Texas Prenuptial Agreements Overview
Today we are going to discuss some of the provisions in a Texas prenuptial agreement. A prenuptial agreement is an agreement you enter into prior to getting married dealing with property, spousal support, and other financial issues.
These agreements can deal with many different kinds of issues such as making sure that separate property assets are preserved as separate property during the marriage.
Prenuptial agreements can also be used to prevent the creation of community property during the marriage so that all property earned or purchased during the marriage is separate property.
A premarital agreement can also provide for spousal maintenance (alimony) in a Texas divorce. On the other side of that coin, these agreements can be used to block or prevent the payment of spousal maintenance if the couple divorces in the future.
A couple can also enter into this kind of agreement after they are married. This is called a postnuptial or postmarital agreement. Whether the agreement occurs before or after marriage, they are often referred to generally as marital agreements.
Texas law favors the enforcement of marital agreements. To be enforceable, a marital property agreement must be in writing and signed by both parties.
Martial Property Agreements
Marital property agreements are presumed to be enforceable in Texas. The party opposing enforcement of the agreement has the burden of proof to establish that the marital property agreement is not enforceable and to defeat the agreement.
A marital property agreement is not enforceable if the party challenging the agreement proves that:
- The party did not sign the agreement voluntarily; or
- The agreement was unconscionable when signed. This means that the party challenging the agreement must show that she:
- was not provided a fair and reasonable disclosure of the property;
- did not waive the right to disclosure; and
- did not have adequate knowledge of the property.
Provisions in Texas Prenuptial Agreements
Below are common provisions our office deals with when drafting prenuptial agreements in Texas.
Eliminating Community Property
One of the first issues that typically comes up in premarital agreements in Texas is whether or not you are going to have community property during the marriage.
You can use a prenuptial agreement to eliminate future community property in a prenuptial agreement. This means that during the marriage you keep everything separate between the two spouses, so that there is no creation of the community property in the marriage.
Each spouse only owns their own separate property during the marriage. This obviously makes it easier to divide property in the event of a divorce.
Temporary Spousal Support
Another issue that frequently comes up in Texas prenup agreements is whether or not you are going to have alimony or temporary spousal support.
You can provide for a certain amount of agreed temporary spousal support in the event of divorce, or you can eliminate alimony altogether by agreement.
Establishing a Household Account
Additionally, something that arises often in premarital agreements is whether you are going to have a household account.
Are you going to set up a fund to pay for the mortgage and daily expenses that you incur during the marriage?
And how are you going to fund that?
How are you going to divide that account or who gets it upon a divorce?
You can also include an infidelity clause.
If there is infidelity – if somebody cheats in the marriage – what is going to happen in that situation?
Meaning that you have a greater share of money or property awarded to the “innocent spouse” if adultery is established.
Award of Marital Residence
You can also deal with what is going to happen to the marital residence upon a divorce.
Who is going to live there during the divorce process, and how long does the other party get to stay in that house? Does the house eventually get sold on the open market or does the home get awarded to one of the spouses in the divorce?
In a prenuptial agreement, you are basically outlining what will happen upon a divorce. It may sound like you are starting a marriage by discussing what’s going to happen in the event of a divorce, but those things can give certainty.
This can also reduce anxiety because the agreement ensures that everybody’s on the same page in the event of a divorce.
Each spouse comes into a Texas marriage with varying degrees of financial stability. If spouses want to keep their finances separate, a prenup is a great way to achieve that goal. Keeping each party’s finances separate can help avoid some pitfalls in the future.
For instance, if one spouse has a lot of debt going into the marriage, a prenuptial agreement can keep the other spouse from getting saddled with that debt. If the couple subsequently divorces, the spouse with the large debt remains responsible for paying it.
Of course, it is common for married people to buy things on credit. Assets purchased on credit during a marriage are presumed to be purchased with community credit, and thereby become a community asset held by both spouses.
However, if this outcome is not desired, there are ways to get around it in a prenup. When granting credit, the couple can agree that creditors only consider the creditworthiness and income of the borrowing spouse. The parties can further agree that both the asset and the associated debt remain solely with the purchasing spouse, so the other spouse remains unaffected.
Income from Separate Property
As previously stated, Texas allows a married couple to keep their property separate during the marriage by writing that provision into their prenuptial contract. However, a unique feature of Texas law is that income derived from separate property becomes community (marital) property.
For instance, if Wife holds Stock A separately from Husband and Stock A returns $100,000 in a year, that profit becomes community property.
But what if dividends of Stock A automatically get reinvested into the stock?
At the time of divorce, would that reinvested $100,000 be separate or community property?And if it is separate, how can it be extracted from its investiture in the original stock?
As you can imagine, this can make the division of assets upon divorce quite complex.
But a prenuptial agreement can solve this problem by specifying that income from any asset remains with the spouse who owns the asset. Likewise, a prenup can specify that gifts given from the income of a separate asset stay with the gifted spouse.
Distributing Property After Death
As part of a healthy estate plan, you may want to use a prenuptial agreement to control how marital community property gets distributed upon the death of either you or your spouse.
In other words, if you do not want inherited land or any other wealth going to your spouse’s family or to their children from a prior marriage, then you can specify that in a prenuptial agreement.
The same is true for wealth that is generated from any assets. Under normal circumstances, most of the wealth generated during a marriage becomes community property owned by both spouses. After death, the normal distribution of property may result in inherited land or wealth leaving your family bloodline.
You can use a prenuptial agreement to protect any property you wish to preserve for your own descendants. Of course, a valid will can also resolve these issues.
But a well-planned prenuptial agreement can be another valuable tool in your estate planning toolbox.
Need More Info On Texas Prenuptial Agreements? Contact Our Law Office Today
These are just some of the provisions that you can consider in a Texas prenup agreement.
If you’re looking to enter into a prenuptial agreement or you need one reviewed, feel free to reach out to The Larson Law Office.