Friends Don’t Let Friends Marry Irresponsibly…
Discuss the Prenup
Wedding season is here, and your best friend just got engaged. There is so much to plan! The venue, live band or DJ, type of food, and the wardrobe? Yes, these are all exciting conversations necessary to make your friend’s wedding the event of the year. But what about the more long-term considerations of marriage? I too want your friend to have an awesome wedding; but as your thoughtful lawyer, I want your friend to have a successful marriage as well.
There is no way around it: Marriage is a legally-binding contract. On the date of the wedding, a person assumes a number of responsibilities and is granted certain legal rights and protections. Have you and your friend discussed these rights and responsibilities? I’m betting no, or at least not yet once you read this.
Although no one wants to imagine a possible separation especially with only a recent engagement, well-known statistics stress the possibility of divorce. However, could we not try to prevent divorce by ensuring open and healthy communication between the soon-to-be spouses? A very open and honest conversation is needed when they are figuring out how they will join their households, their finances, and their lives. And should it all fall apart, how would they prefer things to be resolved? Or would they want to leave those important issues to be decided by a stranger… a Judge?
The laws already dictate what happens to a portion of finances and life’s choices; do you honestly want the laws to dictate what happens to your family and your finances should a marriage not work out? Would you want that for your best friend?
Without a prenuptial agreement, a person gives up the right and autonomy to decide how finances are handled and how assets and debts are distributed. In particular, a prenuptial agreement is crucial should one of the following situations apply:
- Protecting a business that is currently owned or if there are aspirations to open a business in the future.
- If there are children from a prior relationship or family members for whom you want to protect inheritance rights.
- If real property is currently owned or if there is the hope to own real property during the marriage.
- When the incomes of each spouse are substantially different.
- When the assets and debt of one spouse are substantially different.
- When the spouses have completely different spending and saving habits from one another.
- When the spouses have completely different career and financial aspirations.
- If the marriage is occurring later in life for either or both spouses.
Although we hope a marriage will not end in divorce, humans are still unable to predict the future with full accuracy (just ask your local weatherman). It is much better to help our friends manage the risk, even if it is not as fun as picking out the wedding dress or tuxedo.
What can go into a Prenuptial Agreement?
A prenuptial agreement (or what the North Carolina General Statutes refer to as the “premarital agreement”) can address a number of the family law issues and personal decisions:
- The distribution of assets and debts, whether purchased or incurred before or during the marriage, for example:
· Real property
· Bank accounts
· Retirement accounts
· Investment accounts
· Pets
· Business interests
· Furniture
· Computers and other technology
· Vehicles
· Jewelry
· Timeshares
· Marital gifts
- Ownership rights to a death benefit from a life insurance policy
- Creation or modification of a Will or Trust
- Responsibility for certain obligations or assets during the marriage, for example:
· The spouses split the mortgage in a certain proportion.
· How much money the spouses will save for both long-term to short-term needs.
· How income taxes will be filed.
· Plans to cover college education expenses.
· Whether the joint marital income should be relied upon by creditors when either or both spouses are seeking a loan.
- Education Plans for either or both spouses – If one spouse goes to school while the other spouse is providing the sole financial support for the family, the spouses can decide what should happen if a separation or divorce occurs to account for the respective sacrifices.
· A common situation arises when the now-more-educated spouse finds that they can “upgrade,” leaving the other spouse without a remedy or benefit despite the years of sacrifice.
· An issue also arises when one spouse decides to make the leap to quit their current job to go back to school in the hopes of a better future; but then their spouse is no longer agreeable to being the only person working to financially support the household. After separation, the spouse-student has to not only account for education costs but also living costs without the help of a partner.
- Unique Circumstances
· If one spouse has to move locations or travel for their career and the other spouse follows, thereby making sacrifices detrimental to their career and job prospects.
· If either spouse has any unique health expenses for themselves or any children/dependents.
- Spousal Support
· The spouses can agree to waive any claim for Postseparation Support and Alimony (to the extent that neither spouse is forced to apply for public assistance at the time of separation/divorce); or
· The spouses could clearly define a spousal support arrangement should separation/divorce occur.
- Generally, any other topic that does not violate public policy or impose a criminal penalty.
· This is when you see interesting provisions when one spouse reserves the right to utilize a particular gardener or financial advisor after the separation.
· Infidelity clauses are also relatively popular which provide for “fines” should a spouse be caught cheating.
When is a Prenuptial Agreement enforceable?
- When the agreement is entered into voluntarily by both soon-to-be spouses;
- When they both are provided a fair and reasonable disclosure of the property or financial obligations of the other spouse;
- When they both voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
- When they both have, or reasonably could have had, an adequate knowledge of the property or financial obligations of the other spouse.
I know, discussing the legal implications of marriage is not “sexy” or “entertaining,” unless maybe if you are a lawyer. However, if these serious discussions can occur before the wedding date, regardless if the couple signs a Prenuptial Agreement, you are helping your best friend create a strong foundation for a marriage.
If you or a friend are looking for further guidance on the legal implications of marriage or to draft a Prenuptial Agreement, our Modern Legal team is here to help.
Please note: these educational materials are based on North Carolina law where my legal practice is based. While the insights may have wide applicability, readers should consult with an attorney regarding the specific laws in their state or country.
Written by: Theresa E. Viera
