Prenuptial agreements are a topic we hear a lot about in our culture. Usually what we hear relates to celebrities and their marital exploits. Who’s marrying who? They got divorced how soon? Which spouse is going to walk away with the house? These are the types of questions we ask ourselves as we pass by a tabloid magazine or a gossip show on television. These are issues that impact divorce cases for “regular” people like us every day. However, it’s the scale and magnitude of a celebrity marriage that interests us. Like moths to a flame, we are drawn to that discord.
When we learn that a prenuptial or premarital agreement is a part of the case it does not come as a surprise. That’s what the wealthy do, right? A “prenup” is something for the rich to utilize when dividing up property in anticipation of a divorce. Some of us will assume the couple who created the prenuptial agreement assumes that a divorce is going to happen. What a cynical way to approach marriage, we think. That isn’t how we do things in the “real world.”
In the real world, people just like you and I do create prenuptial agreements. Prenups as they are often called are not just for the rich. At the Law Office of Bryan Fagan, we create prenuptial agreements for people from all walks of life. Here are some topics worth considering.
Separate versus Community property
Texas is a community property state. This means that upon your divorce all property is presumed to be community property and thus is divisible by a family court judge. This presumption is overcome by clear and convincing evidence showing that a particular item was owned by you or your spouse before your marriage. This type of property is known as separate property. Any property acquired during your marriage by gift or inheritance is also considered to be the separate property of the receiver.
This is a basic overview of community property law in Texas. If you would like a more in-depth perspective the Law Office of Bryan Fagan has written extensively on the subject. Here are some interesting and informative blog posts on the subject. However, for this article, we are focusing on how a prenuptial agreement benefits people like you. Deciding to marry someone requires a great deal of thought. Very few of us would jump into a marriage without knowing the person well.
With that said, many of us marry someone without first considering the financial implications. Marriage is not just formalizing a living arrangement. Rather, under the laws of Texas it is a defining moment for your financial life. The way that the law treats your property when ending a marriage differs significantly from ending a relationship. With that in mind having a plan is a great idea.
Cohabitating with your significant other
More people cohabitate with one another than in any prior generation in American history. The trends show that living with your significant other before marriage is common. Some studies suggest more people are cohabitating rather than living with a spouse. Considering this, it is important to have your ducks in a row as far as property is concerned. Not just physical property like silverware and dishes, but real property like homes and raw land.
Consider, first, whether you and your partner have lived together before marriage. If so, then there may be property-related issues to resolve now. Sharing a home, making payments towards a mortgage, or purchasing a home together complicates your financial landscape. One of the advantages of negotiating a prenuptial agreement is that you can determine solutions to future problems sooner rather than later. Negotiating with your fiancé now is simpler in most situations than doing so with an upset spouse later.
Determining how your property is treated upon divorce is a major aspect of a prenuptial agreement. When cohabitation occurs that tends to muddy the waters as far as ownership and equity are concerned. Who owns the property? Whose name is on the deed? Did you contribute income towards the mortgage? Answering these questions now provides clarity if a divorce becomes necessary.
Specific questions to ask regarding property and cohabitation
Mapping out a plan as far as how real property is treated at the time of divorce is job number one. Consider the home you and your fiancé live in. Is that home going to be treated as community property? Or are both you and your fiancé going to have separate property interests in the home in a divorce? Consider the circumstances regarding the purchase of the home. Whose name(s) is on the deed or title? What were the income sources used as a down payment? Answer these questions before negotiating on the home.
On the other hand, do you own any property that is likely separate property that you want your fiancé to have a stake in during divorce? For example, some people own separate property businesses that their fiancé contributes to. Those contributions could be financial or simply sweat equity in nature. In any event, determine if your business is likely to separate property. From there, negotiate on how your spouse’s contributions are provided for in a prenuptial agreement.
Expenses of daily living during the marriage
One great aspect of a prenuptial agreement is that you can use it as a roadmap for your marriage. A map helps you to avoid potholes, dead ends, and other hazards. These problems lead to divorce in many situations. By negotiating these subjects now you can avoid the worst outcomes in a marriage. Why not try and resolve problems with your fiancé while you are on good terms? Negotiations with your spouse during a difficult divorce are not as amicable.
How are living expenses going to be shared for the two of you? Do you expect that they are going to be split evenly? If only one spouse is working, then does that change the expectation on shared living expenses? Issues like combined bank accounts shared checking accounts, and transparency in spending are all relevant here. The day-to-day costs of marriage add up over time. Accounting for these now is what matters.
Part of this discussion revolves around items like medical and dental insurance. How are uninsured costs allocated between you and your fiancé? Do you want to continue this into your marriage? This type of arrangement is relevant when dealing with a child custody case. However, it also becomes important in a situation where a prenuptial agreement is negotiated.
How filing taxes are handled during a marriage
One issue that arises during a marriage that does not during a dating relationship is taxes. Determining how taxes will be filed during the marriage creates a plan that is actionable during the marriage. As it happens in a marriage, one spouse handles issues regarding taxes. The other spouse hopes that their partner is handling matters correctly. There is little accountability. Much of the time the problems which arise from the failure to pay taxes are not made known until years later.
Instead of putting yourself in a position where you are on the defensive with taxes why not have a plan established before your marriage begins? This way you are accountable to one another. The last thing you want to do is go into a marriage where an important subject like taxes is completely up in the air. Remember that this is a topic that neither of you dealt with during your dating relationship. That all changes in the marriage.
With complex issues like taxes, it is best to have professionals in your corner. Certainly, tax preparers, accountants, and other financial professionals are important. Additionally, working with an experienced family law attorney with the Law Office of Bryan Fagan is also of great assistance. We know what works and what doesn’t work for families. To that end, we listen to your circumstances and provide information based on that conversation. A consultation with one of our experienced family law attorneys is free of charge.
Wages, earnings, and salary
One of the key points to understand regarding Texas community property law is that earnings during the marriage are typically community property. As a result, the income you earn is just as much your spouse’s as it is yours. The same could be said of their income. Depending upon the earnings dynamic of your relationship this is the topic which may interest you.
Ultimately, the question you need to answer is whether you are going to treat your income in this way. Look at factors like your income, your age, and whether this is a second or even third marriage. Assessing your situation based on these circumstances allows for both of you to be honest with yourselves and one another. You may have had a prior marriage where sharing income in assets was a negative. This undoubtedly will influence how you approach your second marriage.
For those of you who have investments or another type of income, how will this be treated in the marriage? Would divorce cause this income to be a part of the community estate? Will each of you choose to retain your dividends and investments as separate property? Working through issues regarding anticipated feature earnings or dividends these are relevant issues to consider. Before receiving this property and depositing it in a community account you should plan. Doing so resolves issues and gives you all peace of mind.
Retirement benefits
One of the most discussed topics in Texas divorce cases is how retirement benefits are divided. Depending upon your age this is a major issue that spouses work through. Trying to negotiate the complex division of our retirement account during a divorce is difficult. Consider this question if you are a person in your golden years. Most of your working life is behind you. The retirement savings built in your life reflect your hard work. The prospect of a divorce has the potential to greatly change the dynamic of your retirement years.
Look at the circumstances of you and your fiancée. Is he or she much younger than you? If so then their need for retirement at this moment may be much less than yours. In that sense negotiating on a division of other assets during a divorce is sensible. Leaving you with Retirement savings while your spouse walks away with cash is one way to consider this subject in a divorce scenario.
From the experience of the attorneys with the Law Office of Bryan Fagan, this discussion is made easier before the marriage. Once the marriage begins emotion and additional circumstances are in play. These will invariably color your approach to this subject. Rather than position yourselves into a corner why not allow yourself to negotiate now? At this point, the two of you are on good terms. Additionally, each of you may enlist the support of an experienced family attorney. Relying upon the guidance of an attorney while negotiating a prenuptial agreement suits many parties.
Will money be paid out when divorce is filed?
Many times, spouses decide to pay one or the other a sum of money upon the filing of a divorce. This is done to hasten the division of property. It is also seen as a gesture of goodwill from one spouse to the other. Many times, a spouse who does not earn an income feels at a disadvantage during a divorce. This is because their spouse holds most of the property and controls spending. This is a disadvantage for the non-working spouse.
Being in a position like this means having to set deadlines and timelines for payment. Determining that a certain sum of money will be paid from one spouse to the other after a divorce is filed comes up often. However, do not leave the date of this payment up in the air. Instead, specify when the payment shall be made. This ensures there are defined expectations for the payment of this property.
Texas law has specific circumstances under which spousal maintenance can be ordered by a judge. In other circumstances, parties agree to pay informal spousal support. This is where having a plan matters. Establish any spousal support amounts in your prenuptial agreement. Plan to pay spousal support either as a lump sum payment or in periodic payments over time.
Renegotiating a prenuptial agreement
It is expected that circumstances in your marriage may change your approach to planning for divorce. Additionally, prenuptial agreements also come into play when the spouse passes away. All these elements require careful planning. Planning for an estate matters when a spouse dies is a part of many prenuptial agreements. One of the types of considerations is whether life insurance needs to be maintained for a spouse or your minor children. Detail the type of policy coverage amount and any other information you would like to include.
Next, is there a point in time where your prenuptial agreement can be updated? This may come in the form of a postnuptial agreement. Or, simply add an amendment to the pre-existing prenuptial agreement. Again, circumstances do change over time. It may be worth your time to determine that updates need to occur because of these changes. Working through subject matter like this is part of the negotiation process.
Working with an attorney to assist your family
Choosing to look at a prenuptial agreement as a precursor to a divorce is reasonable. However, assuming that a divorce is necessary after drafting a prenuptial agreement would be incorrect. Rather, taking into consideration the twists and turns of life often helps people understand the importance of intentionality. A prenuptial agreement is something that displays a propensity towards planning and forethought.
When going through your options related to prenuptial agreements consider the importance of an experienced family law attorney. For example, the attorneys with the Law Office of Bryan Fagan walk alongside clients every day in divorce scenarios. We see what works for families and what does not work. As a result, we are in a unique position to assist individuals like yourself who are planning to avoid those circumstances. Talking with a person going through a difficult divorce would cement in your mind the importance of planning a prenuptial agreement.
Thank you for choosing to spend time with us today on our website. The attorneys with the Law Office of Bryan Fagan offer free of charge consultations and informative sessions with our experienced attorneys six days a week. Any questions about the material contained on our website can be addressed to our attorneys. We look forward to the opportunity to speak with you about your circumstances. Our attorneys pride themselves on the service they provide to our clients.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in 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 six days a week in person, over the phone, and via video. Interested in learning more about how your family is impacted by the material in this blog post? Contact us today.
Evan Hochschild was raised in Houston, TX and graduated from Cypress Creek High School. He went on to graduate from Southwestern University in Georgetown, TX with an undergraduate degree in Political Science. While in college, Evan was a four-year letterman on the Cross Country team.
Following in the footsteps of his grandfather and uncle before him, Evan attended law school after he completed in his undergraduate studies. He graduated from St. Mary’s University School of Law and has practiced in a variety of areas in the law- including family law.
Mr. Hochschild is guided by principles which place the interests of clients first. Additionally, Evan seeks to provide information and support for his clients with the heart of a teacher.
Evan and his wife have four small children together. He enjoys afternoons out and about with his family, teaching Sunday school at his church and exercising. A veteran attorney of fourteen years, Mr. Hochschild excels in communicating complex ideas in family law simply and directly.
