A Prenuptial Agreement is a contract prepared for a couple that is about to get married. It outlines each individual’s assets and details how property will be separated in the event of a divorce. This may not be the most romantic of topics, but in this day and age many see it as a necessity.
You may have heard that Texas is a community property state, but do you really know what that means? Essentially, everything earned during the marriage is considered community property (including your salary) and each spouse is entitled to half of the property. For example, if one spouse has a job earning $100,000 per year and the other spouse is a stay-at-home parent – under Texas law each spouse earns $50,000 per year. Since income is community property, anything purchased with your earnings is also considered community property including stocks, bonds, cds, retirement plans, rental properties, etc.
By having a prenuptial agreement, a couple can agree to keep some assets classified as separate property in the event of a divorce. This can preserve your financial health should your marriage come to an end. To have a valid prenuptial agreement, there are certain steps that must be followed.
- You should discuss prenuptial agreements early in the relationship – some would say, even before you are engaged. Letting a potential spouse know how you feel about this topic lets them know that you are conscience of your financial health and should open the door to other discussions about how finances will be handled during the marriage.
- Honesty is a key component to a valid prenuptial agreement. Both parties must disclose all property and assets they own in an inventory & appraisement (I&A). It is also a good idea to see each other’s credit report to verify that nothing has been overlooked. If assets are purposely left off of the I&A in an attempt to hide or defraud the other spouse, this could invalidate your agreement. There must be full disclosure for a prenuptial agreement to stand up in Court.
- To guard against the appearance of undue influence or any conflicts of interest, it is best if each party has their own attorney review the document before signing. Having your own private attorney allows all legal questions to be answered openly and honestly and ensures that each person’s interest are protected to their satisfaction.
- To guard against the appearance of coercion, the prenuptial agreement should be signed well in advance of the wedding date. I generally tell couples to use the date the invitations will be mailed out as a guideline. You should meet with your attorneys 4-6 weeks prior to mailing out wedding invitations to begin drafting the terms of the agreement. The agreement should be finalized and signed one week prior to the date you are mailing out invitations at the latest. This gives the couple adequate time to review the terms, consider the implications, and back out of the wedding or agreement if they feel the need to.
Timing is crucial when considering a prenuptial agreement. If the topic is first brought up mere weeks before the wedding, the spouse who is being surprised with the idea can successfully argue that they signed the prenuptial agreement under duress because they didn’t want to suffer the embarrassment and expense of calling off a wedding mere days before the scheduled event. Weddings take a lot of time, energy, and money. There are non-refundable deposits, family members often have to make travel arrangements, decorations and dresses have to be bought or made, and the stress-level in planning all the details is extremely high. It is unfair, as well as unethical, to “surprise” your future spouse by waiting until the last minute to bring up the topic of a prenup. Judges will usually rule an agreement invalid under these circumstances.
Everyone wants to believe they will have a long, happy marriage, but not planning for divorce could have severe consequences. Many adults find themselves living with their parents after going through a divorce. Statistics show that divorced women with children are 4 times more likely than married women to be at or below the poverty line. With less than 60% of married couples making it to their 15 year anniversary, it is critical that you protect your financial future. If you are contemplating marriage and would like more information on Community Property laws or prenuptial agreements, feel free to call The Gilkes Law Firm. We’re here to help.
