by Houston Divorce Attorney Sam M. “Trey” Yates, III
Last week, we discussed Texas separate property agreements vs. Texas community property agreements as defined by the State of Texas. One of the main reasons a married couple would want to clearly define whether an asset is community or separate property is to protect it from the claims of possible creditors. Another reason a couple might want to characterize marital property is to determine how it will be divided upon divorce or death.
In a divorce, the court will order a “just and right” division of the couple’s community property. This means that a party is not automatically entitled to an even split of the community estate nor is a court ever allowed to award one spouse’s separate property to the other spouse. The judge must award the separate property to the spouse who owns it, which means that a party must prove something is separate property to place it out of the judge’s reach in a divorce case.
When a married person dies, 50 percent of the community property is owned by the surviving spouse, which means the will of the deceased person conveys only the 50 percent he or she owned. On the other hand, the will conveys 100 percent of the separate property owned by the deceased because the surviving spouse does not have any ownership in those items.
Marital property agreements include premarital agreements, post-marital agreements, partition or exchange agreements, and co-habitation agreements.
Marital Property Agreements
Marital property agreements provide a way for married couples in Texas to bypass the rules of characterization. The primary purpose of a marital property agreement is to define what will be community and what will be separate property during the marriage.
The agreement can provide that income from separate property will remain separate property. The agreement can govern the disposition of property on separation, divorce, or death. Furthermore, the agreement can waive any homestead allowance, personal property set aside, and family allowance to which a spouse may be entitled.
Texas courts have taken the position in recent years that they will uphold the enforcement of marital property agreements and there are very few exceptions where a party can avoid the effects of a premarital agreement. Specifically, the parties to a marital property agreement may contract with respect to the rights and obligations of each party and any property of either or both of them whenever or wherever acquired or located; the right to buy, sell, use, or otherwise manage and control property; the disposition of property on separation, marriage, death; the modification or elimination of spousal support; the making of a Will, Trust, or other arrangement to carry out the agreement; and including almost any other matter.
A premarital agreement is a written agreement made between prospective spouses in contemplation of marriage to be effective on marriage. A premarital agreement is a contract executed by a couple prior to their marriage that address the rights and obligations of the parties in property they own, property they will acquire in the future, and the disposition of property on death or divorce.
Post-marital agreements allow spouses to accomplish many of the same goals as premarital agreements, but are executed during the marriage. A post-marital agreement is a written agreement made between spouses. It allows a married couple to create rules to govern their property that are different than the rules in the Texas Family Code and the Texas Constitution. These sorts of agreements are sometimes used by spouses to partition and exchange community property into separate property or, conversely, separate property into community property. Spouses can also settle property issues through a post-nuptial agreement instead of a separation agreement.
A valid premarital or post-marital agreement can contractually eliminate the creation of community property by legally partitioning property to each spouse as it is acquired thereby eliminating disputes over division of assets in the event of a divorce.
In addition to issues relating to potential divorce, parties can include provisions for support of a spouse and confirmation of last wills and testaments of spouses in premarital or post marital agreements.
Additionally, a marital property agreement can help spouses and their family members avoid controversy by clearly establishing the character of property in advance as well as delineating each spouse’s priorities before they become issues. These types of agreements can preserve pre-marriage residences and other property, set aside future income as separate property, provide for spousal support, eliminate alimony and avoid other financial claims, and allocate the obligation to satisfy certain debts, including tax liabilities.
Partition or Exchange Agreements
Another agreement frequently entered into between spouses is an agreement to partition or exchange community property. One article of community property may be partitioned by written agreement so that each spouse owns a fraction of that property as his or her own separate property.
A partition does not have to be into equal shares. Further, spouses may exchange their community property interests in different assets in order to make one of the assets the separate property of one spouse and another asset the separate property of the other spouse. If real property is involved in either of these types of agreements, the ownership status must be recorded in the deed records in the county in which the property is located.
The Texas Family Code does not provide for non-marital cohabitation agreements. Nonetheless, like most marital property agreements, a non-marital conjugal cohabitation agreement is governed by contract law, and is not enforceable unless the agreement is in writing and signed by the person to be charged with the agreement. In some instances, it may make sense for persons who are cohabitating to enter into such an agreement.
Many times prospective spouses have substantial assets, children from other marriages, partnership or business agreements, or other reasons why they believe it is important, before marriage, to enter into a marital property agreement defining the respective rights and obligations of each party. In many circumstances, these agreements help preserve and protect the parties’ estates, reduce future litigation and expense, and can be beneficial for both parties.
All marital property agreements, whether pre or post marriage, have significant legal impact and should be reviewed carefully by an attorney. Martial property agreements require complete disclosure of information and have rigid statutory requirements to ensure that the parties fully understand the legal effect of signing the agreement.
At the Law Office of Sam M. (Trey) Yates, III, P.C., our divorce lawyer in Houston helps to assist clients through the creation of marital property agreements. Each property agreement is unique and must be tailored to meet the requirements and circumstances of the particular individual. This includes their economic status, their goals and whether they are bringing children from a prior relationship into the new marriage.
Sam M. “Trey” Yates, III is a Houston-based Board Certified Family Law Attorney and creator of The Guide to Good Divorce seminars for women. If you have questions about your Houston divorce, please contact The Law Office of Sam M. “Trey” Yates, III, P.C. for a consultation.