Beyond Emotions: The Upside of Premarital Agreements

Over the past 37 years, Connatser Family Law attorney Doug Harrison has helped hundreds of clients negotiate premarital agreements. We asked Doug to share some insight on the upside of premarital agreements, which can rattle emotions for some couples.

Very seldom do couples come into a marriage with an equal set of assets, income earning abilities, job skills or potential inheritances – sometimes, but not often.

That imbalance can create roadblocks for couples trying to negotiate and sign a premarital agreement or prenup.

In addition, many young couples marrying for the first time find it difficult to wrap their arms around the concept of a premarital agreement. This is especially true for couples entering a relationship with minimal assets on the date of their marriage but with a promise for much financial growth in the future.

The process can be extremely emotional for some couples, too. One party may fear that his or her future partner lacks love or trust or believes the party is marrying him or her for financial gain. While these concerns may be valid in some cases, many clients – and their partners – find that premarital agreements bring peace of mind for both sides. Why? Premarital agreements can help some couples “get on the same page” regarding their finances and avoid future disagreements about money by clarifying financial goals and terms.

In fact, most family counselors I know say couples that talk about and enter into financial agreements before marriage typically end up having more successful marriages than those that do not.

The collaborative approach can help marriages gain a strong foothold early on

I often encourage clients to take the collaborative approach when negotiating premarital agreements. This approach enables the couple to sit down together, along with their respective collaborative attorneys, and talk about each party’s interests, goals and expectations for their marriage – both financially and otherwise.

During the negotiating process, the respective sides can work through how to meet each party’s needs satisfactorily. Another benefit of the collaborative approach is couples can quickly find out if they are on financial parity with one another or not and whether they can communicate about core features of married life.

Five benefits of premarital agreements in Texas

In 1980, Texas voters approved an amendment to the Texas Constitution that for the first time in Texas history allowed parties to “partition and exchange” prospective income from separate property, as well as salary and wages, and other forms of income to be acquired in the future. This constitutional amendment allowed persons who were contemplating marriage to enter into prenups that were more comprehensive than ever before, because the parties could provide for the characterization, as separate or community, of property to be acquired in the future.

Texas couples commonly use premarital agreements to:

1). Protect family wealth.

Even if a couple enters a marriage with few assets, one of the parties may have parents with considerable wealth, and that wealth will eventually go downstream. It’s not uncommon for wealthy parents to insist their son or daughter enter into a prenup or risk having their future inheritances restricted by trust or other protective provisions.

2). Protect assets from trusts and family limited partnerships.

In Texas, asset distributions from trusts and family limited partnerships may be considered community property (property divided between the two parties upon divorce). This can lead to a comingled mess when couples divorce. With a premarital agreement, parties can agree to treat those distributions as separate property instead and eliminate the risk of such distributions being considered community property.

Learn more about protecting family businesses in this helpful post on business prenups.

3). Avoid paperwork and tracing hassles related to separate property.

In Texas, separate property – the property each individual brings into the marriage or receives as an inheritance or gift during marriage – remains the individual’s separate property following divorce. A premarital agreement can help ensure any income derived from that separate property is not considered community property.

Without taking this step, couples will need to trace the income from that property, so the proceeds can be accounted for during a divorce. This process can be tedious, expensive, difficult and time-consuming, especially for couples that have been married for several years.

4). Spell out what happens to the family home upon divorce.

Most people want to own an interest in the home in which they live. However, if one of the parties owned the family home prior to the marriage, he or she may not want to divide the value of the home 50-50 should the couple divorce.

With a premarital agreement, the couple can clarify what interest in the home each spouse would receive and who would occupy the home upon divorce.

5). Completely remove themselves from the community property system.

In Texas, couples can agree that any salaries, wages and retirement benefits, as well as the earnings and income from separate property, remain or become separate property. However, the decision to go this route can have far-reaching ramifications, especially for a couple married for many years, where one party is left with little to no money for retirement.

Also, in 1997, Texas adopted the Uniform Premarital Agreement Act, which has further broadened the scope of premarital agreements, so long as the agreement is not in violation of public policy or a statute imposing a criminal penalty.

These are but a few of the many concerns that can be covered in a prenup in Texas. To find out how you and your spouse can reduce financial stress and find peace of mind with a premarital agreement, contact a reputable family law attorney near you.

Douglas A. Harrison is a veteran family lawyer known throughout Texas for his expert handling of complex business and property claims in divorce. To learn more about premarital, postmarital and cohabitation agreements in Dallas and Collin Counties, please call (214) 617-1583 to speak confidentially with a knowledgeable and compassionate member of the Connatser Family Law team.

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