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.

Using Social Media as Evidence in a Divorce – What you can and can’t do.

By | Custody and Conservatorship, Divorce, Just and Right, Marital Property Division, Trial Issues

Spouse is cheating, doing drugs, being a bad parent and Facebook can prove it right? All you need is for your lawyer to show the judge. Right?

There are 845 million monthly active users of Facebook and each profile has 40 potential entries of personal information. It goes without saying that a party’s activity on social media sites could be a lightning rod in a family law matter. Case in point: Anthony Weiner’s pictures on Twitter could have affected a would-be divorce brought by his pregnant wife.

Unlike financial records, where information reflecting detailed transaction activity over decades can be discovered via a subpoena, social media and networking sites are protected by federal law from forced disclosure.

Federal law prohibits electronic communication services from disclosing “contents of a communication while in electronic storage by that service” and prohibits remote computing services from disclosing “the contents of any communication which is carried or maintained on that service.” 18 USC § 2702.

Courts have interpreted the meaning of “electronic communication services” and “remote computing services” to include Facebook, Myspace, Twitter and Linkedln as well as email providers such as Gmail, Yahoo and Hotmail. Therefore, you can subpoena the records until you are blue in the face, but they are not required to produce anything more than basic information. Even if it were possible, it would be the most expensive route because many of these companies are out of state and a subpoena wouldn’t be considered until the lawsuit is domesticated.

Fear not, there may be another way.

A court in Connecticut recently and quite boldly ordered divorcing parties to exchange Facebook and dating site login and passwords. Although Texas doesn’t have any reported cases involving this kind of exchange, it is within the realm of possibility considering applicable discovery rules.

A party in a Texas lawsuit is entitled to discovery of non-privileged information that is relevant to the subject matter of the case. Even if the information would not be admissible at trial, it may be discovered if it appears reasonably calculated to lead to the discovery of admissible evidence. Tex. R. Civ. P. § 192.3(a). For more information on discovery, refer to my blog: Finding Hidden Assets in a Divorce.

In the divorce or custody context, this means information relating to fault in the marriage, parenting, child support and everything in between could lead to the discovery of admissible evidence. Content on Myspace or Facebook depicting you behaving like a single person is likely to lead to admissible evidence that you committed adultery. Match.com or eHarmony is a little more obvious. A statement regarding drug use is likely to lead to admissible evidence that you do not have a stable home environment for your children. Therefore, a strong argument can be made that content on social media sites are relevant and in fact valuable in proving your case.

“If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.” Eric Schmidt, CEO of Google 2001-2011.

The best way to discover social media activity is to request it through discovery from the party who controls the account. As you can imagine, your spouse may object and do whatever is necessary to prevent the disclosure of the so-called “private” posts and communications. The privacy argument has been heavily debated but ultimately, the argument is weak in light of how slight the expectation of privacy is on these sites.

There are no bright line rules or tests in Texas that will guarantee you can force disclosure or prevent it. The argument to force disclosure is strengthened by the connection it has to subject matter in the case. It is weakened if there are other means to get the information or if it is out of scope, unduly burdensome or not likely to lead to the discovery of admissible evidence.

Facebook has made it somewhat easier to discover this information by allowing users to download a copy of all their facebook data online. Myspace will allow the production of data with the consent of the account holder. As it gets easier to produce the information, courts may be more inclined to order its production.

Unfortunately, it doesn’t appear that there is a solution to discovering deleted posts so it’s worth hitting the print button on posts you foresee being useful down the road. In situations where crucial information may have been deleted by the user, it may be possible to have a forensic exam of the party’s hard drive.

As always, the analysis will turn on the specific facts of each case and court. Check back for more information as case law in Texas develops.