Premarital & Postmarital Agreements
Couples are permitted by law to make agreements concerning their relationship and property rights and obligations both before (premarital) and after marriage (postmarital). Usually these agreements are for the purpose of changing marital-property rights without any court action (litigation). Avoiding litigation is often a major motivation. These agreements may be part of an estate planning process in addition to making a will and/or trusts.
These agreements are controlled by very technical and complex provisions of the state constitution, the Texas Family Code, the Texas Estate Code, and common (court-made) law and rules. A couple should not attempt to make such an agreement without the assistance of a competent family law attorney.
Other reasons may motivate a couple to make such agreements to more specifically define their rights and obligations toward each other, such as:
- Division of household responsibilities,
- Payment of support and living expenses
- Sharing of child-rearing responsibilities,
- Religious up-bring of children,
- Procedures to resolve serious conflicts, and
- Disposition of their property should the relationship end.
The list is bounded only by the imagination of the couple.
There are several types of agreements, such as:
- Premarital agreement,
- Postmarital agreement ,
- Cohabitation agreements ,
- Agreements in consideration of marriage,
- Separation agreements, and
- Rights-of-survivorship agreements.
Premarital agreement (sometimes called “a prenup”) are made before marriage by couples to define their rights and obligations to one another during their marriage. A premarital agreement may cover a wide range of topics so long as the agreement does not (1) violate public policy or a criminal statute, (2) affect child support obligations adversely, or (3) defraud a creditor.
A premarital agreement assumes knowledge of a wide array of complex legal rules and requirements for validity. A couple should never undertake making a premarital agreement unless they consult with a competent family law attorney who drafts the documents.
Usually the premarital agreement makes changes to the community property system. The community property estate includes all property acquired during a marriage including income and earnings from separate property. Separate property is property owned prior to marriage or property acquired during marriage by either gift or inheritance. All income earned during marriage is community property even if the income is subject to the sole control of the spouse who earned it.
Community property must be divided by a court if the couple divorces and the division may be unequal; however, the court does not have authority to divide separate property; the court may only acknowledge that property’s status to be separate.
Reasons why some couples want a premarital agreement include:
- change by contract the constitutional and statutory rules that govern the definition of community property and separate property;
- preserve fortunes for children from an earlier marriage;
- eliminate, limit, or set future alimony obligations or post divorce maintenance;
- predetermine the parties’ rights and duties during marriage, including child care, housework, career sacrifices, and managerial responsibilities related to family finances;
- detail what property belongs to each party upon entering the marriage and who will have management rights over that property;
- ensure a certain religious upbringing of a child, especially if the marriage is later dissolved;
- keep a party’s income separate to pay off premarital debts or to meet spousal-maintenance obligation associated with an earlier marriage; and,
- clarify how taxes will be filed and who be responsible for income-tax liabilities.
Matters that may be agreed include the follow, but this list is not exhaustive:
- changing the rules of community property and separate property; for example,
- future earning during marriage may be defined to be separate rather than community property,
- separate property may be converted into community property, or,
- community property may be partitioned or exchanged and become separate property.
- rights to manage and control certain property;
- control disposition of the couple’s properties upon
- dissolution by divorce,
- death of either spouse,
- or any other event.
- modify or eliminate spousal support,
- create an obligation to make a will, create a trust or make other arranagments to carry out the intention of the agreement.
- control life insurance ownership and disposition of benefits,
- choice the laws of a particular state or foreign country that will control interpretation of the agreement,
- require use of alternative dispute resolution procedures rather that court litigation for resolution of any disputes,
- provide enforcement of provision through a forfeiture of rights for taking or failing to take certain specific actions, and,
- any other matter, including personal rights and obligations, not prohibited by law.
Post Marital Agreements
A postmarital agreement may be motivated by and serve many of the same purposes as a premarital agreements.
Community property is converted into separate property through a partition/exchange agreement. The agreement may cover future income and earnings as well as other property acquired in the future.
Separate property may be converted into community by a conversion agreement.
A postmarital agreement like a premarital agreement may cover a wide range of topics so long as the agreement does not (1) violate public policy or a criminal statute, (2) affect child support obligations adversely, or (3) defraud a creditor.
A postmarital agreement assumes knowledge of a wide array of complex legal rules and requirements for validity. A couple should never undertake making a postmarital agreement unless they consult with a competent family law attorney who drafts the documents.
Right of Survivorship Agreements
The purpose is to permit the survivor spouse to become the sole owner of community property without any probate proceeding. A valid ROS agreement means that the ownership of the community property passes to the surviving spouse outside of the deceased spouses’ will.
A ROS agreement must be in writing and signed by both spouses. The ROS agreement must contain certain words to make clear the intention of the spouses to create a right of survivorship, such as: (1) “with right of survivorship”, (2) “will become the property of the survivor”, (3) “will vest in and belong to the surviving spouse”, or (4) “shall pass to the surviving spouse.”
The fact that an account is “joint” such as a bank account does not mean that there is a right of survivorship, even if the account has a designation such as ”JT TEN”, “Joint Tenancy”, “joint”, or something similar.
CAUTION: Be careful when opening a bank account or a brokerage account. The bank or brokerage firm will usually have an account “agreement” that is in fine print on a card. Often, the agreement form will have an option to check a box that says, “with right of survivorship”.
Do not check a box of a joint account form that says “with right of survivorship” or similar words if you want your will to control the passing of your interest in that joint account. On the other hand, if you want your surviving spouse to own the assets in the joint account when one dies, then the ROS agreement will control instead of your will.
Property in a joint account with an ROS agreement may be transferred to a third person prior to death of either spouse in accordance with the terms of the agreement.
An ROS agreement may be revoked in writing by either spouse so long as the revocation is in accordance with the terms of the agreement.
Couples may decide — for a variety of reasons — that they do not want to end their marriage with a divorce, but they no longer want to live together. These couples may make a contract called a “separation agreement”.
Texas law does not recognize “legal separation” as a status. What this means is that the “community property estate” continues to exist even though the married spouses make an agreement to live apart from one another. Consequently, the parties may want their “separation agreement” to include: (1) a “partition/exchange” agreement [link to topic] converting community property into separate property or (2) a “conversion agreement” to convert separate property into community property. “Partition agreement” may control the status of future income and federal income tax liabilities.
If the couple have minor children, their “separation agreement” may also address rights and duties of each for care-taking and child rearing as well as an allocation of financial responsibilities for child rearing and general living expenses.
The “separation agreement” may be for a definite or an indefinite period of time or may end based upon certain future contingent events.
Many couples are deciding to live together as sexual partners without intention of getting married. These couples may wish to consider making a “cohabitation agreement”. Why?
The principle reason is to negate (rule-out) slipping into an “informal (common law) marriage”. An informal marriage may come into existence simply by a couple cohabiting (this means living together and having sexual relations) plus making a declaration to others that they are married. Simply making an introduction to others that one’s live-in partner is “my spouse” or referring in public to “my husband” or “my wife” might be sufficient.
If an informal marriage comes into existence, then a “community property estate” will come into existence. Later in time, one partner or their heirs, might make a claim that an informal marriage came into existence. If either partner has assets of significant value, this could lead to a big up-set and expensive litigation. There was a famous case like this involving the singer, Frank Sinatra whose estate was worth $200 million.
A written “cohabitation agreement” clearly eliminates the complications that follow when someone claims an “informal marriage” to the surprise of the other partner or their heirs.
Agreement In Consideration of Marriage
A dating couple considering marriage may — though it is rare — make an “agreement in consideration of marriage”. There may be a wide variety of reasons why a couple would choose to do this. Such agreements are not the same as a “premarital agreement” [link to topic].
A major difference is that an “agreement in consideration of marriage” is effective immediately when signed and may be enforced even if the marriage never takes place. The agreement must be in writing, signed, and done in consideration of marriage.
For example, the “agreement in consideration of marriage” may provide that an engagement ring shall be returned if the marriage never takes place. While the gift of an engagement ring is conditional, an oral promise to return the engagement ring is not enforceable under the Family Code.
The “conditional gift rule” is one sided. This rule would require the engagement ring to be returned to the giver only if the recipient of the ring was at fault in breaking the engagement. If the giver of the ring breaks the engagement, then the recipient of the ring is not obligated to return it.
If a couple is divorcing, it is always a good idea to share a copy of your existing will with your divorce (family law) attorney and seek advice about revoking your existing will and writing a new will.
What is a “will”? Many people have heard the phrase “Last Will and Testament” or simply a “Will”. This phrase refers to a written document in which the maker of the “will” makes statements about what is to be done after his/her death. A “will” may cover many topics (such as funeral arrangements), but the main reason a person makes a “will” is to control who will receive the property of the maker after his/her passing.
A “will” must satisfy several basic requirements, namely:
- it must identify the testator (maker of the will),
- it must be written with “testamentary intent” (meaning that the maker clear the written document is to serve as a “will”)
- the testator (maker) must have “testamentary capacity” to execute a will (that is, must be over 18 years of age and be of sound mind), and
- the will must be executed (prepared and signed) with the requisite testamentary formalities (defined by statute and case law).
A will may be handwritten called a “holographic will”. Such a will must be wholly in the handwriting of the testator and be signed by the testator. However, a handwritten home-made will is not recommended. A handwritten will is often the cause of expensive litigation.
Some people use “will forms” that a now easily obtained from on-line sources. Some companies publish such “will forms” and encourage their use; however, such companies are not practicing law and are not supposed to give legal advice. The use of such on-line “will forms” run the risk that their “will forms” will not satisfy the requirements of the law and will be rejected. Even worse, the will may over-look important considerations that could same money, reduce conflict among heirs, and more effectively carry out the intentions of the maker.
It is best to pay a modest fee to an attorney for the preparation of even a “simple will”.
Also, an attorney may give advice about how to use to legal means to pass property to another person without needing to probate a will, such as, right of survivorship agreements or trusts.
Nevertheless, every person should consider having a will. Even a person who believes he/she does not own property of significant value. Think about the family who inherited a small plot of land with little surface value, but later discover the land has valuable rights to sub-surface minerals (oil and/or gas).
Other reasons for making a “will” include, among other things:
- reciprocal wills for a spouse because the will of a person with a surviving spouse will control only 50% of the community property, so both spouses need to have their own will;
- need to include a trust for property that might pass to minor children;
- make it clear who is to inherit specific items of property (helps to avoid disputes among survivors about who was to receive what property);
- avoid property going to unknown heirs in the absence of a written will (the state’s statute of descent and distribution will control passing of ownership to heirs if there is no valid written will);
- place conditions on inheritance;
- create a trust within a will to control, among other things, the date by when property will pass to an heir without management by a trustee;
- create trusts and other provisions for avoid taxes;
- specify funeral arrangements and place of burial;
- appointment of the person(s) who will be the
- “executor” (person who manages the “probate” estate [the “probate” estate is the property that passes ownership under the will through a probate court proceeding];
- “trustee” of any trust in the will; and/or
- “guardian” of the person of a minor child; and,
- save costs of probate court by appointing an “independent” executor.
Couples who are divorcing should be careful to:
- revoke any will that leaves property to the ex-spouse, if that is intended (a provision may be included in the Decree of Divorce); and,
- make a new will that will control the property awarded to the maker of the will.