Getting married affects your property – property you owned prior to marriage, and property acquired during marriage. After you get married, your earnings (salary and wages) will belong to both of you, regardless of who earned it. If you are coming into a marriage with income-producing property (a closely-held business, rental property, brokerage accounts, etc.), that income will henceforth belong to both you and your spouse, even if the asset itself is your separate property.
Young people starting out together may have little other than personal belongings and student loan debt, and a premarital agreement may be unnecessary or unwanted. People marrying later in life, however, who have already acquired significant assets and may have children from a prior relationship, should consult an attorney about the impact marriage will have on their assets, including what will happen to those assets in the event of a divorce or death of one spouse. A premarital agreement can change what would otherwise happen to your assets under the law, so it is important, before you get married, to understand marital property law and how it might impact your specific assets. The lawyers at NMSB can provide advice about the benefits and possible disadvantages of entering a premarital agreement in your specific situation.
WHETHER A PREMARITAL AGREEMENT IS NECESSARY
The decision to enter a premarital agreement is an important one. Texas law favors the enforcement of these agreements, so signing a property agreement is not a decision that should be made lightly. It is also important to have a thorough agreement that anticipates as many contingencies as possible. The main purpose of many premarital agreements is to define or alter rights to property, so anyone entering such an agreement should discuss it carefully with an attorney. Some of the reasons we see for entering premarital agreement include:
- Protecting the financial interests of children from a prior marriage;
- Identifying and protecting property interests acquired prior to marriage, including the income therefrom;
- Simplifying the division of assets in a possible divorce or death of one party;
- Eliminating community property;
- Ensuring that certain assets will go to a spouse in the event of the other spouse’s death, irrespective of any later will to the contrary;
- Protecting generations of family wealth, such as family trusts and family business interests.
THE BASICS ABOUT PROPERTY OWNERSHIP
Texas is a “community property” state. Since Texas is a community property state, any property or debt acquired during the marriage generally belongs to both spouses. This is true regardless of which spouse holds title to the property. This means that all income, retirement accounts, homes, bank accounts, cars, businesses, and the like acquired during the marriage belong to both spouses, regardless of whose name is on the title and regardless who earned it. There is another category of property – “separate property” – that belongs only to one spouse. Separate property includes property acquired before marriage and property acquired by gift or inheritance.
WHAT CAN BE INCLUDED IN A PREMARITAL AGREEMENT
Texas law allows potential spouses wide latitude in drafting their premarital agreements. Premarital agreements often modify or eliminate community property rights. Premarital agreements regularly include the following:
- An agreement that the spouses will not create any community property but that each spouse will own as separate property whatever they earn or acquire during the marriage.
- An agreement that both parties waive the right to spousal support or an agreement that a set amount of support will be paid.
- An agreement that one or both spouses will be responsible for certain debts.
- An agreement that all property owned by a spouse on the date of marriage remain that spouse’s “separate property” and that any income derived from it will remain separate.
- An agreement that only one asset, such as a house, will be community property.
- An agreement about how the spouses will divide property upon divorce.
- An agreement about how a divorce will proceed, such as whether each party pays for his or her own attorney’s fees.
ENFORCEMENT OF A PREMARITAL AGREEMENT
Premarital agreements are binding on the spouses. Texas law makes it very difficult to undo these agreements. Do not ever sign a premarital agreement thinking you can get out of it later – chances are, it will be upheld, and the property will be divided according to its terms if you end up divorced or your spouse dies. Texas only allows two very narrow ways to challenge a premarital agreement: (1) that the agreement was not “voluntarily” signed, or (2) that the agreement was “unconscionable” and the party challenging enforcement was not given an adequate disclosure of the other party’s assets and liabilities prior to signing it. This is a high burden, and the mere fact that the agreement favors one spouse over the other does not make it unconscionable. Read about Premarital Property Agreements in Texas on our blog.
Any person considering a premarital agreement should meet with an attorney to discuss this decision in detail.