Articles Posted in Premarital Agreements

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….But was that a smart decision for someone worth $400 million??

A premarital agreement is an agreement that changes the rules that the law normally applies when a marriage ends in divorce or death. Do you need a premarital agreement? You must determine whether you need to change the rules that the court normally applies to these matters.

The previous post in this series considered whether you might want an agreement to change the rules that apply to division of property at divorce. This post will consider whether you might want an agreement to change the rules that govern support of a spouse, or the rules that govern division of property upon death.

Upon divorce, the law normally requires the wealthier spouse  (the  “supporting spouse”) to pay support (traditionally called “alimony”) to the less wealthy spouse (the “dependent spouse”). N.C. Gen. Stat. (“G.S.”) § 50-16.3A.  Alimony is often not awarded after short marriages.   After medium-length marriages, alimony is often limited in both amount and duration.    After a long marriage,  however,  alimony can be a  significant obligation, especially if the dependent spouse has been out of the workforce for many years.

If the parties would prefer not to be responsible for the support of one another, the duty to pay alimony can be waived in a premarital agreement. Id. § 52B-4(a)(4).

When the court divides property upon death, it does not divide the property into marital property and separate property. Instead, if the deceased spouse has no will, the surviving spouse simply receives a percentage of the deceased spouse’s property. The exact percentage varies according to the type of property involved, and according to whether the deceased spouse is survived by children and/or parents, but it is rarely less than one-third. The percentage applies to all of the deceased spouse’s property, not just to marital property. Id. § 29-14.

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A premarital agreement is a contract, signed by two persons who are about to be married. It sets forth rules that will apply when the marriage ends, either in death or divorce. It can also set forth rules to govern how the parties will deal with their property during the marriage.

Married persons do not have to sign a premarital agreement. The law already provides rules for dividing property and awarding support upon divorce, and rules for dividing property upon death. If the two people do not have a premarital agreement, these normal rules apply. The purpose of a premarital agreement is to contract out of the normal rules, and to apply different rules in their place.

To understand whether you need a premarital agreement, you need to first understand the rules that will apply if you do not have an agreement. If those rules are acceptable to both parties, there is no need to sign a premarital agreement. If those rules are not acceptable, and the spouses can agree upon a different set of rules that they both like better, there is reason to sign a premarital agreement.

The rules that apply without an agreement vary from state to state. This blog post will discuss the rules that apply to division of property upon divorce, and why spouses might want to sign an agreement that applies different rules.

In North Carolina, when a marriage ends in divorce, the court divides the parties’ property into two categories. “Separate property” which is usually property acquired before the marriage, or property acquired by gift or inheritance during the marriage. Separate property is not divided upon divorce. “Marital property” is everything that is not separate property, and it is divided equitably between the spouses. The presumption is that an equal division is equitable, but the presumption can be rebutted by proof that another decision is fairer.  See generally N.C. Gen. Stat. (“G.S.”) § 50-20.

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By Carolyn J. Woodruff, JD, CPA, CVA

Carolyn

By now, everyone in North Carolina has probably heard that Sharon and Ozzy Osbourne are most likely divorcing after 33 years of marriage. There has been an upturn in so-called “gray divorces” – where a couple divorces after the age of 50.  But, with gray divorces also come gray marriages!

Gray marriages are defined differently by different people, but generally persons over fifty who remarry may be considered gray marriages. Others don’t consider a marriage to be “gray” until a least one of the spouses is sixty or older.  Here are my topmost concerns for “gray marriages”—marriages for people over fifty.  You should go through each of these points, many of which can be handled in a prenuptial agreement.

(1)          Medical and other Basic Necessities:  Husband and Wife are financially responsible for each other’s necessaries, such as medical, housing and basic food.  Common wisdom is that you cannot necessarily contract around this Doctrine of Necessaries in a premarital agreement because the providers, particularly the medical providers, are not parties to the premarital agreement.   In my opinion, it is helpful in a Premarital Agreement (if the parties want the provision) to require the prospective Bride and Groom to put the Waiver of Medical Necessities on file with all health care providers.  It at least gives the provider notice that the other spouse may contest liability for necessaries.  Health care, while potentially expensive at any time in life, can become very expensive as we age.  Is this potential medical commitment one you are willing to take on? Of course, I’ve seen divorces happen over this issue of medical necessaries alone in persons in their eighties in order to preserve assets for estate planning.  This is tough stuff.

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Carolynby Carolyn J. Woodruff, JD, CPA, CVA, North Carolina Family Law Specialist

The North Carolina Premarital Agreement Act describes the law for the creation of valid, enforceable premarital agreement.  The North Carolina Premarital Agreement Act is under North Carolina General Statutes Chapter 52B. This will be one of several articles discussing the North Carolina Premarital Agreement Act.

Formalities:  Obviously, a premarital agreement should be completed before the wedding, and practically, I suggest the prenuptial agreement be finalized before the wedding invitations are sent out.  The Agreement must be in writing and signed by both parties.  Note, the statute does not require notarization, but I think it is a better practice to notarize the Premarital Agreement.  I also ask my clients to initial and date each page so no one can argue later than a page was changed or slip-sheeted into the document.  (Yes, I do this every day, and I have seen this slip-sheet argument of “that is not what I signed.”)

Content: The content of a North Carolina premarital agreement varies based upon individual needs and wants.  Most typically, content revolves around three topics:  spousal support, property division (equitable distribution) upon divorce, and death (Wills and Trusts).

Spousal support is easiest to discuss.  The parties to the marriage can decide ahead of time exactly how spousal support should be handled at divorce, or even whether there should be spousal support.  Spousal support can be waived in the Premarital Agreement.  Likewise, spousal support can be a stated amount dependent on the number of years of marriage before separation/divorce.  Spousal support can be anything you want it to be, as long as you agree before the wedding in the prenup.

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