Creating a Rock Solid Premarital Agreement in Texas

If you just got engaged, discussing certain ‘what ifs’ with your prospective spouse isn’t romantic. However, if handled honestly and delicately, it can establish a sense of openness, trust, and security. Today, more couples are drafting premarital agreements to map their financial future and have a “just-in-case” plan. Creating a rock-solid premarital agreement doesn’t only provide a clear, cost-effective plan for separation, it could help keep you together.

In This Article:

• Should You Draft a Premarital Agreement?
• What Can a Premarital Agreement Cover?
• Drafting Your Texas Premarital Agreement

 

What is a Premarital Agreement? 

If you’re familiar with “prenups,” or prenuptial agreements, then you’re already familiar with the concept. It’s a contract spouses enter into before marriage. The agreement helps define how assets, property, and debts will be divided and treated during and/or after the marriage.

A premarital agreement can also cover a variety of non-financial matters that I will discuss further down.

Should You Draft a Premarital Agreement? 

When you’re in love and planning marriage, the future can feel blissfully wide open, like blue skies over Galveston Bay. Of course, those same skies also bring storms now and then. You wouldn’t set sail without rafts or life vests, would you?

Think of a premarital agreement as extra flotation devices if your marriage should ever capsize. It’s only there if things don’t go as planned. Drafting a premarital agreement doesn’t mean you’re expecting the worst. It means you’re taking sensible precautions.

In Texas, it’s wise to take those precautions. Here’s why:

The Lone Star State is a Community Property State 

Texas is what’s called a “community property” state. That means when marriages split up, both spouses equally own all marital property that was acquired during the marriage, that was not by gift, device, or descent (i.e., inherited).

Moreover, both are equally responsible for all marital debt. Anything acquired during the marriage is fair game in a potential divorce. This includes:

• income, dividends, and/or royalties,
• real estate, business equipment, automobiles, and
• any other assets, such as a corporation formed during marriage, or liabilities.

— Texas Family Code 3.002

Basically, everything you bought, earned, accrued, or collected during the marriage gets tossed into a big pile. (Legally, not literally.)

In a divorce, spouses each pay lawyers to fight for their fair share of that pile. Texas even goes an extra half-mile, adding that:

“Property possessed by either spouse during or on dissolution of marriage is presumed to be community property. The degree of proof necessary to establish that property is separate property is clear and convincing evidence.” — Tex. Fam. Codes 3.003

In other words: Even if you owned something before getting married — an antique car, a box of valuable baseball cards, undeveloped land — you still must convince the court that the property was already yours. Otherwise, it gets piled up with everything else.

By Texas law, each spouse is then entitled to “equal and just” halves of the total property value. — Tex. Fam. Code 3.002

Separate Property 

Anything you or your spouse owned before getting married is considered separate property. This can include obvious tangible items, such as:

• family photo albums, antiques, and heirlooms,
• personal keepsakes, jewelry,
• automobiles in one spouse’s name, and
• house pets, which are considered property in Texas.

It can also include financial assets and property you already owned, such as:

• real estate, businesses, or business assets,
• investments, savings, and
• any money or property inherited by one spouse.

Some property one spouse acquires during the marriage can still be considered separate if:

1.   it was a gift meant specifically for that spouse, or
2.   it was an inheritance bequeathed to one spouse.

Who Should Consider a Premarital Agreement? 

There’s a misconception that premarital contracts only make sense for rich folks protecting themselves from proverbial gold diggers. Perhaps that was true at one time, but times have changed.

Because many people wait until they’re well into their 20s and 30s to get married, it’s common for both spouses to have acquired some wealth and property before tying the knot.

You might consider a premarital agreement a prudent move if you have …

• an established career,
• a special heirloom you want to keep in your family,
• children or property from a previous relationship, or
• a family business.

Protecting Yourself 

Prenuptial contracts don’t have to only protect one spouse’s property and assets. If you’re the lower earner, you’ll want a financial safety net if things don’t work out.

Both spouses should communicate openly about their assets, concerns, expectations, credit scores, and financial goals. You’ll be better informed to draft a premarital agreement that works for both of you.

What Can a Premarital Agreement Do? 

You could probably make a shorter list of what premarital agreements can’t cover. Every marriage is different and has its own specific issues. Still, the primary concerns tend to revolve around property and finances.

Most prenuptial agreements focus on rights and duties to property, assets, and spousal support in case of divorce. Common questions you should answer first in a premarital agreement are:

1. How much contractual alimony should the higher-earning spouse pay to the lower earner? And for how long?
2. How should important marital property, such as the house, bank accounts, and/or shared business assets get divided?
3. Who takes over which debts and other financial responsibilities?

More Financial Clauses to Consider in a Premarital Agreement 

Yes, we’re still talking about money. There are a few more ways a prenup can keep you secure:

Legally Protect Your Family Business 

A prenup can keep a successful business in your birth family if you get divorced. The business should be well-established before your marriage. For example: You are set to take over your parents’ successful auto parts store when they retire. You can specify that this business stays out of the “community property” pile in a divorce.

Shield You Against Marrying Into Debt 

Opposites don’t necessarily attract, but prudent penny pinchers marry reckless spenders more often than you’d think. A premarital contract can limit your responsibility for certain debts, like maxed out credit cards, student loan delinquency, and more.

Safeguard Your Estate Plan 

A marriage can be ended by annulment, divorce, or the death of a spouse. If you have already created a will and living trust, a prenup can reinforce it, keeping your loved ones out of probate court. If you haven’t created a will and living trust, your premarital agreement can be the next-best thing.

Protect the Rights of Children from Previous Relationships 

This goes hand in hand with protecting your estate plan. A prenup can ensure that children from your previous relationship will get their inheritance when you pass away.

Spare Both Spouses Additional Misery and Expense 

Divorce is stressful and costly, averaging $15,000 per person. Splitting assets after things have gone sour can be quite difficult and costly.  A prenup can not only ease asset division and simplify the process, but it resolves these issues while  you and your betrothed are getting along beautifully, rather than waiting until you are barely  on speaking terms.

Additional Prenup Clauses to Consider 

This list is far from exhaustive, but here are more prenup clauses you might think about:

• Pet Clauses: Who owns the family pets? Who is ultimately responsible for physical and financial care of the pets? It’s a good idea to sort this out ahead of time. Otherwise, your loyal dog or precious cat could be considered community property.
• Life Insurance: This is useful if a spouse works in a high-risk profession. A premarital clause can require that spouse to carry a certain amount of life insurance.
• Confidentiality: If one partner is a public figure, celebrity, or social media influencer, a clause may prohibit the other from posting private, damaging, or disrespectful content.
• Sunset Clause: Some premarital agreements are meant to last for only a period of time. After a certain duration, provisions in the premarital agreement can be invalidated. They have their pros and cons, so you’ll want to discuss these with your lawyer.

Lifestyle Clauses 

Beyond finances, prenups now include “lifestyle clauses” dictating spouse behavior during the marriage. Violation of these clauses can lead to financial penalties in a divorce. These clauses cover a variety of issues, like:

• religion,
• spending habits,
• a gambling problem,
• substance abuse, and
• any other issue between the partners

The Infidelity Clause 

An infidelity clause imposes financial penalties on a cheating spouse. Many no-fault divorce states don’t enforce this clause. Texas will enforce this and other ‘lifestyle clauses’ only if the violation can be proven in court. Infidelity can be difficult to prove, especially if the clause is not clear on what constitutes cheating. Trying to prove it can bog down the divorce process in tedious litigation.

What Can a Premarital Agreement Not Do? 

In Texas, there are a few provisions no premarital agreement can include. These common-sense prohibitions are:

• No terms to minimize or eliminate child support: The court determines the amount of child support during the divorce process.
• No terms that encourage or require illegal activity: The law is the law. You’re drafting a prenup. A prenup does not overrule Texas law.
• No provisions allowing polygamy: You only get one spouse at a time in the Lone Star State.
• No schemes to cheat creditors: One spouse cannot shuffle assets to the other in a divorce to protect them from creditors.
• No provisions encouraging divorce: A premarital agreement should be drafted in good faith and in anticipation of a sincere and loving marriage.
• No terms to dictate child custody or possession: The court determines the best interests of the child during the divorce process.

A premarital agreement containing any of the above may have those clauses stricken by the court as against public policy. — Tex. Fam. Code 4.003 (b)

Drafting Your Texas Premarital Agreement 

It’s best to start talking about a premarital agreement early in the engagement. No, not right after the proposal, but well in advance of the wedding. The earlier these conversations begin, the better. You want an open, honest, good-faith process.

Step One: Get Legal Help 

Once you and your future spouse agree to draft a premarital agreement, it’s time to seek legal assistance. You’ll find this helpful if your finances are complex. To ensure fairness and enforceability, you should each retain your own experienced family law attorney.  Lawyers can make certain your agreement complies with relevant laws and covers what it should.

Step Two: Take Inventory 

Now you both lay all your cards on the table. Discuss the financial benefits and concerns that will affect your marriage and lifestyle. Each of you should reveal:

• current assets, income, and debts,
• recent bank statements, property addresses, and vehicle information,
• expenses you expect to share during the marriage,
• your credit scores,
• whether you’ll maintain separate checking and/or savings accounts,
• your financial goals, as individuals and as a couple.

Remember, discussing finances is crucial for a strong marital foundation. It can feel awkward though, so focus on financial planning, not the possibility of divorce.

Step Three: Draft Your Premarital Agreement 

The smart way to establish terms of a prenuptial contract is to use the collaborative process. In other words, draft it together, side by side. Do not huddle separately with your attorney and then spring your prenup on your future spouse. The collaborative process preserves a spirit of trust, openness, and cooperation.

During the drafting ….

• Mention debts and who’s responsible for them.
• Decide which assets stay separate and which will be shared.
• Detail how shared assets and debts will be handled during and after marriage.
• Specify terms for alimony (spousal maintenance), like waiving it or adjusting for living costs.
• Plan for the marital home’s future in case of divorce.
• Lay out financial management during marriage: who handles what, bank account types, bill payments, etc.
• Cover tax-related issues like filing status and existing tax debts.
• Agree on property division if divorce happens.

Step Four: Make it Official 

If you and your betrothed have drafted the prenup in good faith, you’re all set. All it needs is each of your voluntary signatures, in the presence of a notary. This binding, enforceable premarital agreement becomes effective on your wedding day, after you say “I do.”

Ensuring Voluntary Agreement 

The Texas Family Code does not explicitly define what “voluntary” means. However, legal precedent interprets it as free from duress or undue influence. In other words, you cannot use deception, pressure, or intimidation to get your partner to sign. If each of you hires an attorney, you can avoid claims of coercion or deception.

Get Assistance with Your Premarital Agreement 

If you and your future spouse are considering a premarital agreement, talk to an attorney who can give you advice about your specific circumstances.. Call 214-884-3775 to schedule an assessment.