In recent years, divorce rates in the United States have significantly declined. However, people are also getting married much later in life, when one or both persons enter the marriage with significant assets, or significant debts. Moreover, people are increasingly entering into marriages with children from a previous union or marriage. Being in a blended family marriage creates a host of issues over finances, including what happens to the marital property after each spouse dies.
Some people don’t like the idea of a prenuptial or postnuptial agreement because they believe it sets a bad precedent for the marriage. Despite the negative stigma, obtaining either a prenuptial agreement or a postnuptial agreement is a very smart and financially wise decision for married couples. Entering into one of these agreements can protect assets, create peace of mind, and reduce conflict and strife over finances in a marriage. It can also prevent high legal costs of future litigation over property division and spousal support in the event of a divorce.
Texas statutory laws, known as the Texas Family Code, govern prenuptial and postnuptial agreements. Although these agreements often share common goals, the crucial difference is that prenuptial agreements are entered into before marriage, and postnuptial agreements are entered into after marriage. This article explains the similarities and differences between prenuptial and postnuptial agreements in Texas.
If you have any questions on prenuptial or postnuptial agreements, it is crucial that you discuss your options with an experienced family law attorney. Our lawyers here at Jackson, Landrith & Kulesz have years of experience helping our marrying or married clients understand what works best for them and their needs.
What Is a Prenuptial Agreement in Texas?
A prenuptial, or premarital agreement, is an agreement a couple enters into before marrying to among other things, clarify what property and debt is brought into the marriage, define how property acquired during the marriage, and earnings are to be characterized and how property will be divided on death or divorce. Texas law, known as the Uniform Premarital Agreement Act, authorizes premarital agreements and sets terms for these types of agreements. The Act defines “property” as “an interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.”
Under Texas law, a prenuptial, or premarital, agreement must be in writing and signed by both parties. Furthermore, the parties may only amend or revoke a prenuptial agreement after marriage through a written agreement signed by both parties.
The Texas Family Code states that, when entering into a prenuptial agreement in Texas, the parties may contract over the following items:
(1) the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;
(2) the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
(3) the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
(4) the modification or elimination of spousal support;
(5) the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
(6) the ownership rights in and disposition of the death benefit from a life insurance policy;
(7) the choice of law governing the construction of the agreement; and
(8) any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
A premarital agreement becomes effective when the couple is married. Common reasons for entering into prenuptial agreements include:
- Where one person has significantly more assets than the other person
- Where one person enters the marriage with debt
- Where both persons have accumulated substantial assets before the marriage and want to protect their individual assets
- Where the parties want to protect children from a prior union or marriage
- Where one spouse wants to protect a family business
- Where the parties want to clarify whether future property, personal earnings and appreciation of property will be treated as separate or community property
Without entering into a prenuptial agreement, you stand the risk of property you bring into the marriage later being considered marital property in the event of divorce. Without a prenuptial agreement, you could also become responsible for paying debts that your spouse brought into the marriage.
What Is a Postnuptial Agreement in Texas?
A postnuptial agreement is an agreement a couple enters into after they’re married. Texas law authorizes postnuptial agreements, also known in Texas as Postmarital and Partition Agreements. Like a prenuptial agreement, a postnuptial agreement sets the terms for dividing a couple’s marital property in the event of divorce and also can recharacterize to separate or community property even if there is not a divorce.
Postnuptial agreements are entered into for various reasons, including:
- Protecting one or both spouse’s interest in an inheritance
- Protecting a spouse for debts accrued during the marriage
- Protecting children from a prior marriage upon the death of one of the spouses
- Determining each spouse’s roles and rights in operating a family business
- Negotiating estate planning issues, particularly where the spouses have children from prior marriages or unions
- Establishing the rights to and ownership of certain assets
- Establishing agreements about spousal support in the event of divorce
- How the community property will be divided in the event of a divorce
No matter what your reasoning is, it is important to understand how a postnuptial agreement works and how it differs from a prenuptial agreement.
What Is the Main Difference Between the Two Agreements in Texas?
Both prenuptial and postnuptial agreements allow the parties to agree on how to divide property if they divorce. The main difference between the agreements is that prenuptial agreements are entered into before marriage, and postnuptial agreements are entered into after marriage.
Which Is More Important to Create?
Depending on the circumstances, both prenuptial and postnuptial agreements can be very important. A prenuptial agreement will be very important if:
- One or both spouses is entering the marriage with significant assets or significant debt
- One or both spouses expect to gain a large inheritance during the marriage
- One or both spouses have children from a prior union or marriage
- One or both spouses have significant income earning potential
When circumstances change after a marriage, creating a postnuptial agreement may become very important. A postnuptial agreement may become important if:
- One spouse incurs significant debt during the marriage
- One spouse inherits a large amount of money during the marriage
- One spouse starts a business during the marriage
- If the parties want to partition property between themselves whether or not there is a divorce
When Should I Create a Prenuptial Agreement Versus a Postnuptial Agreement?
As noted, it depends. A couple may not own many assets when they first get married. Therefore, it may not make sense at the time to enter into a prenuptial agreement. However, if the parties accumulate assets over time during the marriage, if one spouse starts a new business, or if one person comes into a large inheritance during the marriage, it may start to make a lot of financial sense to enter into a postnuptial agreement.
Moreover, finances are one of the leading causes of stress and conflict in marriages. Couples sometimes discover only after they’re married that they have vastly different spending habits and/or attitudes about money. Agreeing to a postnuptial agreement may reduce simmering tension in a marriage over finances.
What Can a Prenuptial Agreement Protect that a Postnuptial Can’t Protect?
Texas is known as a community property state, which means that all property a couple acquires after marriage is owned equally by both persons. Therefore, subject to a few exceptions, everything you earn individually is considered equally owned by your spouse. Therefore, if you divorce, your spouse is entitled to half of what you earned during the marriage. However, your spouse won’t be entitled to your separate property, which generally includes property you owned before the marriage, plus certain other property, such as property you inherited during the marriage.
A prenuptial agreement in Texas can provide that certain assets that would be considered community property once you’re married will be considered separate property. For example, the prenuptial agreement could provide that each person’s separate earnings are to be considered those person’s earnings only.
It’s important to note that you can also agree in a postnuptial agreement that what’s typically considered community property (such as your earnings) is to be considered separate property. However, it may be more difficult once you’re married for one spouse to agree to this term if the other spouse is a much higher earner. Therefore, you may have a better chance of keeping your individual earnings as separate property if you enter into a prenuptial agreement.
What Can’t Be Included in a Prenuptial or Postnuptial Agreement?
The Texas Family Code specifically states that prenuptial and postnuptial agreements can’t adversely affect a child’s right to support. This means couples can’t agree to waive or relinquish the right to obtain child support in the event of a divorce. Furthermore, terms such as family matters or custody arrangements can’t be included in prenuptial or postnuptial agreements.
When Will a Prenuptial or Postnuptial Agreement Be Declared Invalid?
Parties can sometimes challenge the validity of a prenuptial or postnuptial agreement for various reasons. A court may declare a prenuptial or postnuptial agreement invalid if:
- One of the parties didn’t sign the agreement
- One party was not represented by counsel when the agreement was drafted and demonstrates they did not understand what they were signing
- One or both parties failed to fully disclose their financial situation
- The agreement was entered into under duress or coercion, or a party wasn’t mentally competent to sign the agreement
- The terms are unconscionable
Depending on the circumstances, the court could also decide to declare portions, but not all, of the agreement invalid.
In sum, if you’re planning to get married, or if you’re already married and your financial circumstances have changed, you should contact a Texas family law attorney to see if a prenuptial or postnuptial agreement is a good option for you.
When entering into a postnuptial or prenuptial agreement, you must understand your rights and what you are agreeing to. Contact our experienced family law attorneys today for a consultation to understand what is best for you.