Divorce is often included as one of the most upsetting events in a person’s life. Contracting for the financial details ahead of time can be a godsend in the event that a couple does decide to part ways.
Most people have heard of a prenuptial agreement, or “prenup”, and a settlement/separation agreement. Far fewer people are aware of the third type of contract in North Carolina that lets spouses settle their distribution of debts and assets in a divorce: the postnuptial agreement. However, changes in our state laws in 2013 made this method of resolution much more appealing to couples that did not execute a prenup and are not separated but want to contract for spousal support.What is spousal support?
“Spousal support” is the broad category of payments from a financially stronger spouse to the other in the event of separation or divorce. Spousal support is intended to remedy the disproportional effect divorce can have on the spouse with fewer resources. Alimony is a type of spousal support that specifically refers to support paid once a divorce action is filed and the marital assets have been divided. Temporary spousal support is support that can be obtained in the event of separation.What exactly is a postnuptial agreement?
If you know what a prenuptial agreement is, you’re halfway to understanding a postnuptial agreement. Both types of agreement are legal contracts that preemptively settle a couple’s division of debt and assets in the event that the couple divorces in the future. A prenuptial agreement occurs before the couple gets married and a postnuptial agreement—you guessed it—is one that takes place after the marriage.
- Prenuptial agreement: Done before marriage
- Postnuptial agreement: Executed after marriage but before separation or divorce
- Separation/settlement agreement: Done after separation or for divorce proceedings
Many attorneys highly recommend to their clients in North Carolina to sign a prenuptial agreement before marriage. The prenup exists to protect the rights of both parties. When it comes to the division of property in divorce, North Carolina is an “equitable distribution” state. Equitable does not necessarily mean equal, but there is a strong presumption here that an even distribution of marital property to both spouses is fair. This means that, absent a prenuptial, postnuptial or separation agreement contracting otherwise, any property you acquire during the marriage can be subject to getting split in half upon divorce.
Despite the considerable protections a properly-negotiated prenuptial agreement can offer, there is a stigma against these types of contract in today’s society as cold or unromantic. Many couples do not want to negotiate and execute a legally-binding document that contemplates divorce before they join each other in what they think will be a lifetime of marital bliss.
For couples who never executed a prenuptial agreement before marriage, the postnuptial agreement can be a valuable tool to streamline the separation and divorce process.Postnuptial Requirements
It is important to note that with postnuptial agreements, many of the assets you acquired during the marriage will have already become “marital property.” This can include stock options that were vested and earned during the marriage, income and retirement assets. Because of this a postnuptial agreement should address what will happen to these joint assets.
Prenups, postnups and separation/settlement agreements all require honest financial disclosure by both parties. The more specific the agreement is, the more it will simplify your process in the event of divorce. Spelling out what will happen to earnings, assets, real estate, appreciation, bills, debts, divorce attorney’s fees, and spousal support is helpful.The old law
Prior to 2013, it was considered void and against public policy to allow couples that were still married to address spousal support. Alimony could only be addressed or waived in a prenuptial agreement or settlement agreement in a petition for divorce. Similarly under the old law, if a couple drafted a separation agreement that waived alimony but later reconciled, the waiver became invalid.2013 changes to the law
However, changes in the statute’s phrasing make it possible for spouses to now waive or otherwise agree to spousal support in a postnuptial agreement. For a separation agreement to be valid, a couple has to prove that they are living separate and apart with the specific intent to end their marital relationship. The new law will allow couples who are not yet at this stage and might still intend to work on their relationship to nevertheless contract with each other regarding spousal support.
In addition, the 2013 law keeps separation agreements that waive spousal support for couples that end up reuniting as valid.
If you want to contract for the division of assets and spousal support in the event of divorce, it is important to have the skills of an experienced family law attorney to protect your interests. Arnold & Smith, PLLC has a Family Law Practice Group of skilled and experienced attorneys.