What type of agreements can you come up with in Texas that will handle property rights during your marriage and subsequently during your divorce? The kind of agreement that will do so is premarital agreements and postmarital agreements. What are those documents, and what impact can they have on your marriage and your divorce?
Premarital agreements in a nutshell
A premarital agreement allows you and your fiancé to specify how you would like to characterize certain pieces of property upon either of your passing or at the time of divorce. Premarital agreements are often used to "pre-award" contractual alimony.
Postmarital agreements in a nutshell
A postmarital agreement allows you and your spouse to take an asset or debt and designate it as one of your separate properties rather than being a part of the community estate. You may also partition future earnings or income from that transferred property as part of the spouse's different estate who owns the separate property rather than winding up as community property.
Premarital property agreements examined.
Before you and your spouse get married, you all may choose to enter into an agreement that would seek to define property rights as to certain assets and debts before the time of divorce or the death of either one of you. The benefit to doing so before the beginning of your marriage is that you can think more clearly through potential issues, can consider what is best for each of you, and do not have the "baggage" of emotions impacting your decision making as you would during the middle of a divorce.
Any property- this includes a future interest- interest in real or personal property may be impacted by a premarital property agreement. There are very few requirements for a premarital property agreement to be deemed valid and enforceable by a judge. Among those few requirements include that the agreement must be in writing and signed by both you and your spouse.
Within the contract itself, you may contract regarding any subject you choose as the subject matter does not break the law, violate the public policy of Texas, or hinder your future (or current) children's ability to receive child support.
Are you able to decide in advance issues related to your children in a premarital property agreement?
As I mentioned a moment ago, you cannot agree not to have child support be paid in a future divorce. Your child has a right to be supported by both of their parents, and your negotiating away this right would contravene the public policy of the State of Texas. On the flip side, if you agree to pay for a portion of your child's college education or vehicle costs upon reaching age 16, those portions likely would be enforceable so long as they are found to be in your child's best interest.
Keep in mind that you can contract for child support within a premarital agreement. What you cannot do is agree to anything that would hinder your child's best interests or otherwise harm your child. For instance, if you agree in advance to either raise or not raise your child within a specific religious tradition and put that in writing within the premarital agreement, those provisions would be found to be unenforceable by a judge.
What is the basic structure of a premarital agreement?
Now that you know a little bit more about what can and cannot be included in a premarital agreement, you ought to know what the basic structure of a premarital agreement looks like.
Right off the bat, a premarital agreement will take notice of the law in Texas regarding the property. Texas is a community property state which means that any property in existence at your divorce would be presumed to be community property. It is up to either of you to provide evidence to overcome this community property presumption. If you can do so, that particular asset or debt would fall into a category of your or your spouse's separate property.
Generally speaking, the law in Texas is that income earned during your marriage from a separate property asset of either you or your spouse is considered to be community property. However, you and your fiancé may agree in the premarital property agreement that this income should be a part of the community estate rather.
How specifically does your language need to get in a premarital agreement?
In a premarital agreement, you can legally state that income from separate property is considered either the respective property of you or your spouse. On the other hand, if you or your spouse earn an income from particular property and want that income to be considered individual property, you must state this specifically within the agreement.
Suppose you are not specific regarding income from a separate property business owned by you or your spouse. In that case, such an interpretation will not be read into the agreement to make that event occur. Since the income was earned during your marriage, it will be presumed to belong within your community estate. This is the same presumption that applies across the board in Texas divorces since we live in a community property state.
Dividing up property in a divorce (before the marriage even begins)
If you and your fiancé decide to sign a premarital agreement together, you would be able to consider how you want your community estate to be divided upon your divorce. Likewise, the same concept holds when it comes to the death of either you or your fiancé. You may agree in writing on how to divide property upon the death of you and your spouse.
What can be done concerning retirement benefits?
A premarital agreement in Texas cannot waive your right to survivor benefits under an ERISA retirement plan. Even though you cannot waive your rights to these kinds of advantages, you can include language that mandates that you sign a waiver of these benefits after you and your spouse get married.
When does a premarital agreement go into effect?
A premarital agreement becomes effective at the time you and your spouse get married. If no marriage between you and your fiancé ever occurs, then the document is void and will have no enforceability now or at any time in the future. From what I can tell through researching the subject, a ceremonial marriage must enforce the premarital agreement. For instance, a common-law marriage may result between you and your fiancé, but this will not trigger the validity of your premarital property agreement.
Once you get married to your fiancé, you would be able to change or revoke the agreement only if you and your spouse both signed a document to that effect.
Marital property agreements examined in further detail
A marital property agreement may be drafted, agreed to, and signed at any point in time that you and your spouse are legally married. Your community property estate may be divided between you and your spouse and have items exchanged within the estate with items in either of your separate estates.
Specifically, a partition agreement may be signed by you and your spouse that states income earned from either of your separate properties would remain as a part of your respective estate rather than be counted as part of the community estate.
A marital property agreement must be in writing and be signed by you and your spouse to be determined to be valid. If you intend to partition certain kinds of property or convert community property into separate property, you must make those specifications clearly stated within the document.
Information regarding the enforceability of property agreements
If your spouse attempts to present a premarital property agreement or marital property agreement to a judge seeking to enforce its terms, you do have some defenses to that action. First, you could argue that you did not sign the document voluntarily. You may have been coerced, defrauded, or otherwise forced into signing the document. If you can present evidence to the court that it was not your intent to sign the document, then it will not be enforceable.
Sometimes, courts come across premarital or marital property agreements that are so one-sided (favoring one spouse over the other) that they are unconscionable. If a judge finds that the deal was excessive when the document was signed, that is the first step towards getting the agreement thrown out and not enforced. Here are three more elements that must be in place to render the contract unenforceable by a family court judge.
- You must not have been provided a fair disclosure of the property or financial state of the other party before signing the agreement.
- You did not voluntarily waive in writing any right to receive disclosure of the status of the financial state of your spouse before signing the document.
- Before signing the document, you must not have had a fair disclosure or complete knowledge of your spouse's financial state.
What would lead a court to determine that you did not sign the agreement voluntarily?
Based on the before stated information, you should know that it is essential for a judge to determine that you and your spouse signed the agreement voluntarily for that agreement to be enforceable. Whether or not an attorney guided you during the negotiation/signing process, whether any misrepresentations made by either party led to the signing of the agreement, as well as the amount of information exchanged, and whether any vital information was withheld during negotiations would seem to be the most critical factors to be considered.
Elements like fraud, coercion, lack of mental capacity, and a lack of knowledge on essential matters related to finances would be additional issues for a court to consider when deciding whether or not an agreement was enforceable. If your spouse is threatening you to sign a contract and the threat has wholly removed your ability to act independently, then that is a surefire way to get the agreement tossed out.
What tips may be helpful when negotiating and drafting premarital and marital property agreements?
To avoid a situation where you have signed a premarital or marital property agreement only to have it be found as enforceable, it may be a good idea to follow these tips.
First, both you and the other party should have your attorneys advising you during this process. However, even if you do not have your attorney, that alone does not render an agreement unenforceable. However, keep in mind that if there are other circumstances in place pushing a judge to decide that a contract is unenforceable, then the absence of an attorney for one party may be the straw that rendered the agreement unenforceable. To avoid a potential problem like this arising in your case, you should hire your attorney to advise you, and your spouse should do the same. This would eliminate one potential roadblock to enforceability and likely result in a better, more equitable agreement.
Tomorrow's blog post will include more tips and tricks regarding drafting premarital and marital property agreements.
Please join us here tomorrow to share more tips and tricks about drafting premarital and marital property agreements. In the meantime, if you have any questions about the content of today's blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free-of-charge consultations that allow you to ask questions and receive feedback about your particular circumstances. Thank you for joining us today.