Community Property Laws
Texas is one of the few community property states in the country. Community property generally includes any property acquired during a marriage, which may include wages, benefits, real property and even income earned from separate property. The separate property of the spouses generally includes anything they owned prior to the marriage as well as any gifts or inheritances they receive during the marriage.
Many people believe that getting a divorce under community property laws means that they are entitled to half of the property owned by them and their spouse. But this is not always the case. In Texas, the courts follow a "just and right" rule and will divide the property in a fair and equitable manner as they see fit. If all things are equal between the spouses, each spouse may receive half of the community property, but that may not be the case.
Texas community property laws are, however, default laws. This means that couples may, by means of a valid pre- or postnuptial agreement, divide their property as they see fit.
Protecting Your Interests: Prenuptial and Postnuptial Agreements
A prenuptial agreement, also referred to as a premarital agreement or "prenup," is a contract executed by a couple prior to their marriage that describes each person's rights and obligations in the event of a divorce. Texas law allows nearly anything to be included in a prenuptial agreement so long as it does not contravene public policy or result in a criminal offense. Some of the most common issues that are resolved in these sorts of agreements include:
- Which property will remain separate property
- Which property, if any, will become community property
- What happens to death benefits if a spouse dies
- Treatment of future gifts and inheritances
- Duration and amount of spousal support, if any
- Division of debts incurred prior to and during the marriage
Prenuptial agreements can also ensure that children from an earlier marriage receive the property their re-married parent intended them to have.
Postnuptial agreements allow spouses to accomplish many of the same goals as prenuptial agreements, but are executed during the marriage. These sorts of agreements are sometimes used by spouses to partition and exchange community property into separate property or, conversely, separate property into community property. Spouses can also settle property issues through a postnuptial agreement instead of a separation agreement.
Pre- and postnuptial agreements have a bad reputation: many see them as a means of planning for divorce rather than planning for the future. Wills are not viewed as precursors of death, so why should martial agreements be viewed as precursors to divorce?
The purpose of these agreements is to save the time and expense of litigation, not only in the case of a divorce, but also in the case of a death. The litigation of property issues will likely be costly, time-consuming and will subject the spouses to the default rules of Texas law rather than allowing them to dictate for themselves how their property should be divided.
Validity of Texas Marital Agreements
Texas courts will generally uphold pre- and postnuptial agreements so long as:
- The agreement is in writing
- The agreement has been signed by both parties
- Both parties have the legal capacity to enter into the agreement
- The agreement was entered into voluntarily by both parties
- There was full and fair disclosure of all assets and liabilities by both parities (unless there was a valid signed waiver)
- The agreement is neither unconscionable nor in violation of public policy or other state law
Generally, marital agreements are deemed to be voluntary so long as the parties knew what they were signing. They may be amended or revoked at any time, so long as the changes or revocation are in writing and signed by both parties.
It is a wise idea after signing a prenuptial agreement to then file a declaratory judgment action, which asks the court to acknowledge the validity of the agreement. This can help avoid disputes over the enforceability of the agreement down the road, as well as costly litigation since prenuptial agreement contests often result in full trials.
Don't Rely on a Cookie Cutter Form
Fill-in-the-blank marital agreements are available from a variety of sources, but using these forms may do more harm than good.
Martial agreements work best when couples tailor them to their individual circumstances. Form agreements cannot possibly anticipate every couple's needs and, as a result, they may lack language necessary to protect your interests. Besides offering individual attention, an attorney can both ensure that the agreement is enforceable under Texas law and can inform you of your rights and obligations. To learn more about pre- and postnuptial agreements, contact an experienced attorney.