Is a Prenuptial a Must?
by Charla Bradshaw
The minute you get engaged, the “to do” list for the wedding begins. You have to pick the venue, pick the band…and pick the lawyers? Unfortunately, picking the lawyers should be on the to-do list. The reality is that many marriages end in divorce, and of those that don’t, 100% end in death. In either case, there are assets to be distributed. While it is certainly unromantic to discuss and negotiate a prenuptial agreement, it can save a lot of heartache and money when or if it comes time to distribute those assets due to death or divorce.
What is a Prenuptial Agreement?
A prenuptial agreement is a contract between two future spouses and becomes valid on the date of marriage. Prenuptial agreements are also very difficult to set aside, just because a prenuptial agreement is not fair upon death or divorce is not grounds to set it aside. The agreement survives the death of the spouses therefore, it is wise that estate planning be done in coordination with prenuptial agreements.
Texas is a community property state. This means that upon the date of marriage, all property is presumed to be community property. The Texas Constitution (Article 16, Section 15) provides for prenuptial agreements.
What Does a Prenuptial Agreement Do?
The most common reasons for a prenuptial agreement are as follows:
- To designate which property, if any, will be community property.
- To designate which property will be each person’s separate property. Separate property cannot be divided in a divorce and is protected upon death.
- To prevent claims against a party’s separate property in the case of divorce or death.
- To provide for the division of property in the case of divorce.
- To provide for property upon death.
- To make provisions with regard to income and assets acquired during the marriage.
- To provide for (or eliminate) spousal support or spousal maintenance (a/k/a alimony) in the case of divorce.
- To provide for income taxes and income tax filings.
- To make provisions for the use and ownership of real estate upon divorce or death.
- To provide for business interests. For example, if one spouse has an interest in a business(es) at the time of marriage, or acquires additional interests in businesses during the marriage. Without a premarital agreement in place, determining the community and separate portions of the business(es), and the value of these business(es), can be time-consuming, emotional and expensive.
- Prenuptial agreements can provide for numerous other things, but not for child support, visitation, parental rights or custody.
Another purpose of a prenuptial agreement is to prevent costly court battles upon divorce or death. However, this depends on how well the prenuptial agreement is drafted. A poorly drafted prenuptial agreement can increase the cost of litigation in the case of divorce or death. This is because the prenuptial agreement must be litigated before the case can proceed. Most prenuptial agreements contain a list of each person’s assets and liabilities so that they are each informed about the property of the other person. However, property changes over time, therefore identifying what is separate and community property may still be difficult if proper bookkeeping is not followed.
How is a Prenuptial Agreement Negotiated?
It is not uncommon for one person to bring up a prenup and for the other person to be offended. A prenuptial agreement can be negotiated by each person having their own attorney and the attorney’s can do the negotiating. Another option, if the attorneys cannot reach an agreement, is to utilize mediation. However, a premiere option in formulating a prenuptial agreement is to utilize collaborative law with two collaboratively trained attorneys.
How Do I Know if I Need a Prenuptial Agreement?
The most commonly exempt: a young couple getting married for the first time, with little or no assets, and without the expectation of large inheritances or trusts from their families. But, for those coming into a marriage with assets of their own or the expectation of assets from a trust or inheritance, a prenuptial agreement can be a must-have. It provides certainty for both parties and protections that can go beyond the laws governing the division of assets upon divorce or death.
For couples who didn’t enter into a prenuptial agreement, they always have the option entering into a postnuptial agreement (a martial agreement made after marriage). These are largely the same as prenuptial agreements.
If you think you want a prenup, start early, and consult a family law attorney. After the wedding dress is bought, the flowers are ordered, and the RSVP’s are in, it’s probably not the best time to bring up the subject of a prenuptial agreement. The longer the distance from the wedding, the better the chance of negotiating a prenuptial agreement more peacefully.