Prenuptial Agreements

Prenuptial Agreements

What is a prenuptial agreement?

A prenuptial agreement, (more commonly known as a “prenup”) is an agreement between prospective spouses made in contemplation of marriage.  Generally speaking, prenups control the division of property, such as land, buildings, retirement accounts and personal property.  Prenuptial agreements have to be finalized before the marriage occurs.  They become effective as soon as the parties are legally married.

A prenuptial agreement stays in effect during the marriage and in the event of divorce, will govern how property may be treated during the divorce.  The prenuptial agreement can also govern certain issues that arise during a divorce but not during the marriage, such as spousal support or alimony.  Whether you should get a prenup depends on a number of issues and you will need to talk to your attorney about your specific property and your wishes about how you want that property protected.

If you do not have a prenup, do not worry.  Most spouses do not have one in Texas because for the most part prenups have a “bad rap”.  The majority of people that are on the brink of getting married may not want to consider that someday their marriage could end in divorce.  Here is the good news, upon marriage your separate property will remain separate property and in the event of a divorce, your separate property will remain your separate property, so long as you can prove it belonged to you before the marriage or you received it by gift, devise, or descent (a gift from somebody while they lived or after they died).  The community property is jointly owned and will be subject to a just and right division (not necessarily 50/50). Here is some more good news, if you didn’t sign a prenup before the marriage, you can enter into a marital property agreement called a partition and exchange agreement, or more commonly known as a “postnup”.  Both prenup and postnups will trump community property laws.  Whichever type you choose, the court will apply it first, then apply regular rules of community property law to any assets that weren’t covered in the agreement.

Now, why would you need a prenup if a potential divorce will take care of the separate and community property issues?  Obviously the primary purpose of a prenuptial agreement is to govern property division in a divorce.  However, divorce is not the only reason you may want one.  You may want to control the distribution of property upon your death or your spouse’s death to avoid what would be community property, such as the income from your separate property investments, from going to your spouse’s family or children from another marriage.  You may have inherited the family wealth and want to keep it in your family’s bloodline.  One the other hand, you may also want to make sure that all of your separate property goes to your spouse and/or your kids and not to siblings, parents, or other people in your family tree.  Another reason why a prenup may be in your best interest is to strengthen the financial stability of the marriage.  For example, if one spouse has a lot of debt but not a lot of income, it may make sense to use a prenuptial agreement to keep the debt-free spouse’s income separate property so creditors of the indebted spouse cannot touch things purchased by the salary that would be community property.

What can a prenup NOT do for you?   Under the Texas Family Code there are a few things a prenuptial agreement cannot do:

  • Cannot waive a future spouse’s benefits under ERISA-protected benefit plan, such as a 401k or private employer’s defined benefit pension.  A prenup can include a waiver of rights under the plan as a beneficiary or to receive a division of the plan’s benefit upon divorce but it will only be enforceable if the spouses then reaffirm the terms after the date of marriage.
  • Cannot be used to defraud preexisting creditors.  You can use a prenup to avoid what you already owe with the property you already have.
  • Cannot contain provisions that violate public policy or a statute imposing criminal penalties.
  • Cannot have a harmful or adverse effect on the right of a child to support.  A prenup cannot prevent a parent from paying child support that would otherwise be court ordered.  A prenup can require a parent to pay a greater amount of child support than what the Texas Family Code normally requires.

 

What will make your prenuptial agreement unenforceable?  Under the Texas Family Code, a prenuptial agreement is presumed enforceable if it is:

  • In writing;
  • Signed by both parties;
  • Both spouses disclosed assets and liabilities prior to signing the agreement;
  • Both spouses waived the right to further disclosures.

 

Certain terms of a prenuptial agreement will not be enforced if it violates the Texas Family Code by including terms explained in the last paragraph but may also be unenforceable as a whole if it fails to meet the requirements listed above.

The Texas Family Code only permits challenges to the enforceability of the prenuptial agreement as a whole (rather than striking impermissible terms) for two reasons:

  1. Either spouse did not sign the agreement voluntarily; or
  2. The agreement was unconscionable at the time it was signed plus the party challenging  the agreement:
  3. Was not provided fair an reasonable disclosure of the assets and liabilities of the other spouse;
  4. Did not voluntarily waive, in writing, any right to disclosure of the assets and liabilities of the other spouse-to-be beyond what was already disclosed; and
  5. Did not have or reasonably could not have had, adequate knowledge of the assets and liabilities of the other spouse-to-be.

 

For more in-depth discussions about your prenuptial agreement, give The Gregg Law Firm, LLC a call and we will look forward to working with you to make sure your property is protected at an affordable price!