In recent years, we have witnessed an increase in the popularity of premarital agreements or “prenups.” But what is driving this rise? Please continue reading below for an overview of premarital agreements and how they have helped achieve the goals of couples across Texas.
Gone are the days when the benefits of premarital agreements were the exclusive domain of the vain or wealthy. The foundation of any premarital agreement is the contractual nature of the document. Today, businesses and individuals enter into contracts with each other to reduce risk and produce value. Contracts give the parties a record of their rights and obligations to each other, with the goal of reducing conflict in the future. Premarital agreements operate in much the same way. With a premarital agreement, the couple is able to articulate each parties’ rights and obligations in the marriage.
A common criticism of premarital agreements is that they “sanitize” or “contractualize” a marriage that should be based on romance. This criticism misses the mark. First, nothing about premarital agreements reduces a relationship’s romantic foundation. Second, the contractual aspect of premarital agreements already exists in all marriages. The Texas Legislature has already set the default rules by which all marriages must abide. The Texas Family Code contains these default provisions, and they cover a wide variety of matters, including child custody, spousal support, and property division. The Uniform Premarital Agreement Act simply permits couples to modify those default provisions to better suit their own needs, values, and circumstances.
As we mentioned above, the state’s default rules provide a presumption that all property acquired during the marriage (with some exceptions) is “community property.” Community property is that property in which both spouses have an equal ownership interest. A common example of community property is the marital residence. In contrast to community property is “separate property,” which is property in which only one spouse has an ownership interest. Gifts to a particular spouse, for example, form the foundation of common separate property claims.
Upon the termination or dissolution of a marriage, community property is generally split equally between the spouses. Many of our Lakeway resident clients has voiced their concerns about the default community property provisions. That the provision also splits debts equally has been cause for concern for professionals with substantial education debts. For those clients, premarital agreements can prove useful by ensuring that each spouse’s education debts will retain their separate property classification. Not only professionals can benefit from premarital agreements, however.
Those with children from previous marriages may also reap benefits from premarital agreements. According to the state’s default rules, one the death of a spouse, all of his or her property will pass to surviving spouse. This rule makes sense for a lot of couples. But for those with children from a previous marriage, this default rule could create a situation that leaves those children with nothing. Premarital agreements can be a simple, effective tool to ensure that the interests of children from a previous marriage are protected.
The above discussion has touched on how premarital agreements can help achieve the goals of our clients. But it is also important to understand the limits of premarital agreements power. The Texas Legislature has place a few such limits. First, no premarital agreement can limit a child’s right to support. The law is clear: children of spouses are entitled to support until they reach the age of majority. A premarital agreement that attempts to limit one’s obligation to support will be subject to challenge in the courts—such challenges may jeopardize the entire agreement so it is of the utmost importance to adhere to this prohibition.
Second, no premarital agreement may contain a provision that implicates criminality. In other words, no premarital agreement may contain a provision that requires any person to engage in crime. Though this limit is rarely the basis of an enforcement challenge, a few notable examples have made their way to the courts. In one such episode, a fiancé had pressured his soon-to-be wife to fraudulently certify the contents of her parents’ will; apparently, in an attempt to increase the couple’s community property. The fiancé threatened the soon-to-be wife with an unfavorable property division unless she made the false certification. Fortunately, the soon-to-be wife’s lawyer spotted the improper move and was able to protect the enforceability of the premarital agreement.
After gaining an understanding of the benefits of premarital agreements and their limits, many wish to share with their partners how a premarital agreement can protect the soon-to-be spouse’s interests. Despite these benefits, many still struggle with how to raise the topic with their partner. This is normal; the pop culture conception of premarital agreements misses out on much of their nuance. But we firmly believe that discussing how a premarital agreement can help achieve both partners’ goals is often a great team-building exercise. In fact, focusing your discussion on the partners’ shared goals can be an effective way of raising the subject. Whether your goals include children, retirement benchmarks, or investment plans, premarital agreements can be an important part of the relationship’s future success.
Once both partners understand how a premarital agreement can benefit the relationship, we recommend a “loving negotiation” approach. It is important to that no single partner dominates the discussion or terms of the agreement—remember(!) the premarital agreement is meant to strengthen the relationship, not the individual positions of the spouses.
If you would like to discuss the benefits a premarital agreement can produce for your anticipated marriage, contact our offices at (512) 746-7399 to speak with one of our Lakeway premarital agreement lawyers today. Additionally, if you would like to learn more from the lawyers who draft Kirker Davis, LLP’s Lakeway premarital agreements, please consult our free eBook.