While premarital agreements – or prenups – are common rights of passage for wealthy couples, there are many reasons up-and-coming affluent couples should sign a prenup too. This is especially true for aspiring stay-at-home moms (or “Mister Moms”) who hope to stay home with the kids instead of pursue a career that provides financial independence.
Unfortunately, many couples mistakenly believe a premarital agreement isn’t necessary, because they don’t possess any sizeable assets when they are getting married. According to Connatser Family Law Attorney Abby Gregory, “Failing to plan ahead could cost you dearly. Even if you marry young, before either spouse has acquired any wealth, if your spouse has the potential to earn a sizeable income and you don’t save, you could be left with very little in the event of a divorce.”
Here’s Why …
Most couples don’t enter marriage planning to divorce, but instead, they look to the future with rose-colored glasses.
Consider this common scenario: A young couple expects to kick off married life with few assets (who needs a prenup, right?), a breadwinner husband who has a good college degree and expectations of $75,000 to $100,000 in annual income. The couple plans to start a family, with the wife staying home to raise the kids.
Pan forward a few years … Now the husband’s career has taken off, he’s earning $2 million annually through his growing medical practice, with expectations for higher earnings to come. Meanwhile, the wife is managing the household and shuttling the kids to school, soccer practice, recitals and doctor appointments. Sadly, after several years together, the couple finds they have grown apart and decide to divorce.
Without a prenup, the wife in this scenario could face a significant change to her financial circumstances, not to mention her ability to stay home and raise the kids. “The Texas Family Code has strict guidelines for alimony and child support, which typically don’t favor parents who want to stay home with their children. In addition, many couples rely more on credit and less on saving today, so the assets to be divided are usually not owned free and clear or have very little equity,” Abby says.
Want to Stay Home with the Kids? 3 Reasons You Need a Prenup
If you’re planning a Texas wedding in the near future and are unsure whether a prenup is necessary, think twice. Here are three reasons why:
1. You can’t rely on alimony in Texas.
As Abby explains, “Texas has very limited alimony laws, and the state has strict parameters under which you would qualify for court-ordered alimony. Unless you are unable to provide for your reasonable and necessary means, which essentially means you physically can’t go and get a job, the court won’t award you alimony. If you have a college education and are under age 55 – or often even under retirement age of 65 – the court typically expects you to go back to work.”
2. Child support doesn’t align with the breadwinner’s income in Texas.
In fact, there is a cap on the amount of child support spouses are expected to pay. “Child support is determined by the court, and there are strict guidelines that the Texas Family Court adheres to, except in extreme circumstances. Since there is a child support cap in the state of Texas, someone earning $150,000 is going to pay the same amount of child support as someone earning $2 million.
In addition, the court typically doesn’t care if your daughter needs to continue her pony riding lessons, attend a private school or live in a specific school district. You would need to show she has a some form of learning or physical disability, which requires attendance at a special school to assist her with those learning differences or challenges,” advises Abby.
3. If you don’t ascribe to a saving mentality, community property laws won’t help you.
While Texas is a community property state, if you don’t accumulate any assets or build equity in your home during the marriage, you won’t have anything to split.
According to Abby, “Community property laws were developed to give both spouses a 50 percent interest in the estate. However, we live in such a credit driven society today, where most people, even if they aren’t living paycheck to paycheck, still expend their annual income every year. There isn’t a whole lot of saving going on.
Also, your partner’s future income earnings are not considered community property. If you don’t build equity in your home and no savings or wealth is accumulated during the marriage, you are going to have zero at the end of the day, unless you protect yourself with a prenup.”
Want to learn more about saving and getting your finances in order? Read this earlier post:
Divorce and Taxes: 5 Essential Tips for Avoiding Future Financial Woes
Include Separate Property and an Alimony Package in Your Prenup
“If you want to stay home to raise your kids following divorce, you need to make sure your prenup partitions separate property to you and/or provides for a guaranteed alimony package that is structured to take into account the future earnings of your spouse. Otherwise, if you haven’t saved enough money, you will have to rely on your ability to work to support yourself and the kids,” explains Abby.
Separate property (for the purposes of a prenup) may include retirement accounts, brokerage accounts and/or other assets that are set aside for you regardless of what happens in the divorce and aren’t supposed to be used to support the family.
A guaranteed alimony package awards a set amount of dollars to the stay-at-home mom for a set period of time, which can be a fixed dollar amount or be based on the husband’s expected earnings post-divorce. A premarital agreement can also guarantee who gets the home, as well as who will pay attorneys fees and other expenses in the event of divorce.
“While no bride wants to think about divorce when she’s walking down the aisle, if being a stay-at-home mom is your dream, a reputable Texas family law attorney can educate you about the options available to protect that dream in the event of divorce,” advises Abby.