Historically, spouses and couples about to marry in Texas could not change the character of their marital property by mere agreement because this was prohibited by the Texas Constitution. In 1948, the Texas Constitution was amended to allow spouses to contractually change the character of existing community property to separate property (marital Agreements). It would be another 32 years before further amendments would allow couples considering marriage to partition or exchange their existing and future property by agreement (premarital agreements). Fast forward to 2017 where the Texas Family Code works with the Texas Constitution to provide strict requirements through which those contemplating marriage can alter their marital property rights by agreement.
Why does one need a premarital agreement? To preserve family fortunes; eliminate, limit, or set future alimony obligations; document existing assets and related management rights; ensure religious upbringing for children; keep a party’s income separate or limit its community nature; clarify tax obligations; estate tax elections/credits; and predetermine the parties’ rights and duties during the marriage such as family finances, child care, housework, and other domestic relations. Yes, you can contract for housework, size of house, who pays the bills, number of kids, number of nannies, and frequency of intimate relations in the same document. What you cannot do is violate public policy or statute imposing criminal penalties, adversely affect a child’s right to support, or defraud creditors. And if you want to push the envelope, the general contract doctrine of severability applies to premarital agreements. When you think about it, that leaves it wide open.
A premarital agreement takes effect on the date of marriage. Until marriage, the agreement remains an executory contract. Small issue to note, the Texas Family Code did not adopt the official comments to the UPAA which require a ‘ceremonial marriage’ for a premarital agreement to become effective. It is unclear how Texas courts would decide the issue of whether an ‘informal’ or ‘common-law marriage’ would also make a premarital agreement enforceable.
The Family Code does not provide a termination date for premarital agreements. If the agreement does not specify its duration, it is presumed the parties intended the agreement to continue for a reasonable time. If it appears that any contingencies therein would limit the agreement’s duration, these contingencies would control. For those who think the second or third time is the charm, the Dallas Court of Appeals has previously found that a premarital agreement was terminated by the first divorce and did not contemplate that it would govern the relationship upon remarriage, so best to renegotiate a better deal upon remarriage.
Who typically seeks a premarital agreement? Parties that both think it’s best; one party desires the agreement and the other is only entertaining his/her fiancé’s request; and neither party wants the agreement, but must do so to appease others. The first category is easy. Category two often involves parties with disparate financial circumstances. In these cases, it is important to make sure that each party has independent representation, preferably by an attorney board certified in family law. Category three can be tricky. Often mom, dad, or grandparents demand a premarital agreement to protect inheritance. It is also becoming more common for trusts to contain provisions suggesting or requiring the trustee to consider reducing or eliminating distributions unless the beneficiary produces a copy of a premarital agreement which the trustee deems to adequately protect the beneficiary’s financial resources.
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