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.

Two Regrets of a Divorced Woman

By | Child Support, Community Property, Custody and Conservatorship, Divorce, Marital Property Division, Separate Property

This article was originally published by Plaid for Women https://www.plaidforwomen.com/read-post/two-regrets-of-a-divorced-woman/

The Family Courthouse is paved with women who claim the system is against them. Many feel that they waited too long and some wish they had tried harder to reconcile. Beyond the emotional wasteland left by a divorce, a divorced woman has many economical regrets. Here are two I have heard over and over again:

1. That they didn’t stay employed.

Some women report being frustrated that they were not entitled to spousal maintenance or did not get as much as they would have liked. This is especially true for the homemaker, but in our changing society where women are increasingly doing the “bread winning,” it can be true for husbands as well. Texas law allows for monthly spousal maintenance (a/k/a support) up to $5,000 or 20% of an ex-spouse’s gross income, whichever is lower, if a spouse can prove that she “lacks sufficient property including the spouse’s separate property, on dissolution of the marriage to provide for the spouse’s minimum reasonable needs” among other elements. Please refer to Texas Family Code Chapter 8 for the entire law which contains other elements and factors not addressed here.

Flushing out what “lacking sufficient property” actually means is difficult. Case law demonstrates that Courts look to a variety of factors including, the community property award in the divorce and the spouses education, separate property, health, employment experience and business opportunities. There is no formula such as monthly expenses are $3,000 therefor the spouse is awarded $3,000. It’s much broader than that.

The practical application of this law makes spousal maintenance quite difficult to obtain. One, the ex-spouse may not have sufficient income to pay what is needed for the spouse to get by and two, minimum reasonable needs are typically shelter and food, not mani/pedis. Much to the disappointment of many women, the standard is not to keep the divorced spouse’s lifestyle the same as her married lifestyle.

A common example would be a spouse married to a hard working executive who chooses to stay home because it’s hard enough on the family that one parent is gone all the time. The hard working executive works too hard and picks up a nasty addiction to alcohol. The alcohol abuse leads to the couple’s cash reserves being used up for rehab, disability, therapy and suddenly, when the alcoholism finally destroys the relationship, the money is gone. Now, homemaking spouse is unemployed with a ton of bills and the hard working spouse is no longer employed at the rate he was. Her best asset is now her resilience, from which she has to dig deep to find and use to fuel moving on.

On the flip side but on the same side of the coin, had the homemaking spouse stayed employed, she would at least have somewhere to start. Any place other than unemployed and broke is better than that. True, a spouse with some employment opportunity would be less eligible for spousal maintenance but at least she would have a paycheck rather than being subject to the court’s wide-ranging discretion. It can take months before spousal maintenance is ordered by the court and actually paid by the spouse. A judge can only enter orders and enforce them. She cannot babysit the parties to make sure it gets done. And can you hear the “cha-ching”? Every time a lawyer has to go back to court for something, it costs.

2. That they kept documents.

The way assets and debts are awarded in divorce requires some level of proof as to the asset or debt’s status. How do you prove you used your inheritance to buy the house if you don’t have any records? How do you show that you funded your 401(k) for years prior to marriage? How much cash does a spouse earn under the table? How many credit cards and lines of credit are out there? The dining furniture was a gift to both of you right?

Keeping original documents regarding important transactions are important for many reasons, too many of which to cover in this article. I will discuss two. One, having documents is important to show when property or debt is separate since the law presumes all property and debt owned by either party belongs to the community. In order to overcome that presumption, a party must submit proof that a particular asset or debt is separate property. Separate property is acquired before marriage, by gift or by inheritance. Proof is usually in the form of bank accounts, check stubs, contracts, paychecks, letters, titles and so forth. Who keeps up with that stuff? Not everyone, but the divorced spouse wishes she had.

Secondly, keeping original documents is important to show the current status of income, debt and other property rights. For example, wife swears husband got a $50,000 bonus and bought a sports car for his girlfriend in her name with the cash. This stuff happens people. I know you know it does. Continuing on, the company that bonused him is now out of business and the $300 an hour lawyer can’t subpoena documents to prove the bonus ever existed. This leads to another topic for another day. Stay involved in the finances. This scenario can be a huge waste of time and money for everyone to prove either the existence of a lie or to disprove a wild allegation impossible to disprove because it never happened.

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.

Finding Hidden Assets in a Divorce

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

In order to effect a just and right distribution of the martial assets, it necessarily follows that the first step is to find all the assets and debts. A divorce lawsuit has the same tools any other commercial lawsuit would have when it comes to finding assets belonging to your spouse or to the community.

There are four basic tools to finding assets: inventories, written discovery, oral discovery and third party discovery.

Each party typically discloses assets and liabilities in an inventory which commonly initiates the exchange of financial information. Inventories list common assets such as real estate, securities, an other interests as well as debts such as mortgages, credit cards and personal loans. They are typically filled out by each party under oath and then exchanged between the parties or their attorneys.

Written discovery is a useful tool for seeking more detailed information regarding assets and debts. Written discovery is comprised of interrogatory requests, production requests, requests for admission and requests for disclosure.

Interrogatories are questions asked of opposing parties that require answers under oath. For example a common interrogatory is, “Please list each and every bank account in which you or your spouse owns an interest.” The responding party is obligated to disclose each bank account in response to this question.

Requests for production often seek corresponding documents to interrogatory responses. For example, a common request for production is, “Please produce bank statements for the preceding 3 years from each account your claim separate property is held.” Requests for production can also include a request for inspection, which could be used to inspect a hard drive or books and records.

Requests for admissions are questions that would typically require a yes or no answer. Although not as popular as other requests, they can be valuable in narrowing the issues. An example of a request for admission is, “Admit or deny that the account ending in 123 is comprised of separate property funds belonging to wife.”

A request for disclosure is a standard set of requests that seek information regarding parties with knowledge of relevant facts, the amount in controversy as well as identification of experts among other essential issues in every lawsuit.

In deserving situations, phones and computers could be required to be produced to conduct forensic discovery on the hard drive. Electronic discovery is expensive as is any other situation in which an expert is needed to analyze data. In more and more situations, the expense is justified.

Discovery is permitted from third parties just as it is from parties in the case and is especially valuable if a party is not forthcoming in the discovery process. For example, the power of subpoena can require a bank, employer, partnership or any entity or person with information pertaining to the debts and assets in a case to produce documents or sit for a deposition.

Oral discovery a/k/a deposition discovery can be used to elicit testimony from a party or any other person or entity that may have information pertaining to the proceedings. A deposition is similar to the questioning one might have at trial except that it is typically performed in an attorney’s office, in front of a court reporter and or videographer. The testimony is still under oath the same as if it was in front of the court and can be used as evidence at trial. A deposition could be used in situations where interrogatories are not sufficient for determining the factual complexities of the issues. For example, if a spouse has a complicated partnership interest and more information is needed to explain partnership documents, a party can take the partner’s deposition to resolve the complexities.