What can a pre-marital agreement do for me?

By | Community Property, Divorce, Marital Property Division, Pre-Marital Agreements, Separate Property

I can’t resist commenting on the recent drama with Weiner, Schwarzenegger and Edwards. Could a carefully crafted pre-martial agreement have reduced the likely fallout? Pre-marital agreements, by definition, prepare for the unexpected. No one ever thinks they will divorce when they get married. But most intelligent people know life is hard and it’s reasonable to expect the unexpected. Whether or not “love children” are reasonable to expect is a different question.

Without a pre-marital agreement, Texas courts typically order a fifty-fifty community property division. Fifty-fifty seems presumptively fair except no two divorces are alike and often times people make disproportionate amounts of money, incur different amounts of debt and make different career sacrifices for their family. And sometimes a spouse has independently caused the break-up of the marriage. I’ve heard rumors that Michael Douglas and Katherine Zeta-Jones have a pre-marital agreement that provides for a disproportionate share of their estate to be awarded in the event of infidelity.

With the rise of second marriages and children having more than one parent, it seems that pre-marital agreements should be standard and not just divorce planning for the rich. If your career suffers so that you can raise your spouse’s children, is your spouse going to provide for your children in their will? If your spouse has a significant amount of separate property and you are married for twenty years, shouldn’t some of that separate property be re-characterized as community property? If you and your spouse have agreed to go to counseling before filing for divorce, why not put that in writing?

There are so many options for tailoring a pre-martial agreement to you and your spouse’s specific needs. The only major exception is that you cannot eliminate the need for child support in a pre-marital agreement. Otherwise, if you and your fiancé have any important agreements on how your marriage will function, consider speaking with your attorney about a pre-marital agreement.

Common Law Marriage is Like a Tattoo

By | Community Property, Divorce, Just and Right, Marital Property Division

Common law marriage is like a tattoo: easy to get, impossible to get off. Okay, maybe not impossible but you get the point. There are only three requirements to having a common law marriage in Texas. You must live together, you must have an agreement to be married and you must “hold out” as husband and wife. The “holding out” requirement is a legal term encompassing many factors that generally show the court you behave like a married couple. To get a tattoo, I think you have to be of age and probably under the influence.

As easy as it is to meet these general requirements, especially relative to the cost and time involved in a formal wedding, proving them can cause all kinds of problems in a divorce. And for those that are lucky enough to pass away married, there can also be problems proving the marriage existed in probate court.

The problems are in proving the three subjective and fact intensive requirements. There is no exonerating DNA-like test in this regard. Living together is relatively easy to prove under normal circumstances, but what about the requirement to have an agreement to be married? To prove this, a party must show that they intended to have a present, immediate, and permanent marital relationship. People are living together more and more and behaving like married people but that doesn’t necessarily mean they have agreed to be husband and wife permanently. As Dr. Laura would say, you need a ring and a date. On the other hand, a ring and a date evidencing an engagement could defeat the agreement requirement as the definition of engagement admits the parties are not yet married.

Convincing the court that the parties “held out” as husband and wife could also be difficult. For example, if the parties don’t refer to each other as husband and wife in public, don’t file joint tax returns, or don’t list each other as spouses in medical or legal documents, this requirement could be defeated. But if they owned real property and debt jointly as husband and wife, then they might have a chance of proving the “holding out” requirement.

The hard to get off part is the fact that once common law marriage is proved, it is just as difficult to divorce as it is when you have a formal wedding, if not more difficult. If the court finds your relationship met the three requirements, your assets and debts will be divided in a just and right manner. Most people consider this scenario to generally mean your assets and debts could be split 50/50 but this is not necessarily the case. See my blog “5 Factors Affecting the Just and Right Distribution”. For these reasons, common law marriage should not be entered into lightly.

5 Factors Affecting the “Just and Right” Distribution

By | Community Property, Just and Right, Marital Property Division, Separate Property

A court’s guiding principle in dividing community property in a divorce is based upon the “just and right” standard. Although each spouse has an equal interest in community property, the division won’t necessarily be fifty-fifty. Here is a list of 5 factors that can affect the court’s award of community property.

1. Who has the children? Do the children have particular or expensive needs that would justify awarding one spouse more property due to the increased need at home?

2. Education and Employability? Will one spouse have to start over because he put the other through graduate school while neglecting his own career?

3. Separate Property? If one spouse inherited enough for a lifetime, a court could award the other spouse a disproportionate share of the community.

4. Fraud. If a spouse lent money to his girlfriend during the marriage, an argument could be made that he is entitled to less because of the fraud.

5. Age. Is one spouse going to live a lot longer? Maybe Ashton Kutcher could make the argument that he will live longer and need more assets.

General Separate and Community Property Concepts

By | Community Property, Just and Right, Marital Property Division, Separate Property

The difference between community and separate property is too complex and multifaceted to explain in one article. The purpose of this article is to summarize the general concepts regarding marital property and to address some common misunderstandings.

The reason why it’s important to have a good general understanding of marital property issues is because community property can be divided up by a divorce court while separate property can not. As a side note, community property will be divided in a “just and right” manner which is not necessarily a fifty-fifty split.

The general rule in Texas (with exceptions) is all property is community property except property acquired before marriage, inherited property or gifts. Easy enough to say the furniture you bought while you were single is your separate property and the house you bought after marriage is community property. But what if you owned a house before marriage and rented it out during marriage? Would you say the rent was community property or separate property?

The answer is the house is separate property but the rental income is community property. This rule is generally true for all property that produced income or a profit except for (among other types) oil and gas well royalty which remains separate.

Other things to keep in mind are assets that are made up of both community and separate property, such as bank accounts and 401ks owned before and during the marriage. The separate property amounts are not commingled to the point of non-existence, but it can be difficult to prove their separate character.

For example, if your bank account balance is $100,000 on the date of divorce, the court will consider all of it community property unless you can “trace” through admissible evidence that the balance before marriage was $60,000. This is most commonly done through showing detailed account records which sounds easy but can be difficult for spouses who have been married for decades. If the property can’t be traced, then the $100,000 will be divided up by the court whereas, if the $60,000 can be traced by “clear and convincing” evidence, then the court will only divide up $40,000 of the bank account.

Again, whole treatises and libraries have been dedicated to this subject. This article is intended to generally summarize some basic Texas marital property concepts. If the article makes you wonder about your situation, please don’t hesitate to contact me to discuss it further.