Pre-Marital Agreements

Risk Free Marriage:  The Use and Enforcement of Pre-Marital Agreements

It has been said that life is a gamble at terrible odds, if it were a bet you wouldn’t take it. While you can’t change the odds in the game of life, many people want to fix at least part of the game. Marriage, one of the most personal interactions in life, is also one of its greatest risks. There is no sure thing.

Pre-Marital AgreementsPeople should enter into their marriage with at least the same consideration as they put into making a major purchase or choosing a profession. Bender LeFante Law Offices encourages couples to discuss what they want from their marriage, and how they expect to meet their goals and run their household on a day to day basis. Such discussions and agreements before marriage can do a lot to prevent problems from arising during the marriage. These discussions are even more important when one or both of the parties has been married previously or is entering the marriage with children, or with a large estate or family business.

Do I Need a Pre-Marital Agreement? If it is important to you to have certain matters agreed upon prior to a marriage, a Pre-Marital Agreement is a way of making such an agreement into a legally binding document. A Pre-Marital or Pre-Nuptial Agreement is a contract entered into prior to and in contemplation of a marriage. A Pre-Marital Agreement can set forth rights and responsibilities towards one another and set forth and protect separate property and businesses. It can predetermine the distribution of property upon death or divorce. As such, the document plays an important and useful part in setting to rest possible areas of apprehension or unease in a marriage and can lead to peace and harmony in a relationship. Turner v. Turner, 242 N.C. 533, 89 S.E.2d 245 (1955). Parties have the right to put just about anything in a Pre-Marital Agreement so long as it is not unlawful and so long as it does not concern child custody or child support.

Some people are, understandably, apprehensive when past events or unequal economic positions cause them to wonder if the other party’s desire to marry is sincere or is based on economic priorities. In order to avoid an unjust outcome if it turns out such worries were well founded, while at the same time allowing the marriage to proceed unencumbered by future fears, an agreement can have terms which can change over a period of years or can cause the entire agreement to become void after a certain passage of time. It is important to discuss these matters with your attorney so that the agreement can reflect your true intentions.

It is not the role of the court to void Pre-Marital Agreements merely because one party receives a better result than the other. For this reason, we urge parties to be wary if the prospective spouse couches the desire or need of a Pre-Marital Agreement in emotionally charged terms such as “If you sign the agreement, I’ll know you really love me, not my money” or as a desire to protect the person from the recurrence of past wrongs such as “You know how awful Tom was and how he really stuck it to me”. Or in terms of a need for emotional certainty such as “This is because of my own insecurity. I know you would never be the type to ….” That is not to say that such reasons are without validity, or that you should not enter into an agreement, only that any agreement should reflect both parties’ need for terms which are fair and reasonable.

BEWARE: Life is long. Things change. An agreement which seems fair when both parties work and have similar incomes, may not be as fair when a couple decides to have children and have one of them stay home, or when the couple decides to move for one person’s career which then hurts the other party’s ability to earn, or if one party is hit by a drunk driver and loses a leg, or a million different things that you cannot contemplate when you are entering a marriage but which may, nevertheless, occur. Be sure the agreement you are entering into will be fair for 20 or 30 years or even longer into the future because, unlike most contracts, this agreement will last as long as the marriage and, in some cases, even after that.

There is a growing trend to use Pre-Marital Agreements as a form of “hedging the bet against the uncertainties of marriage”. Pre-Marital Agreements can be used not just to protect what one has, but to keep all future earnings separate, so as to deny the marital union any use of funds. In this new use of Pre-Marital Agreements, one of the parties can come out of marriage with more than that party started with, while leaving the other party unemployable and unemployed with literally nothing but the clothes on his or her back. This harsh result is often justified by reducing the marriage to a form of partnership and creating a false impression of equality. Even understanding the dire nature of the provisions of a Pre-Marital Agreement, romantic exuberance might lead a party to underestimate the likelihood of divorce and the importance of financial planning. This problem is more acute when the parties do not have an equal level of knowledge about business, finance, or the long term effects of such an agreement. Again, the services of an attorney can protect each party in producing an agreement which is tailored to their specific needs and desires.

How To Draft a Pre-Marital Agreement: In order for a Pre-Marital Agreement to be valid in North Carolina, it must be signed by the parties in contemplation of a marriage which then occurs, and there must be a full and fair financial disclosure of the assets and liabilities of each party, and a lack of duress or undue influence. These requirements are found in the Uniform Premarital Agreement Act which is Chapter 52B of the North Carolina General Statutes.

If you are thinking of having a Pre-Marital Agreement, be sure that you meet with an attorney and that your future spouse meets with a different attorney. Discuss what you are trying to do with the agreement and why. A creative attorney can craft an agreement that will allow you and your new spouse to enter marriage protecting what you have and allowing you to grow together towards your common marital goals. There are many ways an agreement can be structured which are fair and equitable to each party. Be concerned if the attorney you consult does not discuss your specific needs and both the short term and long term effects of an agreement. Many attorneys have a “one size fits all” agreement which cannot and does not fit every client’s needs.

Once you have your signed agreement, you may need to use it. Some agreements do not require any further action unless and until an event such as death or separation occurs, in which case the agreement can require a specific result. Other agreements may need to be recorded to allow certain actions, such as buying or selling property or encumbering property. Be sure to discuss with your attorney whether you need additional documents or need to record your agreement with the Register of Deeds.

What Would Make the Agreement Invalid? A Pre-Marital Agreement is valid if it complies with the requirements of the Uniform Pre-Marital Agreement Act. The act requires that a Pre-Marital Agreement must be signed by the parties in contemplation of a marriage which then occurs, and there must be a full and fair financial disclosure, and a lack of duress or undue influence. Fairness in execution is based upon full disclosure of assets and an opportunity to obtain independent counsel. If the agreement meets the requirements of the Uniform Pre-Marital Agreement Act, the courts will then interpret the Pre-Marital Agreement by using contract law.

It is not the role of the court to void Pre-Marital Agreements, merely because one party receives a better result than the other. The burden of proof is on the party seeking to hold the agreement invalid. Defenses of undue influence, duress, fraud, unconscionability and inadequate disclosure are affirmative in nature and require specific pleading. However, the requirement that such transactions be fair and reasonable does not now seem to be a requirement of Pre-Marital Agreements. Rather, the present court has indicated that no matter how unreasonable or unfair an agreement, if the parties met the requisite formalities in entering the agreement, the court will not look to the underlying fairness or reasonableness of the agreement. (See King v. King 114 N.C.App. 454, 442 S.E.2d 154 (1994))

Conclusion: There are many good reasons a couple may wish to have a Pre-Marital Agreement. However, such an agreement should be tailored to the needs and desires of that couple. Such a document can be very important for each party’s peace of mind. Knowing you can leave property to the children of a former marriage, or that the family business will be secure, can allow a marriage to grow and flourish. Be certain to see an attorney who will counsel you as to the terms of an agreement which will meet your needs or you could end up down the line with an agreement that does not do what you had hoped it would or has unexpected or unintended consequences.