Once considered the exclusive domain of the wealthy, premarital agreements or “prenups” have experienced a considerable rise in popularity among Texans over the last several decades. Now, more and more people are seeing the benefits that premarital agreements can bring to their marriages. Please continue reading to learn some of the basics of this unique legal instrument.
A premarital agreement is nothing more than a contract. Just as businesses and individuals across the state can contract with each other for a variety of reasons, couples can also form legally binding agreements prior to their marriage. Many couples have expressed how their premarital agreement has led to increased trust in the relationship because it clearly identified each party’s rights and obligations vis a vis the other. Some may resist entering into an agreement with their partner on the eve of marriage out of fear of “contractualizing” their relationship. This viewpoint ignores the contractual nature inherent in all Texas marriages, however. The Texas Legislature has already created a set of statutes (or default contractual terms) that govern the marital relationship. These rules have been codified in the Texas Family Code, and they cover a wide range of topics, including child custody, spousal support, and property division.
But the law provides an alternative for couples whose interests are best served by departing from those default rules. The Uniform Premarital Agreement Act allows couples to replace the state’s default rules with their own (barring a few exceptions, discussed below). With this law, couples are free to set the terms of their relationship to align with their specific needs, circumstances, and values.
Now that we understand that premarital agreements simply alter the state’s default rules, let’s take a look a few examples of how premarital agreements can benefit Georgetown residents.
One of the state’s default rules provides that all property acquired during the marriage is presumed to be “community property.” Put simply, community property is property which is jointly owned by the spouses. When a spouse dies, his or her ownership interest in all community property passes to the living spouse; and if the marriage is terminated, the community property is (generally) divided equally between the former spouses. But this equal division of property is not restricted to assets—it includes debts as well.
A common topic of interest among our Georgetown clients is the division of community property debts. Some of our Georgetown clients, many of who are professionals who have substantial student loan debts, have been dissatisfied with the state’s default rules in this regard. Fortunately, these clients were able to use premarital agreements to specify the separate property character of their respective student loan debts. But it’s not only professionals who can benefit from premarital agreements.
Prenups are, perhaps, most popular among those who are entering a new marriage with children from previous marriages. The reason for this popularity becomes clear with a brief overview of Texas family law. In Texas, one default rule provides that on the death of a spouse, all of his or her ownership interests in property will automatically transfer to the surviving spouse. This default rule is suitable for many couples. However, the default rule may not conform to the wishes of newlyweds who have children from previous marriages. Many parents wish to protect the interests of their children from previous marriages, but the current default rule does not provide that protection. Premarital agreements allow parents to alter the default rules so that the rights of their children from previous marriages are protected.
Now that we have an understanding of how premarital agreements can benefit Texans, let’s take a look at some of the limits to their power. The most significant limit on premarital agreements is a prohibition on provisions that would limit a child’s right to support. In Texas, children are entitled to support whether their parents are married or not; when parents divorce, their obligation to support their children remains. Consequently, any premarital agreement that seeks to limit one’s obligation to support children is in serious jeopardy.
Similarly, no premarital agreement may contain provisions that implicate criminal activity. For example, a premarital agreement that would require a future spouse to defraud another individual would not be enforceable. Though this limit is rarely the subject of a court challenge, its effect—unenforceability—warrants serious attention.
We hope that the information outlined above has equipped our readers with a better understanding of the benefits of premarital agreements. But even with a firm grasp of premarital agreements (including their strengths and limitations), many have expressed discomfort about sharing the idea with their soon-to-be spouse. Clients fear that such a discussion may risk “sanitizing” the relationship, especially at a time when romance plays an important role. We suggest a strategy that emphasizes the shared benefits of premarital agreements. In fact, expressing one’s thoughts (and fears) can be a great communication exercise for all couples. Often a strategy of focusing on both partners’ shared goals provides a productive way of introducing the topic to one’s partner. Whether your future contains plans for children, investments, or retirement goals, a premarital agreement can help you and your partner achieve success in the future.
If you would like to discuss the benefits a premarital agreement can produce for your anticipated marriage, contact our offices to speak with one of our Georgetown premarital agreement lawyers today. Additionally, if you would like to learn more from the lawyers who draft Kirker Davis, LLP’s Georgetown premarital agreements, please consult our free eBook here.