Prenup, Prenup, Prenup
Prenup, prenup, prenup! Yes, I said it. Although the concept of marriage differs in belief systems or religions, socio-economic statuses, and culture to culture, the one thing every marriage has in common is the conversion of legal rights literally overnight. In the eyes of the law, you and your spouse are looked at as a single entity in a lot of aspects. Some of the common joint benefits of marriage include filing joint income taxes, inheritance benefits, and health insurance benefits. However, when it comes to determining the future of your finances, the “single entity” aspect of marriage is often misunderstood.
Before I get to the many benefits of prenups, let’s discuss how North Carolina law applies to your property and financial interests to get things inter perspective.
Property
Property division as a result of separation and in contemplation of divorce is referred to as Equitable Distribution under North Carolina law. Assets and debts obtained or created “during the marriage” are generally defined as marital property and are subject to property division. But what if the investment account is in my name only? That does not matter. What is more important to the determination of marital property is when the asset or debt was created. Was the asset bought before the date of marriage or after? Did the asset increase in value during the marriage? Was the increase in value of the asset due to passive or active involvement by one of the spouses? And that is just the beginning of the considerations…
Once property and debt is determined to be “marital property” or have a “marital interest,” then the determination of how said property and debts are divided comes into the equation. Generally, a Court will presume that an equal (50/50) division is applied. This is regardless if one spouse was solely responsible for the increase in the investment accounts or the other spouse was solely responsible for the increase in credit card debt. Since the two of you were married, the Court is going to presume that both of you agreed to invest in said investment or become indebted on said credit card because you were “happily married” and “were not separated”…yet. This is also generally applies even if there existed forms of domestic violence in the marriage, in particular economic and financial abuse. Although a Court has discretion to adjust the percentage division, an equal (50/50) division is generally presumed as just and equitable…even when you believe this is unfair.
Spousal Support
In addition to property and debt treatment in a marriage, you also want to consider any spousal support factors. Although I cannot predict the future incomes of you or your soon-to-be spouse, I am relatively sure that most of you will not make the exact same amount of money today than in ten, twenty, or thirty years. I’m not only talking about income creases, but there is a very real possibility that you or your soon-to-be spouse may experience an unpredictable decrease in income-earning ability. This opens the door to the discussion about spousal support.
Spousal support is the concept of financial support paid by one supporting spouse to a dependent spouse. In North Carolina, there are two forms of spousal support: Postseparation Support and Alimony. For purposes of this discussion, the important takeaway is that a person that is substantially dependent on the income of the other spouse at the date of separation has the right to request through the Courts a certain amount of financial support for a duration of time. How much is the amount? For how long does a spousal support obligation exist? Unfortunately there is no calculator in North Carolina for spousal support; however, a Judge will take into account the disposable income available, the standard of living of both spouses, and the necessary expenses of both spouses, to name a few factors. And let me add: a Judge may not always agree with your definition of a necessary expense.
Protecting My Legal Interests
Overwhelmed yet? Divorce is a very daunting occurrence in any person’s life. The divorce process only becomes more difficult when the spouses have negative feelings about one another. Almost every person that says “I do” on the wedding day believes they will never get divorced; and I truly hope that you never have to experience a divorce. But there are unpredictable forces in our world that may force either or both spouses to seek a divorce. And although divorce is never preferred, would you like insurance that the separation and divorce will go as amicably as possible? A prenup, or more properly named a “Premarital Agreement” under North Carolina law, can provide said insurance. The Premarital Agreement, which is established during a time of communication and love prior to the date of marriage, can define what would happen to your assets, debts, and spousal support situation should something lead to a separation or divorce.
In a Premarital Agreement not only can the two of you decide specifically how to address property and spousal support issues, but you can get creative as well:
- If Jay Z and Beyoncé split, Jay Z would have to pay $1 million a year for every year they’ve been married among other large sums of money.[1]
- When Khloe Kardashian and Lamar Odom split in 2015, Kardashian received $2 million for their four year marriage, the $4 million mansion in Tarzana, California, and her $1 million ring.[2]
- If Justin Timberlake is unfaithful to Jessica Biel, he’ll owe Biel $500,000.00.[3]
- Other creative provisions include limits on television use, parenting instructions, random drug tests, fines, and other infidelity clauses.
But a Premarital Agreement is not only a good idea for the rich and famous; more importantly, a premarital agreement is for any person who wants to be financially insured should the unthinkable happen in their marriage.
Especially for individuals with established investment accounts or any aspiring entrepreneurs, a Premarital Agreement can have creative provisions to protect the empire you have established up to the date of the wedding and during the marriage. Although North Carolina law provides from some parameters for Premarital Agreements, this type of marital agreement has a great amount of flexibility to fit the specific needs of you and your spouse. You and your spouse are able to create a relationship-specific insurance policy together instead of relying on the laws of the state or the treacherous litigation process.
“Thanks for the legal advice,” I’m sure you are thinking…“but my soon-to-be spouse and I are ironclad and don’t need the negative emotional implications of a prenup.” I understand your dilemma and respect the same. However, I must comment further about the unintended but positive aspects of discussing a Premarital Agreement. When discussing the Premarital Agreement option, a unique level of openness occurs about financial matters and understandable concerns by both soon-to-be spouses. To secure the foundation of your marriage, the financial discussion is not only tough but necessary. Couples I witness having the Premarital Agreement discussion generally develop a stronger and more trusting relationship that gives them a platform from which to build a healthy marriage. If you can have the hard discussions before the date of marriage, then you can tackle any hard conversations that are to be had during the marriage.
If you would like to learn more about Premarital Agreements, 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
[1] Julia Naftulin, Celebrity Prenups You have to see to Believe, https://www.theknot.com/content/crazy-celebrity-prenuptial-agreements.
[2] Id.
[3] Id.
