole name, without the other spouse’s signature, for instance.
Waiting until a few weeks or even days before the marriage to think about having a pre-marital agreement is a very bad idea. Don’t wait until the last minute to begin the process. Doing so tends to create a hurried and very basic document, which doesn’t include many details. A well drafted agreement that a client has plenty of time to review and ask questions about usually means people are free to enjoy the wedding without bickering about the terms of the agreement, in the midst of being distracted by hurried last-minute wedding planning. Remember, it is your life and failing to properly plan what happens if you separate, divorce or your spouse dies can lead to disastrous consequences. It is much better to consider these things now instead of waiting until a worst case scenario occurs. You will have to deal with the worst case scenario either way. Some pre-nups are just as complicated as separation agreements, and can easily take weeks or longer to prepare and negotiate.
Can We Share an Attorney?
No. Because fiancés are in love and are sharing a joyous occasion, it is difficult to explain that the matters in the agreement create a conflict of interest. An attorney may only represent one person. Usually, what is in your best interest is not in the best interest of the other person, who may be losing assets or alimony in the process. A good attorney is not looking just at the current situation, but years or decades away. In fact, that is the very reason you are entering into a pre-marital agreement, to avoid arguments with each other and family members in the event of divorce or death. It is better for the other person to have his or her own attorney instead of going through the process without an attorney.