Many clients are asking for pre-nuptial agreements as they look forward to tying the knot (hopefully in a ceremony with friends and family). Some clients have told me that if their relationship can survive a pandemic and quarantine, it can survive anything.
Pre-nups aren’t just for the rich and famous. They are practical in avoiding future conflicts. They are particularly useful for those who have children by prior relationships.
What should your agreement include? How can you have a better conversation with your lawyer?
1. Plan to attach to the agreement a balance sheet for each party before signing. Your agreement won’t be valid in North Carolina without them. Your balance sheet needs to disclose to the other party the gist of what you own and what you owe prior to the marriage. Include fair market value of assets like a house, a vehicle, household items (as a group), jewelry if valuable, and usual bank account balances. List approximate values of retirement accounts and describe pension plan interests. Include approximate balances for mortgages, vehicle loans, credit cards, student loans, and personal loans. Let your lawyer look over it to be sure it will pass the test.
2. Sign and notarize. By NC law, pre-nups are not valid unless signed and notarized. Try to do this as far ahead of your wedding as you can to allow each party time to consider the terms. Courts discourage signing pre-nups just before walking down the aisle.
3. Things in common to most pre-nups. Most couples want these starting points:
a. Assets a party owns before marriage stay their separate property, no matter what.
b. Assets a party inherits at any time stay their separate property, no matter what.
c. Make an advance plan about alimony – either there is none because both parties are capable of self-support, or there is a plan for how it will be calculated and how long it will last.
d. Surviving spouse rights that exist by statute won’t apply; instead, the parties will go by what is in the agreement or what a spouse chooses to put in their will. This is important to be sure statutory surviving spouse rights don’t upend a plan for what a deceased party’s children were intended to inherit.
e. Each party’s genetic material (e.g., sperm or egg banking) belongs to that party solely.
4. Extra step needed for retirement plans. A federal law called ERISA governs retirement plans through an employer (like pensions and 401(k)s). By law, your surviving spouse will be treated as your primary beneficiary UNLESS that spouse has signed an effective waiver. Here’s the tricky part. The waiver isn’t effective unless signed when they are a spouse (i.e., after the wedding). Merely including the waiver language in the pre-nup (when they are not yet a spouse) is not effective. The pre-nup should include the requirement that within 30 days after the marriage, the waiving spouse will sign the necessary forms with the retirement plan administrator – and make sure to remember it after the honeymoon.
5. Terms that vary. Forget cookie-cutter. Pre-nups can be tailored to whatever the parties want. Here are some options:
a. Will earnings during the marriage (and the assets purchased with them) be considered separate or marital property? Will title of these assets determine ownership?
b. If both spouses intend to contribute to the mortgage or upkeep of a house one spouse owned before marriage, what would be fair compensation to the non-owner spouse in the event of separation or death? Alternatively, is it understood that the non-owner spouse will not be contributing to the mortgage or upkeep of the house?
c. Where will retirement assets go upon death? In the event of separation, will pre-existing and/or during the marriage retirement assets be separate or marital?
d. Is there a plan for one spouse to leave a career and stay home with children? If so, what does that mean financially if the parties later separate and that spouse is less employable?
e. How will the parties contribute to their joint expenses during the marriage?
f. Are there non-economic issues that are important to the parties to include? These might involve how future children will be raised if parents are of different religious faiths or cultures.
The possibilities for pre-nups are as varied as the people who sign them. If it is important to have a pre-nup, it is important to have good planning. It is also important to have an enforceable agreement, and one the court can readily interpret if the need arises.
Kim K. Steffan is an attorney with Steffan & Associates, P.C. in Hillsborough. She can be reached at (919)732-7300 and email@example.com.