Making and Breaking Prenuptial Agreements
Many people think prenups are only for super-rich individuals who have substantial nonmarital property assets to protect and anticipate a divorce. These things might have been true once upon a time, but not anymore.
North Carolina lawmakers recently approved the Uniform Premarital and Marital Agreements Act. The UPMAA replaced the web of laws and judicial decisions that once governed prenuptial agreements in the Tarheel State. Today, in as little as one office visit, a Beaufort family law attorney can prepare a solid premarital agreement that’s fully enforceable not only in North Carolina but also in most other UPMAA states.
Premarital agreements also place marriages on stronger foundations. Money squabbles are extremely common in marriages, whether the couple is rich, poor, or somewhere in between. Prenups resolve these disputes in advance, at least to an extent, so they don’t have a chance to corrupt your marriage.
Since prenups are so much more common today, if you have been married before, a family law attorney should at least review your situation, so you can decide for yourself if a prenuptial agreement is a good idea or a bad idea.
Making a Prenup
As mentioned, premarital agreements have financial and emotional benefits. The contents of these agreements usually reflect these two benefits.
Most prenups focus on financial matters, especially spousal support limits and property classification/division matters.
Typically, a premarital agreement caps spousal support at varying levels, depending on the length of the marriage and a few other factors. These provisions reduce the amount of conflict in a future divorce because these provisions alter expectations from the beginning.
Typically, property classification and division is the most time-consuming part of a divorce. A stitch in time usually saves nine. Prenups and divorces are no exception to this rule. In fact, a family law attorney can use a prenup to take an extremely complex problem and make it a little more involved than adding a prenup to a divorce order.
We mentioned some of the emotional issues above. A prenup is also a responsibility issue. No one wants or expects to die early, but everyone should at least consider a life insurance policy. Similarly, no one wants or expects to divorce, but a prenup should at least be part of the premarital conversation.
On a related note, prenups usually include inheritance and succession provisions. These provisions are especially important if a spouse has children from a previous marriage that s/he wants to include in these matters.
Breaking a Prenup
Premarital agreements, like pretty much all other contracts, aren’t completely ironclad. A spouse may successfully overturn a prenuptial agreement in a UPMAA state, usually based on:
- Involuntariness: Extreme pressure to sign, like one spouse springing a prenup on the other spouse as the wedding guests are arriving, could make an agreement involuntary. Prenups are also involuntary if one spouse unfairly withheld important financial or other information, so the other spouse didn’t know what s/he was signing.
- Unconscionability: “Uneven” and “unconscionable” are two different things. A 70-30 division is uneven. “You get all the debts and I get all the assets” is unconscionable. Additionally, the agreement must have been unconscionable when it was made. Before 2003, its first profitable year, Amazon stock was almost worthless. That’s not true today.
The saga of Frank and Jamie McCourt, who owned the Los Angeles Dodgers in the early 2000s, is a good case study. California and North Carolina are both UMPMAA states, so the result would have been about the same in either jurisdiction.
When the McCourts bought the Dodgers in 2004, the team was on the decline. This financial decline eventually led to a bankruptcy filing. Supposedly, the team would have been unable to make payroll because it had so little cash.
At the same time, the McCourts were going through a divorce. In the property agreement, Frank gave Jamie about $300 million in property and cash, and Jamie gave up half of the team.
In 2012, Frank sold the team for $2 billion. Since the property agreement left Jamie about $700 million short of a 50-50 split, she tried to overturn it. She claimed the agreement was unconscionable and, since Frank lied to her about the team’s value, it was also involuntary.
The court rejected both arguments. Jamie, who was a co-owner at the time, had unlimited access to financial records. Additionally, and perhaps more importantly, the agreement wasn’t unconscionable when it was made. Jamie got $300 million and Frank got a near-worthless baseball team.
As a footnote, President Donald Trump later made Jamie the U.S. ambassador to France. That’s not a bad consolation prize.
Reach Out to a Diligent Carteret County Lawyer
Prenups have emotional and financial benefits. For a confidential consultation with an experienced family law attorney, contact Schulz Stephenson Law. Convenient payment plans are available.