Do You Need a Pre or Post Marital Agreement?
Post by: Lesley Hempfling
Most people think only the rich and famous need these fancy legal documents. Just turn on Extra or E! and you are likely to hear about the latest celebrity who either has a premarital agreement or who needs one! The famous May-September romance between Anna Nicole Smith and J. Howard Marshall certainly could have benefited from a well-drafted premarital agreement - saving Mr. Marshall's heirs millions in legal fees fighting over his estate.
However, the reality is when you live in a community property state such as Texas, these agreements are considerations for many regular, non-celebrity types as well. The marital property laws in Texas can be complex and confusing at times, but simply put it works like this: whatever you owned before the marriage or receive by gift, devise or inheritance is your separate property and is not considered in a property division upon divorce. At death, you may freely give 100% of your separate property away to whomever you would like. Once you marry, the presumption is that any after acquired property is community property. Community property is subject to a just and right division (e.g. not necessarily 50-50) at divorce and is subject to a 50-50 division at death. In the context of estate planning this is important to know because you can only dispose of property that you own. Therefore, if you only own community property, then you can only give away 50% of that property. For example, if you want to make a specific bequest of your entire bank account or your rental property, you cannot because you only own half of that asset. Now, the community property presumption can be overcome, but this is a very expensive process to go through post-mortem. A simpler solution is a pre/post marital property agreement.
So, what is a pre/post marital agreement anyway? A pre-marital agreement is a document that allows you to determine the characterization of your property (e.g. you may decide that income from separate property will remain separate property after marriage) and to set almost any other parameters of your relationship prior to marriage (e.g. you may include alimony or allowance provisions in your agreement). A post-marital agreement allows you to partition and exchange separate and/or community property between spouses - after you are married.
There are many reasons why a pre/post marital property agreement may be a necessary piece of your estate planning. Here are a few of the most popular reasons:
• Second marriage with children from a previous marriage;
• You are business partners with others who do not want to be in business with your spouse upon divorce or death;
• Less "monied" fiancé plans to give up his or her career to stay home with the children after the marriage;
• You are marrying later in life, have built a successful career and want to ensure your assets are protected moving forward;
• You have a high-risk job and want to protect your spouse and family (e.g. doctor).