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10 Common Misconceptions About Prenups

There are many misconceptions about prenups in Texas, even among lawyers. These are the ones I have heard most. There are many more. For years prenups were not allowed by the law, causing misconceptions. The law varies by state, creating confusion; and movies take license about misstating the law. This makes better movies, but also causes more confusion. Read More “10 Common Misconceptions About Prenups”

When Reinvested Earnings Become Commingled Community Property

It can be difficult to tell when reinvested earnings become commingled community property, as divorce is always complicated by a business. Most businesses retain some of their earnings to drive growth opportunities over the near term and as cushion for a downturn. These assets can be crucial to the business’s functioning, but they can also be targeted during divorce, especially if there is reason to believe the business-owning spouse is hiding income in the company. Read More “When Reinvested Earnings Become Commingled Community Property”

Are Restricted Stock, Stock Options and Restricted Stock Units Community or Separate Property?

Restricted Stock Units (RSU’s), stock options, & restricted stock are only valuable if the employee remains employed for the required period, usually the vesting period. When part of the vesting period occurs during marriage and the other part is before or after the marriage, the assets are part community and part separate property.

Only community property is divided in divorce. Read More “Are Restricted Stock, Stock Options and Restricted Stock Units Community or Separate Property?”

How To Write A Bullet-Proof Texas Post-Marital Agreement

If you’re getting ready to sit down to prepare a postnup, you should know the basics of how to write a bullet-proof Texas postnup partition & exchange marital agreement.

There are essentially two different kinds of considerations that you’ll want to make to ensure that the contract will hold up against any questions of its validity that may come up later. Read More “How To Write A Bullet-Proof Texas Post-Marital Agreement”

How To Defend A Prenup In Divorce

If you’re getting ready to tie the knot and want to create a prenup, or if you already have one and need to know how to defend a prenup in your divorce proceedings, you should know the four most common mistakes that can invalidate the contract.

  1. Involuntarily Signing the Agreement
    A good way to defend against accusations of involuntariness is to create the contract well ahead of the wedding date. Each party should have adequate time to read and review the document and consult legal counsel. Deciding to draft and/or sign a prenuptial agreement can be a difficult decision to make, and is not something that anybody should be forced to consider the day before the wedding.
  2. Not providing fair and reasonable disclosure
    You should fully disclose all assets and liabilities in the agreement. If any missing information is revealed or if any disclosures that you provide are found to be false, the contract may be invalidated by the court. Minimally, the divorce will become more expensive because there will be issues to litigate.
  3. Not being fair and reasonable
    The details of your prenuptial agreement are largely up to you and your partner. However, if the agreement is unconscionable, it will be vulnerable to dismissal by the court.
  4. Creating illegal clauses
    This should go without saying, but you cannot include clauses that are contradictory to the law. A good example of such a clause is one which limits child support as this is to be determined by the court.

Knowing how to defend a prenup in divorce cases is important, and you should consider consult legal counsel who can give you definitive advice specific to your circumstances.

Can I Get A QDRO For A Partition Agreement Without Divorce?

Many judges and lawyers are unaware that retirement funds can be transferred between spouses via a QDRO even when no divorce is filed. This is useful as part of a postnuptial agreement. A QDRO can be signed by a judge to protect the portion of a spouse’s retirement given to the other in the postnup.

A postnup might give one spouse some of the other’s retirement. The retirement plan may ignore the postnup. It is not binding on a retirement plan. The only way to make the plan give some of the funds to the other spouse is with a Qualified Domestic Relations Order (QDRO).

If a divorce occurs, the non-employee spouse might find there are no funds in the 401(K) because the other withdrew them. A QDRO when the postnup is signed will require the plan to safeguard the non-employee’s share, ensuring it’s available if a divorce occurs, or when the employee spouse dies.

After the funds are transferred into the name of the non-employee spouse via a QDRO, tax laws now apply to the non-employee spouse. That person may withdraw funds, but may have a portion withheld and owe taxes and penalties, depending on the person’s age when the withdrawal is made.

A postnup that awards a spouse some of the other’s retirement should be accompanied by a QDRO. This will increase the cost of the postnup but the added cost is minimal compared to the funds in retirement that might not be available later.

Can I Do A Prenup After I’m Married?

If the media is any indication, every celebrity couple has a prenuptial agreement in place, but nuptial agreements are not just a concern for famous people. There are many couples that could use the peace of mind that comes with a marital agreement, but it doesn’t have to come in the form of a prenuptial agreement. Postnuptial agreements are on the rise, according to the American Academy of Matrimonial Lawyers (AAML). Half of AAML survey respondents confirmed that over the last few years, they have seen a significant increase in postnuptial agreements. And many of these couples already had a prenup in place. There are good reasons for securing a postnuptial agreement, even with a prenup, as things can change during the course of a marriage.

Postnups Are the New Prenups

Texas law refers to a postnup as a Partition and Exchange Agreement. It partitions the community estate into separate estates and may exchange community for separate property.

Postnuptial agreements are similar to prenuptial agreements, in that they seek to define both spouse’s assets, and ensure that those assets remain the property of their owner. If, for example, one spouse enters the relationship with a high value trust in his or her name, a nuptial agreement will ensure that, in the case of divorce, that trust remains their property. In this way, there is little difference between prenuptial and postnuptial agreements.

The difference really comes down to timing. Prenuptial agreements are put together before the marriage ceremony, and before the couple confirms their new marital status. Postnuptial agreements are put together after the vows are read and (usually) after the honeymoon. Some of the rising popularity of postnups, therefore, can be explained by timing.

An important difference between the timing of a prenup and postnup is the alternative if no agreement is made. Before marriage there is no community property. While it is inconvenient and may be embarrassing, canceling a wedding means each person keeps their own property. There is no community property to divide. Community property begins the moment people are married. A postnup is negotiated after community property already exists. The alternatives, if no agreement is made, are to remain married or seek a divorce. Remaining married without a binding written marital agreement means community property laws apply. For some, choosing between continuing to accumulate community property and a divorce is heart-wrenching.

There are times when a postnup is needed, even when a prenup was written before getting married. Life usually gets more complicated after the wedding. Some of the reasons why a couple might secure a postnup after a prenup include:

  1. New assets enter the picture – Lawyers assisting with a prenup do their best to account for every possible asset, present and future. This includes assets like trusts and retirement benefits. Sometimes, though, a couple experiences an unexpected windfall. For example, a spouse may be in line for an inheritance that they weren’t aware of. When a good deal of new money enters a relationship, a postnup can ensure that it remains the property of the beneficiary, should a divorce eventually be necessary. In short, it’s the same kind of protection that a prenup offers.
  2. A spouse’s business takes off – Whether a spouse starts a business after getting married, or the business was already up and running, it can be extremely difficult to project its performance over the long haul. If, however, a business does suddenly become profitable, it may be time to create a postnup. A postnup can define who owns the business, and what the other spouse’s relationship to the business is, forming a plan in the event of divorce or passing.
  3. There’s reason to believe a prenup will be voided – Nuptial agreements have to follow a strict set of guidelines to be considered valid. Among these guidelines is complete disclosure of all assets, for both spouses, or a properly worded waiver of disclosure signed BEFORE the prenup. If these assets are not made clear in the prenup, and a waiver is not signed, it can put the entire agreement in danger. If either spouse has reason to believe that this could be the case, a postnup will clear up any potential problems and ensure there is a plan in place.
  4. Medical issues force their way into the relationship – As people age, things they would never have considered, like medical problems, become major points of concern. If either spouse is stricken wth a disease that threatens their ability to make decisions, such as Alzheimer’s, then a postnup can set everything in stone before medical issues intrude.

There are almost no limits on what can be handled with a postnup, as long as it is overseen by an experienced attorney. The agreement need not be as simple as partitioning the community estate into separate estates. It can also provide for equalizing payments between spouses and a financial penalty if one is at fault in a divorce. If a spouse takes time off from a career, for example to raise children or assist with the other’s career, a postnup can allocate some of the other’s earnings to the stay-home spouse.

A postnup need not clinically divide each spouse’s estate so they feel like roommates. It can provide for joint financial accounts, including joint household checking; joint purchases; joint tax returns; and even joint debt. It can also keep all finances separate and say how the bills and expenses will be paid.

Postnups are a comprehensive way to add stability to a relationship, answering the tough questions about assets and debts. They are just as useful even with a prenup in place, and can cover areas not addressed by a prenup or concerns that pop up over the normal course of a marriage. Married life isn’t always easy, but a postnup can make it easier.