The last several decades have seen a significant rise in the popularity of premarital agreements (or “prenups”) by residents of our state, North Texas included. Gone are the days when only the vain and wealthy could reap the benefits of premarital agreements. These days, couples from across the social spectrum have turned to premarital agreements to achieve the benefits this powerful tool can provide. Despite this rise in popularity, however, outdated misunderstandings about premarital agreements still linger in the minds of the general public. To learn some of the benefits of premarital agreements and how they can help more than just the super wealthy, please continue to our brief overview below.
Like all other agreements, premarital agreements are nothing more than a contract between two parties. Everyday thousands of businesses and individuals enter into contracts to achieve their goals and protect their interests. For far too long, soon-to-be-married couples have deprived themselves of the advantages this type of contract can bring to themselves and their marriage. Of course, anyone who is considering a premarital contract will likely need to confront some of the instrument’s common misconceptions. Principal among those misconceptions is the idea that premarital agreements reduce a relationship to a purely contractual nature. They do not. On the contrary, many express their surprise when they learn that married couples already enter into a legally binding contract upon marriage. The only difference between the premarital agreement and the default marriage contract is that the terms of the latter are dictated by the Texas Legislature. The Texas Family Code provides hundreds of statutes covering a broad array of topics, ranging from property division, to child support and child custody. Couples who deprive themselves of a privately-negotiation contract are simply choosing to accept the state’s default terms. For some couples, the Texas Family Code’s default rules produce many benefits (even if not every provision is perfect or even necessary). However, some couples have unique circumstances, which may necessitate the substitution of those default rules.
Texas’ version of the Uniform Premarital Agreement Act, provides Texas couples anticipating marriage broad authority to craft a marital contract tailored to their own circumstances. By place the power back into the hands of these couples, the UPAA encourages marriages that more closely conform with couples’ specific goals, values, and circumstances.
With this basic of the basic mechanism through which premarital agreements operate, let’s turn our attention to why so many couples have sought premarital agreements in recent years. Texas law recognizes two “characterizations” of spousal property: the spouses’ separate property and the marital estate’s community property. Separate property is that which is acquired by gift, devise or descent, and is wholly owned by either one of the spouses. Community property, by contrast, is that property in which both spouses enjoy an equal ownership interest. Common examples of community property include a marital residence purchased by the couple, vehicles and retirement accounts. In the absence of a premarital agreement specifying otherwise, courts are required to presume that all property of the marital estate is “community property.” In the event that a dispute between the spouses concerns the characterizing of property, the court will find that the property is the marital estate’s community property unless the challenging spouse can prove otherwise with “clear and convincing” evidence. And this community property presumption applies not only to assets—liabilities (often in the form of debts) may also be shared between the spouses. For couples with significant debts (like many of the couples in McKinney), the characterization of the spouses’ debts as community property may not align with the couple’s goals or wishes. Fortunately, premarital agreements may be used to ensure that the spouses’ separate debts remain their separate property characterization.
Some couples see the need for a premarital agreement when there exist children from a previous marriage. Generally, the state’s default inheritance rules provide that the children of a current marriage have first priority to the property of their parents. Of course, the question of inheritance may be further complicated when considered the property characterization of specific assets. Today, many blended families prefer to bypass the state’s default inheritance rules to protect the interests of all their children—whether born of the current marriage or a previous one. It is hard to overstate the peace of mind such an agreement has brought to some blended families in McKinney.
Much of the discussion above focused on the various benefits premarital agreements can bring to couples. However, there are limits to the authority able to be wielded by premarital agreements. In enacting the Uniform Premarital Agreement Act, the Texas Legislature was careful to place a few key limits on premarital agreements: Principally, the Legislature put limits on the types of provisions Texans could include in their agreements. Specifically, the Legislature strictly prohibited any provisions that modify or eliminate a child’s right to support. As a result, any premarital agreement that include a provision that seeks to modify or eliminate a parent’s child support obligations will be unenforceable. The courts have been rigid in their interpretation of Texas law, and only courts are authorized to make determinations concerning child support obligations in accordance with the best interest of the child.
Another important restriction placed on the power of premarital agreements concerns crimes. That is, premarital agreements are prohibited from including any provisions that may implicate criminal behavior. In other words, a premarital agreement containing a provision that requires any party to commit an act prohibited by the Texas Penal Code will be unenforceable in its entirety. Fortunately, premarital agreements are rarely contested on these grounds. However, the severity of an unenforceable premarital agreement warrants that brief discussion here.
As we alluded to above, misconceptions concerning premarital agreements still pervade the minds of the public. However, these misconceptions are often easy to overcome once one has an understanding of the true nature of premarital agreements and the benefits they can bring to a marriage. Indeed, many of those who learn the benefits that premarital agreements are, subsequently, eager to share the idea with their fiancés. It is common to feel like such biases can make broaching the subject with a future spouse a complicated prospect. And while the topic can be a sensitive one, we believe that couples who engage their partners with empathy are best positioned to create a premarital agreement learning moment.
One strategy that has worked in the past is to maintain a strong focus on the partners’ shared goals. Proceeding delicately and always focusing on “our” goals and values rather than “my” goals and values, can open the door to a frank discussion that can also act as a powerful teambuilding exercise. Whether your shared goals concern retirement goals, children, or property characterization, a premarital agreement can be an important step on the path to those goals’ realization.
Do you want to learn more about premarital contracts? If so, please take a few minutes to review our free eBook, which provides a more thorough overview of premarital (and postnuptial) contracts. For those interested in discussing how a premarital agreement could help their anticipated marriage, please contact our offices at (512) 746-7399 to speak with a McKinney premarital agreement lawyers today.