No matter how long (or short) a marriage has lasted, any marriage can benefit from a postnuptial agreement. Though not as well known as its sibling, the premarital agreement (or “prenup”), postnuptial agreements can help spouses achieve their goals. Please consult our webpage on Lakeway premarital agreement post for a brief overview of the ins and outs of those agreements. For those already married, continue reading to gain and understanding of the benefits and limits of postnuptial agreements.
Though postnuptial agreements share many similarities with premarital agreements, their differences warrant some explanation. Premarital agreements are signed by individuals in anticipation of marriage. By contrast, a postnuptial agreement can only be made between spouses. Most couples who seek a postnuptial agreement do so to clarify the spouses’ rights and obligations. Generally, spouses will explore postnuptial agreements when there has been a material change to the circumstances of one or both of the spouses. Common examples of such changes include changes to professional practice of one of the spouses, or other significant life events. Additionally, postnuptial agreements can be amended or modified as needed, and can even be used to modify premarital agreements.
Postnuptial agreements can address a broad range of subjects, including property classification, and the spouses’ marital responsibilities. Property classification centers around whether the spouses’ property is community or separate. Community property is that property in which both spouses have an equal ownership interest. A spouse’s separate property is that property in which only one spouse has an ownership interest. For example, the marital residence is often community property, while gifts to a spouse are separate property. In Texas, courts will proceed on the assumption that all property is community property. As a result, a spouse will have the burden of proof when arguing that an asset is separate property. To avoid this tedious process, couples routinely use postnuptial agreements to specify their separate property claims. Doing so can help reduce tension in the relationship by negating future conflicts. To learn more about community and separate property, please consult our blog post on the topic here.
Many blended families can also benefit from postnuptial agreements. Many individuals who remarry do not realize the state’s default property division rules. When a spouse dies in Texas, all of his or her assets pass to the surviving spouse. For example, one newly married Lakeway couple each had had a child from their previous marriages. Only months after the new marriage ceremony, the husband tragically died in a car accident. Pursuant to the default rules in Texas, the entirety of his assets passed to his new widow. In an unfortunate turn of fate, the widow met an untimely end not long after. Again, the default rules kicked in, and her assets passed to her child, with the late husband’s child receiving nothing. We will never know if this result conformed with the late husband’s wishes, but most parents want to ensure that the needs of their children are met. Postnuptial agreements can help protect their children’s interests, and avoid peculiar results that flow from the state’s default rules.
Some couples turn to postnuptial agreements to control how their retirement accounts are handled. Pursuant to Texas law, contributions to retirement accounts made during marriage are community property. This rule even affects couples who have made efforts to keep their accounts separate. With a postnuptial agreement, couples can ensure that their retirement accounts (and even future contributions) are each spouse’s separate property.
With our newly gained appreciation of the benefits of postnuptial agreements, we can now turn to their requirements for legal validity. To be an effective agreement, a postnuptial must:
The term “written” permits more than most people think. A “written” document could include everything from a handwritten note scrawled on a bar napkin to multi-page email chain. Because of this broad definition, it is important to seek the advice of a lawyer early in your postnuptial agreement process, otherwise some written records may be incorporated into a final agreement.
Both parties must sign the final written agreement “voluntarily.” This prong was intended to reduce fraud and other unconscionable behavior. Courts often engage in extensive fact-driven inquiries to determine whether a party’s conduct was “unconscionable.” These determinations have led to some conflicting results. One court found that another husband’s threat to take his wife’s children away unless she signed the agreement was clearly unconscionable. However, another court held that any document that had been negotiated by the parties could only have been signed voluntarily.
The last important prong is the full financial disclosure or waiver thereof. But even this requirement has produced some interesting rulings.
For example, one court found that even though the wife’s financial disclosure was out-of-date, the agreement was still valid because the husband was an accountant and should have known the figures were not current.
If you would like a more thorough analysis of the benefits of postnuptial agreements, please consider reading our eBook here. You can also contact our offices at (512) 746-7399 to speak with one of our experienced Lakeway postnuptial agreement lawyers today.