Your Constitutional Right
The Texas Constitution establishes the right of future spouses and current spouses to enter into premarital and marital property agreements, respectively. Both types of agreements generally are valid as long as they are in writing, signed by both parties, and not for the purpose of defrauding current creditors. Further requirements are specified in the Texas Family Code and explained below.
Premarital Property Agreements
Rights That Can Be Altered
A premarital property agreement becomes effective upon marriage. The Family Code permits the future spouses to contract with respect to the following rights and obligations:
- That each future spouse’s paycheck will be their sole and separate property;
- That interest and income earned from each future spouse’s seperate property remains that spouse’s separate property as well;
- That one future spouse will have the sole ability to sell, use, transfer, dispose of, or mortgage certain property;
- That one future spouse will have the sole ability to dispose of certain property on separation, divorce, death, or the occurrence (or non-occurrence) of any other specified event;
- That one future spouse will have sole ownership and disposition rights to the proceeds from a certain life insurance policy;
- That each future spouse will execute a Will, Trust or other specified arrangement to carry out provisions of the premarital agreement;
- That each future spouse will forgo any claim to spousal maintenance (“alimony”) in the event of divorce; and,
- Any other matter that does not violate public policy or criminal statutes.
A Right that Cannot Be Altered
The Family Code identifies one item that cannot be affected by a premarital agreement because it violates public policy—the right of a child to support. While future spouses might decide to eliminate the prospect of spousal maintenance (“alimony”), they cannot eliminate the prospect of child support. Doing so would violate the Texas legislature’s charge to the courts to hold the best interests of the children paramount.
Agreements Not Enforceable
The Family Code establishes that a premarital property agreement is not enforceable if the party seeking to avoid the agreement proves each of the following three elements:
- The agreement was not signed voluntarily;
- The agreement was “unconscionable” when it was signed; and,
- Before signing, that party:
- Was not provide fair and reasonable disclosure of the property and financial obligations of the other party;
- Did not voluntarily and expressly waive disclosure; and,
- Did not have, or reasonably could not have had, adequate knowledge of the property or financial obligations of the other party.
What Does “Unconscionable” Mean?
To find an agreement “unconscionable” means more than proving that one party had greater rights or bargaining leverage than the other. Rather, it means proving that the agreement was so lopsided in favor of one party that no reasonable person could consider it to be the product of an “arms-length transaction.” An “arms-length transaction” generally means that both parties had adequate knowledge of all relevant factors at the time they negotiated the agreement.
One Attorney Cannot Represent Both Parties
Because of the concerns described above (e.g. potential claims of inadequate disclosure, absence of voluntary signature, etc.), one attorney cannot represent both future spouses when crafting a premarital property agreement. An attorney can represent only one future spouse – either the bride or groom. The other future spouse must hire his or her own attorney – or knowingly and voluntarily decide not to do so.
Marital Property Agreements
Current spouses can at any time agree to convert some or all of their community property into separate property—and specify which spouse now owns it as their separate property. The agreement can apply to property now owned or later acquired. While normally income produced by separate property is community property, a marital property agreement can determine that all income produced will be separate property as well.
Current spouses can at any time agree to convert some or all of their respective separate property into community property. Mere transfer of property to the name of the other spouse is insufficient to establish it as community property. An agreement must specifically identify the separate property and state that it is being converted to community property.
Agreements Not Enforceable
A marital property agreement generally is not enforceable if the same three elements that apply to a premarital property agreement are proven. Refer back to the section above under “Premarital Property Agreements” for discussion of the three elements. The same caution applies where one attorney may not represent both spouses in crafting a marital property agreement.
In closing, the subject of premarital and marital property agreements is an important one—particularly when one or both spouses come into a marriage with substantial assets or children from a previous marriage. The Cramp Law Firm stands ready to help if you need us.