|April 11, 2014|
Previously published by Examiner.com on Spring 2014
In today's complicated world, it is not uncommon for spouses and prospective spouses to have substantial assets, children from previous marriages, partnerships or business agreements. So, as a board certified family law attorney I often counsel couples who are considering entering into marital property agreements. In many circumstances, these agreements can be beneficial for both parties. They not only define the respective rights and obligations of each party, they may help preserve and protect the parties’ estates, and reduce future litigation and expense.
One of the main reasons a married couple may want to consider creating a marital property agreement would be to clearly define whether an asset is community or separate property. This action is designed to protect an asset from the claims of possible creditors. Another reason a couple might want to create a marital property agreement is to determine how marital property will be divided upon divorce or death.
In a Texas divorce, the court will order a “just and right” division of a couple’s community property. This means that a party is not automatically entitled to an even split of the community estate, nor is a court ever allowed to award one spouse’s separate property to the other spouse. A judge must award the separate property to the spouse who owns it, which means that a party must prove something is separate property to place it out of the judge’s reach in a divorce case.
When a married person dies, 50 percent of the community property is owned by the surviving spouse. This means the will of the deceased person conveys only the 50 percent he or she owned. On the other hand, the will conveys 100 percent of the separate property owned by the deceased because the surviving spouse does not have any ownership in those items.
Marital property agreements
Marital property agreements may include premarital agreements, post-marital agreements, partition or exchange agreements, and co-habitation agreements. The primary purpose of a marital property agreement is to define what will be community and what will be separate property during the marriage. These agreements also provide a way for married couples in Texas to better control where these assets go, bypassing the rules of characterization.
Such agreements can provide that income from separate property will remain separate property. The agreement also can govern the disposition of property on separation, divorce or death. The agreement also can waive any homestead allowance, personal property set aside and family allowance to which a spouse may be entitled.
Texas courts have taken the position in recent years that they will uphold the enforcement of marital property agreements and there are very few exceptions where a party can avoid the effects of a premarital agreement. Specifically, a married couple may contract that marital rights and obligations of each party and any property of either or both of them whenever or wherever acquired or located; the right to buy, sell, use, or otherwise manage and control property; the disposition of property on separation, marriage, death; the modification or elimination of spousal support; the making of a Will, Trust, or other arrangement to carry out the agreement; and including almost any other matter.
A premarital agreement is a written agreement made between prospective spouses in contemplation of marriage to be effective on marriage. This agreement is essentially a contract executed by a couple prior to their marriage that address the rights and obligations of the parties in property they own, property they will acquire in the future, and the disposition of property on death or divorce.
Post-marital agreements are written agreements made between spouses allowing them to accomplish many of the same goals as premarital agreements, but are executed during the marriage. These agreements allow a married couple to create rules to govern their property that may be different than the rules in the Texas Family Code and the Texas Constitution. These agreements are sometimes used by spouses to partition and exchange community property into separate property or, conversely, separate property into community property. Spouses can also settle property issues through a post-nuptial agreement instead of a separation agreement.
A valid premarital or post-marital agreement can contractually eliminate the creation of community property by legally partitioning property to each spouse as it is acquired thereby eliminating disputes over division of assets in the event of a divorce. In addition to issues relating to potential divorce, parties can include provisions for support of a spouse and confirmation of last wills and testaments of spouses in premarital or post marital agreements.
Marital property agreements also can help spouses and their family members avoid controversy by clearly establishing the character of property in advance as well as delineating each spouse's priorities before they become issues. These types of agreements can preserve pre-marriage residences and other property, set aside future income as separate property, provide for spousal support, eliminate alimony and avoid other financial claims, and allocate the obligation to satisfy certain debts, including tax liabilities.
Partition or exchange agreements
Another agreement frequently entered into between spouses is an agreement to partition or exchange community property. One article of community property may be partitioned by written agreement so that each spouse owns a fraction of that property as his or her own separate property.
A partition does not have to be into equal shares. Further, spouses may exchange their community property interests in different assets in order to make one of the assets the separate property of one spouse and another asset the separate property of the other spouse. If real property is involved in either of these types of agreements, the ownership status must be recorded in the deed records in the county in which the property is located.
In some situations, it may make sense for persons who are cohabitating to enter into a cohabitation agreement. The Texas Family Code does not provide for non-marital cohabitation agreements. Nonetheless, like most marital property agreements, a non-marital conjugal cohabitation agreement is governed by contract law. However, cohabitation agreements are not enforceable unless the agreement is in writing and signed by the person to be charged with the agreement.