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Often times I meet clients who are about to get married who have a high net worth estate, children from prior marriages, partnerships or business agreements, or other reasons they believe necessitates entering into a pre-marital agreement that defines their respective ownership interest and/or obligations. In Texas, parties may contract with one another to alter the law with respect to the rights and obligations of each party and to any property either or both of them may own.
They may contract with respect to 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. They may also alter, by contract, the manner that property may be disposed of on separation, marriage, death, or on the occurrence or non occurrence of any other event. They may also modify or eliminate spousal support; agree on spousal support; the making of a Will, Trust or other arrangement; the choice of law governing the construction/interpretation of the agreement; and almost any other matter that they deem important in their lives.
In recent years, Texas courts have upheld the enforcement of marital agreements. There are very few exceptions where a party can void the effects of a marital agreement he or she previously entered into. However, it is preferable for enforcement purposes that each party to an agreement have their own independent family law attorney.
How do Pre-Nuptial Agreements Work?
I often hear people tell me I don’t need a pre-nuptial agreement, because we don’t have any assets. I've also heard clients say that they don’t want to enter into a pre-marital agreement because it takes away all the romanticism of the moment, and that there are so many other things going on in planning the marriage that there simply isn’t time to broach this subject. Granted, you intend to be married forever. However, to assure the vitality of the marriage, many couples enter into pre-marital counseling to address the myriad of issues in their fast-changing lives.
If pre-marriage counseling is important, and you intend to engage in it, then I suggest the discussion about whether a pre-marital agreement is appropriate for the two of you, should also be a part of that counseling. After all, the most common reason couples fight is over finances. And the unfortunate reality is that almost half of first-time marriages end in divorce.
During your pre-marriage counseling, which I recommend be done early on after your engagement, you'll undoubtedly talk about issues such as whether children are desired, how many, how the parenting duties will be shared, issues of discipline and religious preference, if any, in raising the children. Discussions should also involve issues such as control over money, how decisions should be made on large purchase items, amount to be saved, and your general financial goals. By doing so, you will flush out differences now, rather than later, and be able to address these issues before marriage.
If one of you is going to sacrifice a career to remain home and raise the children and support the other in pursuing his or her vocation, then what happens in the unlikely event of a divorce? A pre-nuptial agreement can address these issues, and more.
The reasons for a pre-nuptial agreement can vary greatly. The obvious ones are the cases where one person has substantially greater wealth than the other, or where this will be a second marriage and one or both parties have children from a prior relationship that they choose to provide for. The value of a pre-nuptial agreement, however is not just limited to wealthy those situations.
Pre-Nuptials for Your First Marriage
A pre-nuptial agreement may be appropriate in a situation where your soon to be spouse is about to begin a business of his own, and takes out substantial debt in that pursuit. Or in a situation where you're likely to inherit substantial assets in the future. Provisions can be made in such agreements to protect you from those debts, or to protect your inheritance. Provisions can also be made in such agreements in the event you choose to be the stay at home parent, and are going to sacrifice an otherwise lucrative career to support your spouse’s professional endeavors and that of raising a family.
Second Time Marriage
If you’ve been married and divorced before, and are now contemplating marriage again, certainly your scenario has changed since the first marriage. Perhaps your assets have increased or have children from the prior relationship, both of which you wish to protect. Perhaps you’re concerned because your future spouse has a high debt load and you don’t want to be burdened with paying for those debts with your hard-earned income or assets during marriage, or be burdened with them in the event of divorce.
You may be the lesser wealthy party, with your future spouse having substantially more assets than you, and you want to make sure you will be provided for during the marriage and in the event of a divorce. A pre-nuptial agreement can help in all of these situations.
How do Post-Nuptial Agreements Work?
If you’ve already married, and did not enter into a pre-marital agreement, you can still reap the benefits by entering into a post-nuptial or post-marital agreement, if your spouse is willing to do so. Obviously, if he or she is not agreeable, then this option is out. You may also have lost some of the “leverage” one sometimes has before a marriage, if you didn’t enter into an agreement beforehand.
Marital agreements are contracts entered into by two parties about to be married, or who have become married, who desire to alter the law as to;
Who owns an asset
Who is responsible for paying debts
Whether income or dividends generated from an asset owned by one party is community property or not
Parties to such agreements can also enter into agreements that simplify the process of divorce in the event the marriage fails. For example, the parties can agree in such a contract as to:
How their assets will be divided
What assets are community property versus separate property
Whether spousal support will be paid on divorce and for how long and
Whether the parties should avoid court proceedings in their entirety and be required to go to binding arbitration in the event of any dispute in their marital agreement.
Such an approach can simplify the process and save money in event of dissolution of the marriage.
Are Pre-Nuptial and Post-Nuptial Agreements Enforceable?
The Texas legislature has made it public policy that all marital agreements, whether entered into before or after the marriage, should be enforced, and has created a presumption that they are enforceable. In other words, well written marital agreements, which follow the statutory requirements are usually upheld as valid and therefore, enforced as to the terms set forth in the agreement.
Can Pre-Nuptial and Post-Nuptial Agreements be Made Invalid?
Texas statute provides for two primary ways to invalidate pre-marital and post-marital agreements. The first path to set aside a marital agreement is to prove it was not signed “voluntarily” by a party to the agreement. How do you prove that?
Texas statutes do not provide a definition as to what constitutes a “voluntarily” signed agreement. Guidelines as to what is meant by this is found in appellate case law, wherein it has been interpreted to mean that the signor to the agreement was under duress and undue influence.
This inquire turns on the specific facts in each case, as each case has a different set of facts surrounding when, how and under what circumstances the agreement was signed. The party seeking to declare the agreement invalid, because it was not entered into voluntarily has the burden to prove this element.
A second path to invalidating a marital agreement is to prove the terms of the agreement are “unconscionable” at the time it was signed. To be unconscionable, you would need to prove that the terms of the agreement are so unjust or one-sided as to shock the conscience of the court. You can do this by showing that before the agreement was signed, you were not provided a fair and reasonable opportunity to know the extent of the properties and financial obligations of the other party. In other words, if the other party failed to disclose this information to you before signing, you might carry this burden of proof. You would also need have to prove that you did not waive in writing, voluntarily or expressly, your right to the disclosure of this information, and that you did not or could not have known the extent of the other party’s financial circumstances without a written disclosure.
A challenge to the enforceability of a marital agreement is very fact based, and requires an intense exploration of the circumstances leading up to the signing of the agreement. You should consult an experienced family law attorney to see if you can make such a claim.