My spouse and I never considered getting a “Pre-Nup” – premarital property agreement – nor have we considered getting a “Post-Nup” – marital property agreement entered into during marriage. Thus, I was surprised – and confused – when you said that “every married couple already has a pre-nup, even if they did not want one.” What did you mean by that statement?
When the subject of pre-marital agreements or marital property agreements comes up, many people respond: “I don’t need one. I won’t get divorced and, besides, that’s so ‘unromantic’.” What these individuals may not realize is that they already have a pre-marital (or marital) agreement; that agreement is called, collectively, the marital property laws of the state in which the couple will reside(s).
Conceptually, a pre-marital (or marital) agreement is a vehicle for estate planning during life, much like a Last Will and Testament is a vehicle for estate planning after death. In both cases, state laws dictate what will become of your property upon the occurrence of a certain event if you have failed to do your own planning prior to the occurrence of that event. Collectively, we can refer to these types of state laws as the government’s plan for your estate. The estate plan that the government has legislated for you – the plan which is effective upon your marriage and the plan that becomes effective upon your death – both have provisions which allow you to “opt-out.”
The benefits of estate planning for after death are fairly well-known. Most people understand that if they pass without a Last Will and Testament (or other type of estate plan), their property will be distributed in accordance with the intestacy laws of their state of residence.
Most people also understand that each state has laws concerning the acquisition and division of what is generally known or referred to as marital property. What is less well-known or understood is that, in the United States, there are two basic types, or systems, of marital property law: common law (also known as “equitable distribution”) and community property. Although no two state’s marital property laws are identical, the marital property laws of each state fall – more or less – into one of those two categories.
The marital property laws of common law states operate essentially as follows: property acquired during marriage is NOT automatically classified as marital property; only property that the spouses specifically designate as marital property will be treated as marital property. Upon divorce, a court will divide the couple’s marital property in a manner the court considers “equitable” (or some similar legal term, such as “just and right”). An equitable division essentially means that a divorce court can divide, in almost any manner it pleases, that property which the couple has designated as marital property.
On the other hand, the marital property laws of community property states generally provide that ALL property acquired during marriage (with minor exceptions) is marital property and that upon divorce, marital property is to be divide equally between the spouses, without regard to fault or other non-marital property considerations.
Texas considers itself to be a community property state. Thus, as a general matter, all property acquired by Texas spouses is deemed to be community property. However, unlike under a traditional community property system, Texas law does NOT require an equal division of community property upon divorce. Rather, Texas law for division of community property is modeled more on the common law system of equitable division, and gives Texas divorce court judges very broad discretion to divide marital property in any manner or proportion a court deem “just and right.”
Thus, from the perspective of spouses who would rather do their own marital property estate planning, rather than leave such planning to politicians, bureaucrats, and judges, Texas has adopted what some would regard as the worst attributes of the two American systems of marital property: Texas classifies (virtually) all property acquired during marriage as marital (community) property, but then allows that property to be divided “equitably,” that is, unequally, upon divorce, in almost any manner in which a Texas judge deems “just and right.”
Thankfully, this Texas “worst of both worlds” outcome can easily be avoided. Texas spouses can use a premarital or marital property agreement to opt-out of the Texas statutory system of marital property law (Texas community property laws) and define for themselves what property will be classified as marital property (if any), and how that property will be divided (if at all) upon divorce.
Although beyond the scope of this article, premarital and marital property agreements also can, in appropriate situations, be structured so as to provide asset protection qualities, that is, protection from overreaching third-party creditors.
For more information on this topic, click here to: Contact Lapin Law Offices
Lapin Law Offices, P.C.
5001 Spring Valley Road, Suite 400 East
Post Office Box 802401
Dallas, Texas 75380
Disclaimer: The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship. The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction. Do not rely on the information contained in this publication for any purpose. If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.