The Importance of Premarital Agreements for Clients Considering Marriage (or Remarriage)
For many clients who are contemplating marriage (or re-marriage after the death of a spouse or after a divorce), an important estate planning consideration will be whether to enter into a premarital agreement with their intended spouse. Under North Carolina law, once a couple marries, a spouse becomes legally entitled to various rights in the other spouse’s property (including the earnings or income from such property) in the event of the death of the spouse or in the event of the parties’ divorce. A premarital agreement is a contract made between a husband and wife prior to the marriage in which the parties agree in advance regarding various legal rights and obligations relating to the marital relationship, including inheritance rights, property division in the event of divorce, alimony and spousal support, and other rights provided to married persons under both state and federal law.
For clients entering into a first marriage, a premarital agreement may be advisable, especially for those clients who have significant assets (including closely-held or family business assets) or who may expect to receive significant assets in the future through inheritance from parents or other family members. A premarital agreement can provide protection for these assets in the event of death or divorce, by providing that the client’s spouse agrees to waive any right to these assets upon death or divorce or, in the alternative, agrees to accept other assets in lieu thereof, either outright or in trust for the surviving spouse’s lifetime.
For clients considering re-marriage following the death of, or divorce from, a previous spouse, a premarital agreement will enable a client to retain control over the disposition of his or her estate at death, free from claims of the new spouse. A premarital agreement can ensure that the client’s assets and estate will be preserved for the client’s children from the prior marriage or the client’s other beneficiaries. A properly drafted premarital agreement may also limit or eliminate a client’s exposure for the payment of alimony or spousal support in the event of separation or divorce. The agreement will also address, in advance, how the parties’ separately owned property and jointly owned property will be divided in the event of divorce.
In order for a premarital agreement to be legally enforceable, each party must be represented by separate legal counsel and be given full disclosure of the other’s financial information, including the other party’s assets, liabilities, and current income. Each party must also be allowed sufficient time prior to the date of the marriage to review the proposed agreement and to be advised by legal counsel of the ramifications of entering into the premarital agreement.
For many clients planning to enter into marriage or re-marriage, a premarital agreement will be an appropriate and indeed, in many instances, a necessary part of a couple’s planning and groundwork for a successful wedding and marriage. A premarital agreement that has been negotiated and agreed upon by a couple prior to their marriage can be a positive factor both for the parties to the marriage and for their families and can help to ensure a happy marriage for many years to come.
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