Newlyweds Prince Harry and Meghan Markle are enjoying their second month of wedding bliss after the whole world stopped briefly to observe their May 19 wedding ceremony. While reports surfaced that the couple did not sign a prenuptial agreement before the big day due to the uncommon practice of executing those agreements in the U.K., the intensely analyzed royal courtship is a great reminder of what couples with significant assets should consider when preparing to head down the aisle.
Let’s assume for a moment that the royal couple had married in Texas, where premarital agreements offer many options because they are considered legally binding contracts. Texas contract law allows almost anything to be accomplished contractually unless the spouses are trying to do something illegal or against public policy.
The theory behind a premarital agreement allows two parties to minimize disputes that may come later, an insurance policy for couples. Instead of a property division and characterization of property based in the Texas Family Code, the parties simply write their own rules in the premarital agreement.
One clear benefit is that a premarital agreement can greatly simplify having to prove separate property. In Texas, separate property is not divisible by a Texas court, while community property is subject to division. This is important because all property is normally presumed community property. Premarital agreements typically alter that presumption and also lower or eliminate the normal elevated burden required by Texas law to prove separate property.
The biggest difference in a premarital agreement compared to Texas law is the manner in which it can characterize income generated from separate property as separate property. This minimizes tracing issues, as well as potentially eliminating commingling issues. In long marriages, it is often difficult to prove what portion of an account was income (community property under Texas law) and what portion was owned before the marriage or inherited (separate property). Premarital agreements typically eliminate that conflict by making income separate property.
It’s also possible for spouses to address and eliminate maintenance and support: attorney fees, reimbursement claims, and basically any other property right that would fall under the Family Code. In theory, addressing these issues in a prenup makes a divorce much simpler.
You don’t have to be an heir to the crown jewels to benefit from a prenup. People who have been previously divorced may want one in order to avoid mistakes from a previous property division dispute; younger spouses who have significant wealth also benefit from these agreements. Premarital agreements are useful for anyone who expects a large inheritance, and this is where Prince Harry might fall. While separate property is separate, income on those assets is considered community property in Texas. With the stroke of a pen that community property income can be defined as separate property. Typically, young couples who don’t own much and don’t expect to inherit much are not good candidates for a premarital agreement. They typically earn an estate together.
Executed properly, premarital agreements in Texas are fairly rock solid. All contractual defenses to premarital agreements have been eliminated by statute, and there are only two defenses to a premarital agreement in Texas: (1) voluntariness, and (2) unconscionability. The unconscionability defense can be eliminated by simply including a fair and reasonable disclosure of a spouse’s property and debts, and/or a waiver of disclosure executed before the premarital agreement is executed. It is standard practice for a waiver to be executed in just about every premarital agreement at the time of signing, so the unconscionability defense is most often eliminated right off the bat.
The involuntary defense can be eliminated by careful drafting and a timely exchange of documents, and ensuring that both sides are being represented by lawyers. Signing a premarital agreement significantly in advance of a wedding is not only good practice for enforceability, but also for the fiancés’ relations with each other leading up to the marriage. Marriage preparation can be stressful enough without a premarital agreement drafting dispute looming over the wedding date.
Premarital agreements are usually accompanied by a marital agreement signed after the marriage of the parties. This marital agreement clears up any partition of separate property income issues, ratifies the premarital agreement, and addresses some ERISA-related issues with regard to spouses waving retirement benefits. It is quite typical in executing a prenup package to have a marital agreement prepared prior to the wedding and for review at the time the premarital agreement is signed. This agreement is signed typically within 30 days after the marriage to make all the issues as clear as possible.
With all that said, not all marriages need a premarital agreement. It is a very personal decision for the spouses, despite the risks. So we can have a lot of respect, if not a little fear, for the young Prince Harry and Meghan. We wish the royal couple a happy and successful marriage!
Brad LaMorgese is a partner in the family lLaw boutique Orsinger, Nelson, Downing & Anderson. LaMorgese regularly represents clients’ trials and appeals involving high-stakes legal disputes, including matters involving interstate jurisdiction disputes, prenuptial agreement litigation, property divisions, custody and visitation.