Prenuptial agreements are contracts, drafted by lawyers, that change how the law would normally apply to the spouse’s assets in divorce and death.
If you live in Texas, the assets you own at the time of marriage are your separate property. You DON’T NEED a prenup to confirm the separate property you own coming into your marriage. A prenup is helpful to specifically identify your assets, but without a prenup, you can still prove that you owned an asset prior to marriage in other ways. Be aware, though, that it is your burden to prove your separate property assets by clear and convincing evidence – a high burden. Regardless of whether you have a prenup, you do need to be able to trace your separate property all the way through your marriage, so keep your separate property assets separate from your joint assets and keep excellent records.
- Download and save all bank statements as they are provided to you so that you do not have to go back to the bank years later in an attempt to gather all bank statements generated during your marriage.
- Scan and save all documents generated in real estate transactions to show the source of funds for down payments & cash at closing (copies of checks and bank statements showing withdrawals and deposits, including wire transactions), closing or settlement statements, bank statements showing where proceeds are deposited and interim statements through the date the proceeds were used to buy a new property.
But in Texas, the income earned off your separate property assets during the marriage is community property. You DO NEED a prenup if you intend for the income earned off your separate property assets to remain your separate property. If you don’t have a prenup that specifically says that income earned off separate property is to remain separate property, then all the income and dividends paid on your separate property investments will be community property; all the net income earned from renting your separate real estate investment will be community property; all the income earned from your separate property small business will be community property; and all the trust distributions from your separate property trust interests will be community property.
In Texas, all income and employment compensation earned from the date of marriage forward is community property, no matter where it is deposited. You DO NEED a prenup if you intend for the money you earn during your marriage to be your separate property. Without a prenup, it doesn’t matter that you deposit your paycheck into an account solely in your name after you get married; it is the marriage’s money. Without a prenup, it doesn’t matter that a 401(k) match is paid into a retirement account solely in your name and that you had prior to marriage; those funds earned during marriage in a retirement account owned prior to marriage still belong to the marriage. If you don’t have a prenup, stock awards, stock options, restricted stock units and other employee benefits granted during marriage are community property and have a community property component to them even if they vest post-divorce.
In Texas, a community estate will form automatically upon marriage. You DO NEED a prenup if you do not intend to have a community estate at all during your marriage. This means there will be no assets to divide upon divorce. A Texas marriage with no community assets needs to be planned for carefully, with all contingencies considered and accounted for before eliminating altogether the protections Texas law provides via a community estate.
That said, a prenup doesn’t have to get in the way of your vision of creating family and accumulating wealth together if, for instance, you want your assets and the money you make to remain your separate property, but you’re still willing to contribute to the community estate. But you need to plan ahead for it.
Not only can a prenup shield assets, they can protect against debt, detail what spousal support will look like, and, in the best-case scenario, they can ensure that both parties don’t end up destitute. Still, they can’t dictate child custody rules, and while people can agree to anything, they can’t really enforce lifestyle stipulations.
So, do you need a prenup? There’s no harm in exploring it, and you certainly should if you’re not interested in letting the law define how your assets are divided if you and your spouse split up. Not everyone who has a prenup ends up using it but taking the time to prepare a customized prenup before you marry can give you peace of mind now and in the future. Call Lazar Law at 512-477-1600 and let our experienced Austin family law attorneys help you figure out if a prenup is the right step for you.