The Texas Family Code allows parties to enter into a prenuptial agreement, or prenup, before marriage. It makes those agreements enforceable so long as they meet the requirements set out in the Texas Family Code. A prenup in Texas is an agreement between two people prior to entering into marriage that contractually determines property issues during the marriage, during a divorce, or both.
A prenuptial agreement stays in effect during the marriage. In the event of divorce, it will govern property treatment during the divorce. The prenuptial agreement can also govern issues during a divorce, such as spousal support or alimony. Whether you should get a prenup depends on a number of issues. Many people think of them as insurance against a foul dissolution of the marriage; but they can also be useful tools to protect property against creditors.
Not everybody needs a prenup and the vast majority of Texas marriages do not include a prenup. If you think you need a prenup before marrying, then you should talk to a family law attorney in your area. Prenuptial agreements are complex agreements and judges often look for reasons to invalidate a prenup. Your attorney will take the necessary steps to evaluate your situation, draft the agreement and ensure the process will create an enforceable prenup. Attempting to draft a prenup without an attorney, at least in Texas, is likely to result in an unenforceable prenup in a divorce.
What is a prenup or prenuptial agreement in Texas?
First, let’s learn more about what a prenup agreement is, what it does and why you may need or want one.
A prenuptial agreement is a contract between future spouses signed before the marriage to address property issues during the marriage and in the event of divorce. To be a prenuptial agreement the prospective spouses must complete and sign the agreement before the marriage. (The spouses can enter into a similar agreement after the marriage called a postnuptial agreement.) A prenup becomes effective once the parties marry.
The purpose of a prenuptial agreement in Texas is to dictate ownership of the assets of the individual spouses and collectively as a married couple. Texas is a community property state which creates complicated ownership rules that certainly affect a divorce but can also become an issue in business ownership disputes, bankruptcy, consumer debt issues and other property-related disputes. Under Texas community property rules even property you owned before the marriage can become partially jointly owned during the marriage and divided in a divorce.
Who should get a prenup in Texas?
The single most common reason people get a prenup in Texas is to protect individual assets in the event of a divorce. Typically people seeking a prenup are future spouses concerned about an imbalance in the financial status of one future spouse compared to the other. One person may worry about what the other person will pursue in a divorce. Alternatively, one person may have a lot of debt and the other worries about becoming saddled with the other person’s debts. It may be the case that both spouses have significant assets and want to ensure that a divorce does not disrupt ownership of their respective assets or force the parties into a complex and expensive divorce to sort out community property issues.
The goal of the prenup is to spend a smaller amount of money discussing these issues when the parties are on good terms instead of spending a lot of money in a divorce when the parties may be hostile.
What can a prenuptial agreement do in Texas?
The Texas Family Code authorizes premarital agreements to establish rules for ownership of current and future assets of the spouses. Prenups in Texas can decide many financial issues between the spouses and in ways significantly different from the normal rules under Texas law. A prenup can even go as far as dictating the property status of a spouse’s assets upon death. Some issues a prenup can address under the Texas Family Code:
- Ownership of pre-marital assets by each spouse after marrying;
- Ownership of assets acquired during the marriage;
- The rights and duties of each spouse regarding property owned before and during the marriage;
- How to divide property in the event the spouses separate or divorce;
- The right to receive spousal support or alimony in a divorce;
- The amount and terms for spousal support or alimony in a divorce;
- Require the parties to create wills, trusts, and other legal arrangements;
- Rights to receive death benefits, funeral reimbursements and survivor benefits from insurance and pension benefits;
- Choice of law provisions over which state’s law will govern disputes involving the prenup.
A prenuptial agreement can address a wide range of other property and non-property issues. You should talk to your family law attorney about your concerns and whether the Texas Family Code permits a prenup to govern those issues. A Texas prenup cannot require the parties to engage in a criminal act or to violate Texas public policy. There are some key issues a prenup cannot address discussed below.
Poison pill provisions in a Texas prenup
One question that arises around prenups is whether Texas allows for poison pill provisions. Yes, generally a prenup can include a poison pill. A poison pill provision is a term in the agreement that either dissolves the prenup or changes the terms to become less favorable if a certain event occurs. For example, a prenup agreement might give the husband alimony in a divorce; however, if he cheats on his wife then he cannot receive alimony. People sometimes want their attorneys to include a poison pill to deter bad behavior in the marriage; but consider what that says about your relationship.
Why you might want that prenup?
Obviously the primary purpose of a prenuptial agreement is to govern property division in a divorce. So there is some truth to the statement that having a prenuptial agreement is acknowledging the possibility of a divorce. However, it is not the only reason you may want one.
Property distribution on death
You may want to control the distribution of property upon your death or your spouse’s death to avoid what would be community property from going to your spouse’s family or children from another marriage. These estate planning purposes are important. (Although you can get a postnuptial agreement after the divorce that changes community property to separate property or vice versa.) You may have inherited family wealth or land and want to keep it within your family’s bloodline. If the income from that separate property becomes community property and reinvests into that wealth you can end up with a messy situation where people outside your lineage have their hand in the cookie jar.
Protecting separate property
On the other hand, you may also want to make sure that all of your separate property goes to your spouse and/or your kids and not to siblings, parents, or other people in your family tree. You can also sign a prenuptial agreement that converts some or all of your separate property into community property. The danger here is if you divorce after signing that agreement then all your property is subject to its terms. Delivering your property to your chosen family members may more effectively resolve through an estate planning document.
Another reason why a prenup may be in your best interests is to strengthen the financial stability of the marriage. For example, if one spouse has a lot of debt but not a lot of income, it may make sense to use a prenuptial agreement to keep the debt-free spouse’s income separate property. That also requires carefully documenting of income and assets.
Of course, you also run the risk as the indebted spouse of receiving far less in a divorce because property that would have been community property is now separate property and indivisible by the court without the agreement of the spouses (which is unlikely). You can also protect one spouse’s property from creditors by constraining management rights over community property.
What can a Texas prenuptial agreement not do?
As discussed above, a Texas prenuptial agreement can dictate a lot about the marriage and property involved; however, it is not an absolute agreement. The agreement is a contract subject to the Texas Family Code, contract law and various other state and federal laws. We’ve already discussed that a prenup cannot require the parties to commit crimes or violate Texas public policy. These are not the only limitations. Here are some common issues a prenup cannot change:
ERISA-protected employee benefits
A prenup agreement cannot waive a future spouse’s rights to benefits under an employee benefit plan protected by ERISA. ERISA is the Employee Retirement Income Security Act of 1974. It is a federal law that protects many private employer benefit plans such as 401k plans, defined benefit pension plans and employer-sponsored health insurance. The purpose of ERISA is to protect plan beneficiaries from bad acts by others involved in the plan, such as the employer and other beneficiaries–like the spouse. ERISA prevents one spouse from cutting off the spouse from plan benefits without the other spouse’s consent.
As a result of this protection a future spouse cannot waive their own rights under the plan as a spouse. You cannot cut off your own rights under the plan as a spouse before you are a spouse. That means the prenup agreement can include provisions waiving plan benefits but it will not be enforceable over ERISA or plan rules. To make that waiver valid the spouses can complete a waiver form with the plan after marrying or reaffirm the terms of the prenup after marrying.
A prenup cannot be a tool to defraud the creditors of one of the future spouses. Although a Texas prenup allows spouses to reclassify property ownership, the spouses cannot reclassify property to evade debts owed. Under Texas community property rules generally one spouse’s separate property cannot be seized to satisfy the debts of the other spouse. If a spouse enters a marriage with a lot of debts and assets that are not judgment proof, then that spouse might want a prenup that transfers ownership of assets to the other spouse to avoid seizure. In this situation a court will not enforce the terms of the prenup against the creditors.
Alternatively, it is perfectly fine to use a prenup to protect your assets from your spouse’s creditors. A prenup can confirm the separate property identity of your current and future assets. That would resolve any question about what assets of yours are off limits to your spouse’s creditors.
Child custody and child support
Child custody and child support are tricky issues in a prenuptial agreement. A prenup may establish agreements about child custody issues or child support payments; however, the divorce court is not bound by these agreements. Under the Texas Family Code the judge must decide issues of child support and custody according to the best interests of the children. The judge is unlikely to give much consideration to the prenup on these issues.
Including these terms come with risks beyond judges refusing to consider them in the divorce. If one spouse gave up assets or property rights to gain child custody or child support terms, then that spouse may end up losing out if the judge rejects those terms. If the prenup requires the spouses to agree to custody or child support terms in the divorce as a poison pill, then there is a risk the judge may find the entire agreement unenforceable.
There are effective ways to ensure additional child support exists in the prenup; however, these should be considered with your attorney as part of the larger strategy while drafting a prenup.
What happens in a divorce when you don’t have a prenup in Texas?
If like the vast majority of marriages yours comes to an end without a prenup, then your divorce will follow the laws of the state. As a community property state, Texas rules for property division in a divorce are different from most states which follow equitable division rules. Sorting out community property from separate property can be a large and expensive endeavor in a large or complicated marital estate. The outcome is sometimes not what the spouses expected or hoped for which can drive a lot of frustration and negativity in the divorce.
What makes a prenup agreement enforceable in Texas?
Now that we know what a prenup agreement is and what it can do let’s talk about what makes it enforceable under the Texas Family Code.
Most states follow the same or similar requirements for a prenup agreement spelled out in the Uniform Premarital Agreement Act (UPAA). Under the Texas Family Code a prenup is legally valid if all four elements are met:
- the agreement is in writing;
- signed by both parties;
- both spouses disclosed assets and liabilities prior to signing the agreement;
- both spouses waived the right to further disclosure of assets and liabilities.
What this means is that the two spouses must make a written contract signed by both parties with a full understanding of what is at stake. Texas courts will not enforce prenups where the spouses made insufficient disclosures.
It is not a requirement that either party has an attorney involved with a prenup; however, it helps prove enforceability if both parties have separate legal counsel.
What makes a Texas prenup agreement unenforceable?
As a contract a Texas court may strike down the entire agreement or just terms unenforceable under contract law or the Texas Family Code. When a party seeks to void a prenup entirely the Texas Family Code gives specific reasons why the entire agreement may be struck. If the party seeking to void the prenup cannot prove one of these reasons, then the agreement may stand although part of the agreement may be void. Typically though a prenup is either enforced as written or void entirely.
The Texas Family Code only permits challenges to the enforceability of the prenuptial agreement as a whole (rather than striking impermissible terms) for three reasons:
- The agreement was not made in writing;
- Either spouse did not sign the agreement voluntarily; or
- The agreement was unconscionable at the time signed plus the party challenging the agreement:
- was not provided fair an reasonable disclosure of the assets and liabilities of the other spouse;
- did not voluntarily waive, in writing, any right to disclosure of the assets and liabilities of the other person beyond what they already disclosed; and
- did not have, or reasonably could not have had, adequate knowledge of the assets and liabilities of the other spouse-to-be.
Let’s get into what this means.
An agreement was involuntary if the person was forced to sign the document (i.e. gun to the head), the signature was obtained by fraud, or undue influence. Usually when drafting a prenuptial agreement, both parties will obtain separate attorneys to disprove a later argument that the agreement was involuntary or misunderstood. The involuntariness of a prenup is a very high standard to prove. It’s not enough that one spouse threatened not to marry the other without a prenup.
If a party seeks to void the prenup on unconscionability the party must prove the prenup is unconscionable plus at least one of the issues in the subsequent bullet points. A prenup is unconscionable under this provision if one party concealed material information and took advantage of that concealment to reach an unfair agreement. It is not enough for the agreement to be one-sided.
A prenuptial agreement is unconscionable at the time of signing if unfairness relates to the process and terms. In other words, the party challenging the agreement must show the agreement was unfair to him or her at the time signed (not that the arrangement looked good at the time but ended up a bad deal) and he or she lacked equal bargaining power at the time signed. The latter half of that relates to the three bullet points listed above. If the party does not receive reasonable disclosure of the assets and liabilities then it difficult to determine whether the fairness of terms.
Can I change or terminate a prenuptial agreement after marriage?
Yes. In Texas a prenuptial agreement is a contract so like any contract the parties can agree to amend the terms after entering into it. To modify or invalidate a prenup in Texas the parties must agree to the new terms in writing.
Do I need to hire a Texas attorney to draft a prenup agreement?
Although technically you can draft a prenup without an attorney, the question for you is whether you want to get into a divorce or probate case down the road and discover the prenup isn’t enforceable after all. Until we can time travel you are stuck with the agreement you signed for better or worse. Hiring an attorney means leaving drafting to an expert. It also means letting an expert ensure the process of obtaining the prenup agreement will lead to an enforceable agreement. The presence of legal counsel on both sides means the judge is more likely to believe the parties entered into the agreement with knowledge and consent. If you care enough to get a prenup you should care enough to ensure it does its job if the time comes.