Prenuptial, antenuptial, or premarital agreements are more than forms you print off on LegalZoom or similar sites. Printing off a document and flitting it off can leave critical assets unprotected or prevent you from following all the best practices in Texas for your prenup. A strong prenup can preclude a court from striking any clause down and enforcing the wishes you set out before a marriage takes effect.
Good prenups are like any well-written contract: all the terms get guarded, a court enforces them, and the parties are protected. The ideal scenario is one where Texas courts see a prenup as good and have to sustain the clauses within it. Texas courts have generally observed of prenups:
Parties “shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts.” … We rarely find a contract unenforceable on public policy grounds. Premarital agreements are no exception.
(“The legislature and the people of Texas have made the public policy determination that premarital agreements should be enforced. If we refuse to enforce [Husband’s] and [Wife’s] premarital agreement, we would thwart, rather than advance, our state’s public policy enforcing these contracts.”). In re I.C., 551 S.W.3d 119 (Tex. 2018).
The more significant point here is that a strong prenup moves the burden onto the party challenging the prenuptial agreement. A party with the presumption has the tall order of getting a court to do something it does not want to do.
Texas courts have said parties attacking a premarital agreement have the burden to show (1) they signed the agreement voluntarily or (2) the agreement was unconscionable. Osorno v. Osorno, 76 S.W.3d 509 (Tex. App. 2002). A strong prenuptial agreement pre-emptively prevents that bar from getting met and locks courts as much as possible into following the prenup.
Step one: Get a lawyer.
The first step to creating a solid prenup in Texas is getting an attorney familiar with Texas law. Prenups and the legal challenges to them are highly fact-determinative. Part of building a robust prenuptial agreement is establishing with your attorney the necessary facts that make challenging a prenuptial agreement difficult.
If a lawsuit to the prenuptial does come, litigation has a predetermined set of facts designed to win. And the attorney that helped you build the particulars and clauses of the prenuptial agreement will be the best person positioned to defend that work in court.
Ideally, get not one lawyer but two. A lawyer for you and one the other party to the prenuptial agreement. If both parties have their own lawyers, it is easier to avoid conflicts of interest. Both spouses can get the same attorney and waive conflicts. However, if one of the sides is more wealthy or powerful than the other, a conflict-of-interests could still exist.
In one infamous Texas case, the court struck down the prenuptial agreement. The contract was terrible, and the court struck it down for several reasons. But the judicial opinion made a particular point of highlighting how the husband made poor choices in picking an attorney.
After [the husband] realized the premarital agreement could be subject to attack if [the wife] did not have her own lawyer, he suggested she hire an attorney at his expense. Initially, [the wife] suggested two family law attorneys, but [the husband] told her both were too expensive. [Husband and his attorney] then suggested [the wife] hire Mickey Hunt, an attorney that offices in the same building as [husband’s attorney]. Moore v Moore 383 S.W.3d 190 (2012).
The husband also lied about what the attorneys said and prevented the wife’s attorney from approving various aspects of the prenuptial agreement. When the wife eventually got her own attorney, her lawyer sliced and diced the prenuptial contract to pieces.
Attorneys can also help navigate the negotiations between the two parties to the contract. Establishing that the two spouses navigate that process voluntarily, the courts will look on that process favorably. If everyone in the process is acting in good faith, working towards the same goal, and not under duress, the control is more likely to be upheld.
Texas is a Uniform Premarital Agreement Act state, meaning it is trying to create a standardized process for prenups. While what the committee that developed the UPAA says is not law, their comments about the UPAA can be helpful. Independent attorneys for both parties is not required by statute or in the model codes; however, the UPAA committee heavily promotes them:
The requirement of “access to independent counsel” … represents the view that representation by independent counsel is crucial for a party waiving important legal rights. The act stops short of requiring representation for an agreement to be enforceable … When a party has an obligation to make funds available for the other party to retain a lawyer … this refers to the cost of a lawyer competent in this area of law, not necessarily the funds needed to retain as good or as many lawyers as the first party may have.
It is important to remember that a prenuptial agreement can waive legal rights parties would have during divorce proceedings. That aspect makes a prenuptial agreement helpful for asset protection. But it is also essential to make sure both parties to a prenup understand the rights they are waiving and voluntarily agree to that.
Step 2: Follow the formalities.
The next step to a strong prenup is following the formalities. Texas lists few formalities here, “Sec. 4.002. FORMALITIES. A premarital agreement must be in writing and signed by both parties. The agreement is enforceable without consideration.”
Some simple things here: do not make a prenuptial agreement by oral or handshake pact. Prenups have to get written up and signed by both parties to it.
Next up, a prenuptial agreement must get created before a marriage. “Sec. 4.004. EFFECT OF MARRIAGE. A premarital agreement becomes effective on marriage.”
You cannot get married and then enter a prenuptial agreement. However, Texas law does allow for Marital Property Agreements, which are different kinds of contracts used to differentiate community and separate property after a marriage has occurred.
It is important to note here that Texas law “does not distinguish between civil and religious marriage ceremonies.” Zetune v. Jafif-Zetune, 774 S.W.2d 387, 389 (Tex.App.-Dallas 1989, writ denied). The vital part “is the parties’ marital status, rather than a specific type of ceremony, that is significant.”
For instance, in one case, a couple held two ceremonies. The first ceremony was a traditional Islamic religious ceremony, but not a civil marriage ceremony. The parties held it out as a prospective marriage before the traditional ceremony more than six months later.
In the interim, the couple formed a prenuptial agreement. It then held the traditional wedding ceremony complete with a marriage license. The Texas courts struck down the prenuptial agreement because it got formed after the marriage was effective. Texas law does not distinguish between the religious and civil kinds of ceremonies. Ahmed v. Ahmed, 261 S.W.3d 190(Tex. App. 2008).
A prenup must get formed before a marriage. There is an important lesson here, too, for common law marriages. There are situations where a couple that does not follow traditional marriage requirements but
- “agreed to be married,”
- “after the agreement they lived together in this state as husband and wife,” and
- “they represented to others that they were married.”
If these three factors are together, Texas considers a common law marriage formed. If a common-law marriage is created, enforcing a prenuptial agreement would be significantly more challenging because the parties are presumed married.
Common law marriages can pose a tricky situation for asset protection to thread because of the uncertainty involved. Courts would have to establish an exact date when a couple is married.
Again, challenges to prenuptial agreements can be fact-heavy investigations in litigation. Common-law marriages provide a level of indecisiveness. A wise asset protection plan does not build off the uncertainty of common-law marriages. Attorneys can help establish all the necessary things.
An example where Texas courts liked the formalities is as follows:
Sauls and Worley, an elderly couple, were married on May 2, 2015. On April 30, 2015, a few days before the marriage, they executed a premarital agreement. … Each page of the premarital agreement was initialed by both Sauls and Worley, and it is undisputed that they both signed the premarital agreement before a notary public.
The premarital agreement listed the separate property assets of both parties and contained an agreement that they would remain each party’s separate property after the marriage. It also contained agreements “with respect to . . . the disposition of property on separation.” … In re Marriage of Sauls (Tex. App. 2021).
The court upheld the agreement and noted the strong presumptions in favor of supporting the prenup. A preferable situation is when a court favors listing how a prenup follows best practices instead of the ways a prenuptial agreement fails them.
Hiring attorneys ensures that many of these steps get taken.
Step 3: List out all assets for both spouses.
Prenuptial agreements need good-faith negotiation between the parties. In Texas, a community-property state, prenuptial agreements mean that parties are waiving rights to property and assets they might otherwise claim in a marriage. The written agreement needs to state everything to show the parties are waiving with knowledge.
Returning to the UPAA committee, the intent of this requirement is assets and property that are “reasonably known.”
The requirement of reasonable financial disclosure … pertains only to assets of which the party knows or reasonably should know. There will be occasions where the valuation of an asset can only be approximate, or may be entirely unknown, and this can and should be noted as part of a reasonable disclosure. Disclosure will qualify as “reasonably accurate” even if a value is approximate or difficult to determine, and even if there are minor inaccuracies.
Assets that can change price can get approximate valuations when the agreement gets formed. This factor is essential for real estate, art, collectibles, stocks, bonds, or new asset classes like cryptocurrency and crypto-based assets like Non-Fungible Tokens (NFTs).
Given that negotiating and listing assets will depend on specific situations, it is best to look at good and bad cases in Texas courts.
First up, what not to do in listing out assets. This example comes from the Mueller v. Mueller case. The husband essentially came up with a laundry list of things not to do in forming prenuptial agreements.
[The husband] first attempted to use his own lawyer to assist them to write the agreement in a “collaborative effort.” When he realized this could subject the agreement to attack, he suggested [the wife] retain a lawyer at his expense. [The husband], however, rejected the lawyers [the wife] requested and directed her to a lawyer of his own choice.
He then made it effectively impossible for [the wife’s] lawyer to review the final draft by misrepresenting to her that he did not have the agreement when they went to Martha’s Vineyard and then hiding the agreement for several days until just hours before their wedding.
The draft [the wife] was presented at that time was the first version of the document that did not contemplate a value of [the husband’s] estate being provided. The document also required her to verify [the husband] had given her full disclosure of the nature, extent, and value of his assets. [The husband] also requested [the wife] to sign a document waiving further disclosure.
[The wife] panicked, tried to call her lawyer, and could not reach him. [The husband] then told [the wife] that [the wife’s attorney] had approved the agreement and told her it was okay for her to sign. [The wife] testified she was concerned but signed because of [the husband’s] assurances and would not have done so but for such assurances.
The trial court could find based on this evidence that [the wife] did not sign the agreement voluntarily.
That case had everything: lies, fraud, and purposeful omissions. The husband’s decision to meddle with the wife’s lawyers, lie about it and attempt to hide all his assets doomed the prenuptial agreement.
Texas courts ruled this was an involuntarily signed agreement because of all the fraudulent representations. The court could easily have said it was an unconscionable prenuptial agreement too.
In short, it would be difficult to do more destructive things to a prenuptial agreement than the husband in that case. Let’s switch to a contract Texas courts thought was well written. It also functions as a helpful bullet point list:
- “[T]he Parties intend that there shall never be any community property.”
- “The Parties hereto each agree that each of the properties listed on Exhibit ‘A’ hereto, together with the income earned therefrom and all mutations thereof, shall forever remain [the husband’s]’s separate property, and except for gifts or transfers . . ., [the wife] shall never have any ownership or other interest of any kind or nature therein.”
- The Parties each agree that “each of [the] properties, together with the income earned therefrom and all mutations thereof, shall forever remain [Sauls]’s separate property, and except for gifts or transfers . . ., [Worley] shall never have any ownership or other interest of any kind or nature therein.”
- “[The Wife] agrees that all properties standing in [the husband]’s name, now or during the marriage, shall be presumed to be his separate property.”
- “Properties purchased from the proceeds of sale of such separate properties shall remain separate properties.”
- “As [the husband]’s separate property he shall retain all present and future retirement funds and benefits of any nature, wherever and by whomever held by or for him. [The Wife] agrees that all of such present and future retirement funds and benefits shall be free from any claim from her, and that [the husband] may designate the beneficiary or beneficiaries of such retirement funds who are to receive same at his death without designating [the wife] as such beneficiary.”… In re Marriage of Sauls (Tex. App. 2021).
Texas is a community property state. Generally speaking, community property presumes that the property the spouses bring into the marriage becomes owned by both spouses once a marriage begins. A prenup prevents this by listing and declaring what is and isn’t separate property.
The first clause is critical in this prenup: it eliminates community property in the marriage. After that, everything else gets listed via exhibits. The clauses explain that the separate property remains separate even if it makes money or interest during the marriage.
Because this prenuptial agreement was well-written, followed formalities, and negotiated in good faith, the court upheld it. Clauses that entirely remove rights to a specific property are possible in a prenuptial agreement if designed and negotiated fairly.
Step 4: Update the prenuptial agreement.
Even if you list out every possible thing known at the time of a marriage, with broad clauses, changes may arise. Suppose any of those changes cause a material change in the prenuptial agreement. In that case, the parties need to consult their attorneys and update the contract accordingly.
You may already have a prenuptial agreement and want to include broad clauses like the previous section. That is possible as long as the parties agree and create an amended prenuptial agreement. Texas law allows for this by stating:
Sec. 4.005. AMENDMENT OR REVOCATION. After marriage, a premarital agreement may be amended or revoked only by a written agreement signed by the parties. The amended agreement or the revocation is enforceable without consideration.
Once married, that does not mean the prenuptial agreement is written in stone and unchangeable. The original prenup must hit the formalities of getting formed before a marriage. Amendments can occur at any time after the wedding.
One of the major updates that may weigh on future amendments to a prenuptial agreement can involve children. The ages and number of children can be unknowable before a marriage. Updating the contract to reflect how things should get divided once children are involved can be crucial to an amended prenup.
Finally, laws can change. The Texas legislature can pass laws that would be advantageous to add to a prenuptial agreement. Just as updating wills, trusts, and estates can be essential to reflect beneficial tax law changes, similar things can occur in legislation that could impact prenuptial agreements.
Changes to the law are why it is vital to get an attorney. They can help guide you through any new changes to regulations. State legislatures pass hundreds and thousands of new laws a year. Attorneys keep up with those changes and can alert you to optimal changes. Suppose some new law could benefit your asset protection plan, or new clauses get developed that could support you. In that case, the attorneys can notify you of those changes.
Following these steps can provide you with a strong, defensible prenuptial contract. Awareness of them can help you ask pertinent questions of your lawyer to ensure every avenue gets explored. Having that information and guidance can be invaluable in designing a long-term asset protection plan that is hard for any attorney to attack.
LEGAL DISCLAIMER: Information in this article is provided free of charge and purely for informational and educational purposes only and is not offered as legal advice. No attorney-client relationship is created by the offering of this article. TexasAssetProtection.org is not a law firm, does not represent clients, and is not representing you or anyone else. Although every effort is made to keep information up-to-date, laws may change. Retaining legal counsel for your individual case and circumstance is advisable before taking any action that has legal consequences. Consult a tax advisor or financial consultant as well, as this is not offered for any tax or financial service or advice.