Whether the couple is celebrating their fiftieth anniversary or just walked down the aisle, any marriage can stand to benefit from a postnuptial agreement. Like prenuptial agreements, or “prenups,” a postnuptial agreement is nothing more than a contract between spouses. And while postnuptial agreements share a few more similarities with their pre-marital counterpart, a few key differences that are worth exploring. Below, we have provided a brief overview of postnuptial agreements, including advantages, limits and how they can benefit a couple’s marriage. Also, if you have not read our primer on premarital agreements, we suggest you do so. You can find our premarital agreement overview here
In its simplest form, a postnuptial agreement is a private contract between married spouses. Many couples who have executed postnuptial agreements do so to clarify their rights and obligations vis-a-vis each other. Additionally, many North Texas couples have used postnuptial agreements to amend or update earlier premarital agreements.
The most common reason that Dallas couples execute a postnuptial agreement is due to a significant change in their circumstances that did not exist earlier. Such material changes include a substantial, impending inheritance, or recent developments in a spouses’ professional practice. Additionally, a growing number of couples with children from previous marriages have turned to postnuptial agreements to protect the interests of the children.
Texas law provides couples who seek a postnuptial agreement broad powers that can address a variety of marital topics, including property characterization and the spouses’ marital responsibilities. Texas is a a member of a small group of states that recognize two main forms or “characterizations,” of spouses’ property. Put simply, characterization refers to a process through which the court determines whether a spouse’s assets are the his or her separate property, or whether such assets are the martial estate’s joint community property. Separate property is that property which is acquired through gift, devise, or descent. All property that is not a spouse’s separate property is the marital estate’s community property. In many cases, a couple’s community property will include vehicles and/or the marital residence. Texas courts proceed will presume that all property within the marital estate is community property. A spouse who argues that an asset is his or her separate property must convince the court with “clear and convincing evidence.” Often, this is more easily said than done. Due to the difficulty of meeting this burden, many couples opt for postnuptial agreements. In this way, the couple can include property characterization provisions that describe which assets, or classes of assets, are the spouses’ separate property and which assets are the marital estate’s community property. By providing clear delineations in postnuptial agreements, many couples are able to avoid difficult questions that can arise later.
As we alluded to above, couples with blended families also stand to benefit from postnuptial agreements. It is often said that the law develops at a glacial pace. And the fact that the foundations of Texas family law were drafted in an era in which blended families were much less common than they are today. As a result, the default rules found in Texas family law may not conform to the values or desires of those who are now in blended families. One specific example of this may be found in the state’s inheritance laws; for example, generally, the children of a couple will inherit the parents’ estate if both parents pass away. But in the case of blended families, the disposition of each spouse’s separate property may be passed down in a way that does not conform with those parents’ wishes. Many blended families in Dallas have turned to postnuptial agreements to ensure their property is distributed according to their wishes were the unthinkable to happen.
Additionally, couples in which each spouse maintains his or her own retirement account may wish to have those accounts remain intact in case of a death or separation. Postnuptial agreements can be used to apportion retirement accounts in any way the couple wishes.
The last benefit of postnuptial agreements we will mention here is their ability to change with the times. Texas law provides couples with existing postnuptial agreements the ability to amend, alter, or extinguish those agreements as necessary. Indeed, many North Texas couples’ circumstances, goals and even values can change over time. In order to ensure those couples that their postnuptial agreements will reflect their current wishes and desires, the law provides the ability to amend any postnuptial (and premarital) agreement at any time—the agreement need only conform to the requirements discussed above.
While the broad powers that can flow from postnuptial agreements can provide a number of benefits, we must also take note of the limits to such powers. The limits on the enforceability of postnuptial agreements deal primarily with formation requirements. In other words, unless a few key conditions are satisfied, a postnuptial agreement will not be enforceable. Given the significant risks of an ineffective postnuptial agreements, it is extremely important to pay special attention to these formation requirements. To be legally binding, a postnuptial agreement must: (1) be in writing, (2) be voluntarily signed by both parties, and (3) contain a full financial disclosure by both parties or an express waiver thereof.
The writing requirement is, generally, the easiest requirement to satisfy. However, ambiguities may nonetheless exist. For example, a “writing” may encompass more than just a lone, written document. Email exchanges and even text messages can constitute writings, so it is important to engage with an experienced lawyer before discussing any specific terms with one’s spouse. Failure to do so may lead to the unintentional incorporation of a term into the final agreement.
Not only must a postnuptial agreement be in writing, it must be voluntarily signed by the spouses. The operative word in this prong is “voluntarily.” Whether an agreement is sufficiently “voluntary” largely depends on the behavior of the parties, and whether that behavior was “unconscionable.” The Texas Legislature included this prong to act as a kind of backstop to prevent fraudulent or abusive conduct by unscrupulous spouses. However, an unintended by product of the voluntary prong has been a number of conflicting interpretations by courts as they struggle to standardize the term. In one notable case, a husband’s threats to take his children away unless the wife signed a postnuptial agreement was held to be unconscionable, and thus, not “voluntary.” But courts have not yet drawn a bright line. For example, in another case, a court found that the existence of any negotiations between the parties created a presumption of voluntariness. The advice of an experienced lawyer can help you walk the line between negotiation and improper influence.
The third and final prong requires both spouses to include a full financial disclosure, or an express waiver thereof. This requirement was enacted to ensure that both spouses can be fully informed before signing. However, like the voluntary prong, this requirement has been applied in a seemingly inconsistent way by the courts. In one case, the wife had provided an outdated financial disclosure. Despite, this obvious deficiency, the judge found that the defect would not invalidate a postnuptial agreement because the husband was CPA, and therefore, should have known the information was out of date.
This brief overview can only scratch the surface of postnuptial agreements. If you would like a deeper dive into the world of postnuptial agreements, please download our free eBook here. And if you would like to discuss your postnuptial agreement options with a Dallas lawyer, please contact our offices at (512) 746-7399 to speak with an experienced postnuptial agreement lawyer today.