The word "adulting" has been added to our lexicon in recent years about activities that are thought to display the qualities of being an adult. Things like waking up early for work, staying in to complete a project instead of going out, doing your taxes on time, and any other ordinary task that shows self-restraint are those sorts of undertakings that are generally thought of as adulting. I believe the term is pretty harmless and may even add some fun to the everyday tasks to fulfill our obligations to ourselves and our families.
Working as an attorney means that we do quite a bit of adulting- for ourselves and our clients. One of those adulting-type subjects that we family law attorneys work in is helping clients going through a divorce plan for their lives once the divorce completes. It is sometimes difficult to do since these folks don't know exactly where they will be regarding finances, location, or other factors once their divorce has been completed. However, it is a benefit to think ahead to this stage.
Today's blog post from the Law Office of Bryan Fagan, PLLC, will center around the subject of estate planning after a divorce. Over the next few days, we will get into some subtopics that touch on this subject. Issues like what to think about when your marriage is heading towards divorce and how to plan for your life after the divorce once your divorce is close to wrapping up. Today, though, we will begin by discussing what to do from a planning vantage point if you are considering divorce or anticipating that a divorce is on the horizon.
Planning for your financial future before your marriage
Prenuptial agreements are a great planning tool for you and your spouse if you choose to utilize one. Despite these contracts' semi-bad reputation in the media and our culture, premarital agreements can and should be mutually beneficial. These agreements set forth a statement of the parties as to what will be considered separate and community property and can also set the standard for what degree (if any) spousal maintenance is to be paid from one spouse to the other after the divorce.
For a premarital agreement to be valid, it must be in writing and agreed to without fraud or coercion. This means that if you or your fiancé has purposefully and knowingly withheld information from the other or pressured the other to sign the agreement, these are defenses to the validity and enforceability of the contract. Part and parcel with this is the full extent of your financial state: debts, property, income, assets, etc., must be disclosed to your finance, and vice versa.
Another factor that I will need to mention is that your premarital agreement cannot be unconscionable. This means that the contract cannot be so one-sided in favor of you or your finance that no judge could reasonably determine equitable or fair to both parties. Finally- you and your finance must have given one another sufficient time to consider the terms of the agreement before signing the document. I always give folks an example that involves people signing a premarital agreement one day before their wedding. The timing of this indicates to me (and I believe that it would to a judge, as well) that one side or the other coerced an agreement. This is especially true if the contract was presented only a day or two before signing the agreement.
All in all, the best advice I can give you if you are planning to negotiate a premarital agreement is to have an attorney negotiating on your behalf. If you and your fiancé both have attorneys, this will significantly increase the likelihood of a judge determining the agreement to be enforceable. Keep in mind that you both should hire your attorneys because your interests, although you are engaged, will not be the same when negotiating the terms of your premarital agreement.
What are some issues that you should consider including in a premarital agreement?
A lot can change in your life, and your fiancé after the agreement is signed, so in my opinion, it would be wise to include a provision in your premarital agreement that the deal applies no matter what happens to either of them after the marriage takes place. As I'm sure you could imagine, your life would look a lot different if you or your spouse were to become disabled, ill, or unable to work for any other reason.
Secondly, suppose that your spouse owns a home that is their separate property, distinguished in your premarital agreement. What happens when and if your spouse passes away during your marriage? Will you be given any use of that property during your life? That is a question that is very much up in the air if you do not include some provision for it in your premarital agreement.
Finally- and this is a point connected to our initial point on the change in status of your health or income earning ability- have you considered whether or not you or your finance should be obligated under the premarital agreement to apply for life insurance? Term life insurance for relatively young and healthy people is very affordable, even for people on a budget. Naming your spouse as the beneficiary under that policy is excellent protection that you can offer with little cost to either of you.
What issues should you know when deciding to sign a premarital agreement?
One of the benefits of having a family law attorney help you negotiate the terms of your premarital agreement is that we can anticipate issues that could confront you to avoid them down the road. Let's take some time to discuss those types of problems to see what I mean.
A feature of premarital agreements that many people take advantage of is that you and your fiancé can designate various pieces of property in ways that do not coincide with the community property laws of Texas. In this way, you can control the designation of the property and see to it that you and your finance can plan for how the property will be dissolved in the event of death or divorce.
Can you take separate property and turn it into community property, however? Let's consider money (property) included in your individual property due to the premarital agreement. After signing the contract, you utilized that money to buy a home and titled it in both your and your spouse's names. This means that you have likely taken that separate property asset and converted it into a community property asset without even knowing it.
Another issue that you and your family should be aware of is the general rule about gifts made during a marriage being considered separate property. While a gift made from a family member or other person to you is a law contained within our statutes on community property, it is safer for your gift-giver to place their gift into a trust to protect that gift from any subsequent divorce proceedings that you become a part of.
More information to be posted tomorrow on financial planning and divorce in our blog
Stay tuned tomorrow as we continue to discuss methods to help plan your estate both before, during, and after a divorce. If you have any questions regarding this subject, don't hesitate to contact the attorneys with the Law Office of Bryan Fagan, PLLC. We offer free of charge consultations with one of our licensed family law attorneys six days a week. It would be our honor to meet with you to answer your questions and discuss the services we can provide to you as a client of ours.