Whether you just returned from your honeymoon or you are planning a 25th anniversary celebration, it may be a good time to consider a postnuptial agreement. Though many are familiar with their pre-marital cousin, the prenup agreement, few have as good of an understanding of the benefits of postnuptial agreements. Both types of agreement can achieve similar results, however a few key differences warrant a separate examination. If you would like to get up to speed on premarital agreements, or “prenups,” we recommend reviewing our brief overview of prenups here.
In contrast to the premarital agreement (“prenup”), which is signed in anticipation of marriage, a postnuptial agreement is one that is made between spouses. Though there are many reasons to use postnuptial agreements, we will focus on three of the most common here. First, many couples use postnuptials to clarify or reaffirm their rights and obligations. Another common reason for couples to draft a postnuptial is to amend or modify an earlier premarital or postnuptial agreement. Finally, some couples will use a postnuptial agreement to address a significant change in the spouses’ circumstances, such as a change to a professional practice, a recent or pending inheritance, or a significant life event for the children of a previous marriage.
The Texas Legislature has made it clear that spouses should have broad authority to use postnuptial agreements to address a wide variety of circumstances, such as property characterization and the spouses’ marital responsibilities. Property characterization is the process by which the marital estate’s property is determined to be either “community property” or the “separate property” of one of the spouses.
Community property is that property which is owned jointly by the spouses. A common example of community property for many couples is their principal residence, which is typically purchased during the marriage. Both spouses have an equal ownership interest in all community property, and in the event of the marriage’s termination, both spouses are entitled to an equal share. Please consult our overview of community property blog post for a more in-depth analysis of community property here.
In Texas, an inheritance bestowed during the marriage is presumed to be community property. For couples who wish to avoid tension in their relationship, a postnuptial agreement can offer peace of mind by clarifying their rights, if any, vis-a-vis the spouse’s inheritance.
The increasing prevalence of blended families has also led to a rise in postnuptial agreements. Many people remarry after having children from a prior marriage. But this change can lead to some unintended consequences. Texas family law was largely written before the rise of blended families. Consequently, some aspects of the law may not conform to all families’ desires. For example, when a spouse passes away, his or her separate property will automatically pass to the other spouse. But this may not be the desired outcome for all couples, especially couples with children from previous marriages. Furthermore, the children of the surviving spouse may have a priority claim over the children of the deceased spouse. Taken together, these default rules can lead to some puzzling results.
In one notable case, a Husband and Wife couple tragically perished in an airplane accident. Over the next several years, the children from the wife’s previous marriage engaged in a brutal court battle with the child of the late spouses over control of the couple’s estate. Surely, none of the parents involved would ever have wanted their children to spend their time dueling over their estates. A postnuptial agreement could have avoided the court contest by clearly clarifying the rights of all children involved.
Due to the wide range of issues that can be addressed by postnuptial agreements, the Texas Legislature has set a few key requirements for such agreements to be valid. There are three key requirements: First, the postnuptial agreement must be in writing. Second, the postnuptial agreement must be signed by both spouses voluntarily. Finally, the postnuptial agreement must include a full financial disclosure or waiver thereof. Failure to satisfy any one of the three requirements could result in a costly inquiry or, in the worst case, an ineffective agreement.
The requirement that the postnuptial agreement be “in writing” may encompass more than you were thinking. Electronic communications such as email chains have been found to constitute “writings.” This has led many couples, to their surprise, to realize that some of their communications were incorporated into a postnuptial agreement.
Similarly, the postnuptial agreement must be signed voluntarily. This requirement was added to deter unconscionable behavior by one or both of the spouses. But what kind of behavior is “unconscionable?” Generally, the unconscionability enquiry is a fact-driven inquiry. Unfortunately, this has led to some divergent court decisions. For example, in one case, a husband’s threats to take away his wife’s children unless she signed the postnuptial agreement was clearly unconscionable. But in another case, a court ruled that an agreement signed after the parties had engaged in negotiations must have been signed voluntarily.
The last requirement is a full financial disclosure by both parties or an express waiver thereof. Like the conscionability prong, this requirement was designed to ensure fair dealing by the parties, but can lead to some interesting court rulings. In one case, the court held that the term “full disclosure” did not include up-to-date information because one of the spouse’s was an accountant, and should have known that the disclosure did not contain recent financial developments
If you would like to learn more about the benefits of postnuptial agreements, please consult our eBook here. You can also contact our offices at (512) 746-7399 to speak with one of our experienced Georgetown postnuptial agreement lawyers today.