PRENUPTIAL AND PARTITION AGREEMENTS 

What is Community or Separate Property

Before we talk about premarital agreements it helps to review what is separate and community property.  When a couple marries, there is a presumption that everything they own is community property and that they each own an undivided ½ interest in that property.  However, that is not strictly true.  A spouse’s separate property consists of the property owned or claimed by the spouse before marriage; the property acquired by the spouse during the marriage by gift, devise, or descent; and  the recovery for personal injuries sustained by the spouse during the marriage, except any recovery for loss of earning capacity during marriage.

After marriage, trying to prove what is separate or community property becomes difficult and the longer the couple is married, the harder it is to resurrect the records that might prove it one way or the other.  Therefore, the way to solve this dilemma is to sign an agreement identifying everything each person is bringing into the marriage and agreeing on what is going to happen after the couple are married. 

The Texas Family Code recognizes three kinds of marital agreements:

a. Premarital Agreements
b. Partition or Exchange Agreements
c. Agreements to convert separate property to community property

Premarital Agreements

            Before a couple marries they can sign a premarital agreement that covers, among other things:

a. Whether they will have anything they acquire after they marry will be community property;
b. Whether the growth or income from separate property will be community property;
c. What happens in case of death or divorce;
d. Whether there will be alimony;
e. Will there be a joint bank account for every day living expenses.

Any agreement regarding custody or child support will probably not be enforceable because the court reserves the right to decide what is in the best interests of the children. 

Enforceability of Premarital Agreements

The Texas Family Code says that for a Premarital Agreement to be enforceable it must be:

a. in writing;
b. signed by both parties voluntarily;
c. was not unconscionable (unfair, excessive or unreasonable);
d. and before signing the agreement, the party:
 
- was provided a fair and reasonable disclosure of the other party’s property and financial obligations; and
- did not voluntarily waive in writing the right to a full disclosure; and
- had or could have had adequate knowledge of the other party’s property and financial obligations.

Partition or Exchange Agreements

After a couple are married, at any time they can sign an agreement to partition or exchange property or financial obligations.  A partition or exchange agreement is basically the same as a premarital agreement and the decisions are the same. 

Agreements to Convert Separate Property to Community Property

A couple may sign an agreement to convert separate property to community property if they execute the agreement voluntarily and if they receive a fair and reasonable disclosure of the legal effect of converting the property to community property.

An agreement that contains the following statement, or substantially similar words, prominently displayed in boldfaced type, capital letters, or underlined, is rebuttably presumed to provide a fair and reasonable disclosure of the legal effect of converting property to community property: 

“THIS INSTRUMENT CHANGES SEPARATE PROPERTY TO COMMUNITY PROPERTY. THIS MAY HAVE ADVERSE CONSEQUENCES DURING MARRIAGE AND ON TERMINATION OF THE MARRIAGE BY DEATH OR DIVORCE.

 

FOR EXAMPLE: 

 “EXPOSURE TO CREDITORS. IF YOU SIGN THIS AGREEMENT, ALL OR PART OF THE SEPARATE PROPERTY BEING CONVERTED TO COMMUNITY PROPERTY MAY BECOME SUBJECT TO THE LIABILITIES OF YOUR SPOUSE. IF YOU DO NOT SIGN THIS AGREEMENT, YOUR SEPARATE PROPERTY IS GENERALLY NOT SUBJECT TO THE LIABILITIES OF YOUR SPOUSE UNLESS YOU ARE PERSONALLY LIABLE UNDER ANOTHER RULE OF LAW.   

“LOSS OF MANAGEMENT RIGHTS. IF YOU SIGN THIS AGREEMENT, ALL OR PART OF THE SEPARATE PROPERTY BEING CONVERTED TO COMMUNITY PROPERTY MAY BECOME SUBJECT TO EITHER THE JOINT MANAGEMENT, CONTROL, AND DISPOSITION OF YOU AND YOUR SPOUSE OR THE SOLE

MANAGEMENT, CONTROL, AND DISPOSITION OF YOUR SPOUSE ALONE. IN THAT EVENT, YOU WILL LOSE YOUR MANAGEMENT RIGHTS OVER THE PROPERTY. IF YOU DO NOT SIGN THIS AGREEMENT, YOU WILL GENERALLY RETAIN THOSE RIGHTS. 

“LOSS OF PROPERTY OWNERSHIP. IF YOU SIGN THIS AGREEMENT AND YOUR MARRIAGE IS SUBSEQUENTLY TERMINATED BY THE DEATH OF EITHER SPOUSE OR BY DIVORCE, ALL OR PART OF THE SEPARATE PROPERTY BEING CONVERTED TO COMMUNITY PROPERTY MAY BECOME THE SOLE

PROPERTY OF YOUR SPOUSE OR YOUR SPOUSE’S HEIRS. IF YOU DO NOT SIGN THIS AGREEMENT, YOU GENERALLY CANNOT BE DEPRIVED OF OWNERSHIP OF YOUR SEPARATE PROPERTY ON TERMINATION OF YOUR MARRIAGE, WHETHER BY DEATH OR DIVORCE.”