Pre-Nuptial Agreements

What is a Pre-nup?

A prenuptial agreement or “pre-nup” is entered into before marriage. It establishes the property and financial rights of each spouse in the event of a divorce.  Most importantly, a prenuptial agreement can preserve the nature of property in the event the marriage ends. In other words, separate property can remain separate, instead of being subject to community property laws.

About one half of all marriages in America result in divorce proceedings. As such, it is smart to  consider a prenuptial agreement.  Pre-nups are often used to protect the assets of wealthy spouses but also can protect family businesses and serve other important functions.

Why Use a Prenuptial Agreement?

No pre-nup, no problem. Upon marriage your separate property will remain separate property and in the event of a Texas divorce your separate property will remain your separate property, so long as you can prove it belonged to you before the marriage or you received it by gift, devise, or descent.   All other property and most forms of income obtained during marriage will become community property. Community property is jointly owned and will be subject to a just and right division (not necessarily 50/50). That includes salary and salary-related benefits, such as 401k plans and pensions.

A key issue is that the income from your separate property, such as a rental property, business, stocks, mutual funds, etc., is almost always community property. Certain forms of distributions from property retains separate property status. That can be an important issue, especially with investments that pay returns that are reinvested. An initial investment in stocks or mutual funds can grow several times over during decades of marriage if the income payments are reinvested. If the initial investment was separate property and distributions during the marriage are reinvested every time, the majority of your account could end up being community property.

 

What can a prenuptial agreement not do?

Under the Texas laws there are a few things a prenuptial agreement cannot do:

Cannot contain provisions that violate public policy or a statute imposing criminal penalties. No prenuptial agreement that a spouse kills somebody else or they lose all their property.

  • Cannot be used to defraud preexisting creditors. You cannot use a prenuptial agreement to try to avoid what you already owe with the property you already have, such as making all of your separate property your soon-to-be-spouse’s separate property so your creditors cannot get at your property to satisfy your debts. That is different from using the prenuptial agreement to protect your spouse’s property and income from your preexisting creditors.
  • Cannot have a harmful or adverse effect on the right of a child to support.
  • A prenup cannot prevent a parent from paying child support that would otherwise be court ordered.
  • The prenup can be enforced to require a parent to pay a greater amount of child support than what the Texas Family Code normally requires.
  •  A prenup can pre-determine certain visitation or conservatorship issues but the Family Court will always review those terms in light of what is best for the child.

 

 

What Makes a Prenuptial Agreement Invalid?

A prenuptial agreement may be considered invalid under a number of different conditions and scenarios.

  1. Above all else, a pre-nup must be written and signed by both parties and properly acknowledged.
  2. If it was signed ” under duress” or not even read, then it may not be considered valid.
  3. Finally it is very important that each side have their own attorney ( independent counsel) – for without that, a court may not recognize a prenuptial agreement include lack of independent counsel (for each spouse), false information, and unconscionability.