For Better or Worse Why Marital Agreements are Important 

Often in these times of crypto, start-ups and other wealth creation, parents require and their children are willing to ask that anyone joining the family agree to a marital agreement.  A marital agreement, whether a prenuptial (“prenup”) or a postmarital (“postnup”) agreement is actually considered part of any good asset protection plan, like a LLC, a Will or trust or a power of attorney, a prenup or postnup is not just for people who are unwilling to give up assets or who aren’t sure they trust their prospective spouse.

Prenup and postnup candidates today are often wealthy people entering second marriages who have children, retirement accounts, homes or businesses they want to protect or want to stay in the family, but more and more often they are also younger adults who may have waited to get married, have accumulated assets in the course of their careers such as stock options in start-ups, or who have or will inherit assets from parents or grandparents. A prenup (or postnup) not only helps protect these assets in case of a divorce but can also help avoid student loan, credit-card or other unsecured debts affecting one of the intended.

After the marriage, a prenup or a postnup are a safeguard against a divorce, but often clients don’t consider that they also provide some protection in a bankruptcy or lawsuits from actions of the other spouse, such as a car accident or medical malpractice.  It is not necessarily romantic when prospective spouses are still aglow with the possibility of spending a lifetime with his or her intended, but everyone headed to the altar should at least consider a marital agreement for these reasons alone.

Texas is a community property state and defaults to a 50/50 split of assets in the case of divorce.  A marital agreement will often address how the assets are divided if a marriage ends.  Often these agreements can include “buy-outs” or offsets of certain assets thereby protecting each spouse, but differently, and for the reasons the spouses choose, NOT by a divorce court.

Co-owned marital assets in a community property state can typically be reached by creditors of one spouse.  Married to a doctor?  An entrepreneur? A real estate developer? A postnup can protect important assets from the issues resulting from the other.

Another fact to consider is that these marital agreements are completely private and do not have to be filed in any public record — they are simply contracts between two individuals, signed before or after marriage, that specify how assets will be distributed when the marriage ends.  Nothing in the agreement prevents the spouses to leave all assets to each other at death, which often happens.  If you need it – it is a powerful tool in a divorce or other legal battle.  These agreements however take some consideration and I would not encourage anyone to sign one without legal advice and a complete understanding of the financial circumstances.  There is an urban myth about the Powerball winner who had his spouse sign a postnup on Friday before he went public with the ticket on Monday! (BTW – although a nice try – that would not stand up in any court I am aware of).

Of course, as estate planning attorneys we have a number of tools in our “toolbox” to move premarital assets out of one spouse’s estate so they never become part of the marital assets. However, a marital agreement, because both spouses have input and say, makes the process and the final agreement much more impactful.

If you would like to know more or to take advantage of our complimentary initial meeting call or email our office to schedule – or (512) 263-5400.