Four Women Who Need a Pre-Nup in Texas

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

1. The Business Owner. A properly created business has exhaustive company agreements, succession planning and creditor protection. Unless you have every confidence in your documents, you may want to consider a pre-nup to set up agreements between you and your spouse. I see many family-owned businesses severely disrupted by divorce, especially by the temporary orders phase. Image a couple in crises and both spouses are signatories on the company checking account. Perhaps each believes he/she runs the business and should be able to continue to run it exclusive to the other spouse. Where does a court begin to do what’s in the marital estate’s best interest? It is much easier on the Court if there is an agreement in place.

2. The Second Wife and Step-Mother. The reason wife No. 2 needs a pre-nup has everything to do with the probate code. When a spouse dies without a will and has children from a different marriage, Texas law requires that the majority of the estate goes to the deceased’s children. This is a huge problem for second wives.

Imagine a second wife who has young children being left with almost nothing. She will have her community interest in property earned or acquired during the marriage except for property her husband inherited, but that’s it.

A pre-nup can avoid this problem in two ways. One, a pre-nup can provide for trusts, bequests and contingent awards in a highly tailored manner. Typically, these provisions satisfy the needs of children from prior marriages as well as the spouse and children from the second marriage. Because a pre-nup is created before marriage, it provides answers to these issues before the challenges of marriage influence decisions. Secondly, a carefully drafted pre-nup can trump a will that leaves out a spouse. Yes, that’s right. Spouses do not have to leave their estate to their surviving spouse unless they have a pre-nup.

3. The Stay-At-Home Mom. As you may have read in previous articles, a stay-at-home mom is the most common penniless woman in the family courthouse. If the plan is for you to stay at home — the flexible one, the one who doesn’t climb the corporate ladder and so on — you won’t have much of a launching pad for a career should you divorce or your spouse pass away.

There isn’t a way to provide for a launching pad in divorce, but you could at least ask for yearly retirement savings in the likely amount you would have earned had your career not been the priority. For example, if you leave your advertising job of $80,000 per year to raise children by your never-home regional manager husband, consider asking for him to agree that the family will deposit 10 percent of your forgone salary into a retirement vehicle that would be considered your separate property upon divorce or death. Your resume may not be prepared, but at least you wouldn’t have to start all over on retirement planning.

4. The young (and dumb). Please do not take offense. I say young and dumb because undisclosed credit card debt is a very big and growing problem. Refinancing, consolidating, co-signing … can be very confusing and often misleading to the young and in love. A key element to pre-nups is that they require full disclosure of assets and liabilities. Younger people simply do not have the skills to confirm the credit worthiness of their fiancé. I suppose a good liar would also lie about their liabilities before marriage, but at least with the majority of people, a meaningful conversation can be started about debt, who is paying for it and how to get out of it.

Pre-Nup Agreement Invalidated in Dallas as Involuntary

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

The 5th District Court of Appeals in Dallas upheld a trial court’s finding that a pre-marital agreement was invalid and awarded the wife $1.39 million on July 3, 2012. Moore v. Moore, 2012 Tex. App. LEXIS 5290 (Tex. App. Dallas July 3, 2012).

There are many lessons to be learned from the Moore case. For example, don’t say you need a pre-nup because you have a lot of “loans, liens and lawsuits” as Mr. Moore did in this case when in reality he was a millionaire. Also, make sure both parties are represented by good counsel.

In Texas, a pre-nup is not enforceable if the party against whom enforcement is requested proves that he or she did not sign the agreement voluntarily. Tex. Fam. Code § 4.006(a)(1).

The following 4 factors are considered when determining voluntariness in entering a pre-nup: 1. whether a party has had the advice of counsel; 2. misrepresentations made in procuring the agreement; 3. the amount of information provided; and, 4. whether information has been withheld. The court may also hear evidence as to fraud.

That being said, claiming you didn’t know what you were signing when you signed it isn’t enough to invalidate a contract in Texas. In fact, Texas law presumes that a party to a contract knows what he signed, the meaning of what he signed and can comprehend its legal effect. There are a number of exceptions to this principle as demonstrated in the Moore case. Each case is different and there are no bright line rules.

The evidence uncovered at the trial court level in Moore showed the wife signed the pre-nup a few hours before the wedding, that she had been incorrectly informed that it was reviewed and approved by her attorney, that it did not disclose husband’s assets and that it had generally been withheld from her until the morning of her walk down the isle. All of these facts influenced the court in finding that the wife did not sign the pre-nup voluntarily.

According to the Dallas Court, “voluntary” means “an action that is taken intentionally or by the free exercise of one’s will.” While the wife freely signed her name to the pre-nup, it wasn’t enough to make the agreement enforceable in this case with these specific facts. Therefore, the pre-nup was invalidated and the Moore assets were divided up according to “just and right” principles. For more information on “Just and Right“, please follow the link.

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.