Spouses can agree to change their rights and obligations with regard to property by signing a Texas pre-marital agreement. Premarital agreements, also known as prenuptial agreements, are often used in circumstances involving a high net worth or where one spouse enters the marriage with significantly more assets than the other. While prenuptial agreements can be valuable tools to protect a spouse’s assets, they can also be contentious in the event of a divorce.
A husband recently challenged the property division in his divorce decree, arguing the trial court had not followed the premarital agreement in dividing the parties’ property.
Before the marriage, the parties executed a premarital agreement the husband bought online.
The wife petitioned for divorce in 2021 and sought to enforce the agreement and divide the marital estate accordingly. The husband also sought enforcement of the premarital agreement.
Following a bench trial, the court awarded the wife 60% of a 401(k), 100% of an IRA, $20,000, and a $42,976.66 judgment as reimbursement to the community for funds spent on the husband’s separate property.
Husband’s Appeal
The husband appealed, arguing the parties agreed in the premarital agreement “to waive any claims against the other’s separate property” and “that any property in one spouse’s name would be awarded to that spouse.” He argued the court abused its discretion in awarding the wife a portion of his 401(k) and all of his IRA.
The wife argued the premarital agreement had “exempted only certain things from [the] community estate” and that it did not characterize the husband’s earnings as his separate property.
Neither the husband or wife argued the premarital agreement was invalid or ambiguous. The appeals court therefore considered the language in the agreement.
The appeals court noted that the agreement did not expressly characterize the husband’s retirement accounts that were acquired during the marriage as separate property. It did contain a provision stating that “all property acquired by each party in their own name shall be deemed to be part of their separate estate. . .” It further provided that each party waive their claims to the other party’s separate estate.
The husband argued this provision meant that the retirement accounts, which were in his name, were his separate property. He acknowledged, however, that the agreement did not expressly state a party’s income would be considered their separate property.
The appeals court pointed out that the agreement did not define “property” and used the word to refer to both real and personal property. The husband cited the definition of property in Texas Fam. Code § 4.001, which is “an interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.” The appeals court acknowledged that property is defined broadly under Texas law.
The appeals court instead focused on the word “acquired” in the provision of the agreement at issue. It rejected the husband’s argument that property held in his own name was separate property under the agreement. The appeals court concluded the provision did not characterize all property held in the husband’s name as his separate property regardless of how and when it was acquired. For the retirement accounts to be separate property under the agreement, the husband therefore had to show by clear and convincing evidence that the retirement accounts were “acquired” in his name, and not just held in his name.
The appeals court noted that contributions to retirement plans from income earned during the marriage are generally community property.
The husband had not presented evidence showing the source of the funds in the accounts or how he acquired the accounts. He also had not shown how much the accounts had increased due to interest and dividends. Interests and dividends are generally community property in Texas, even if the investments are separate property. The appeals court pointed out the premarital agreement did not provide that interest and dividends from separate property would be separate property.
The appeals court concluded the husband had not met the burden to rebut the community property presumption with regard to the retirement accounts. The appeals court found no abuse of discretion in the implied finding the husband had not successfully rebutted the community presumption with regard to the retirement accounts.
The husband also argued the premarital agreement waived reimbursement claims, citing to language providing that each spouse waived all right acquired as the spouse of the other party to the other party’s separate property. The wife argued reimbursement claims were not referenced anywhere in the premarital agreement.
Texas law requires courts to construe premarital agreements narrowly and in favor of the community estate. The appeals court therefore rejected the husband’s argument that the language he cited waived the wife’s right to reimbursement.
The appeals court also rejected the husband’s argument that the lump sum award divested him of his separate property because the joint checking account only had $1,193.29. The appeals court pointed out, however, that the community estate included more than just the joint checking account, and the husband had not cited legal authority to support his argument.
The appeals court affirmed the divorce decree.
Seek Legal Advice
This case illustrates the importance of seeking legal advice before signing a premarital agreement. The parties in this case had different interpretations of their premarital agreement. Neither challenged the validity of the agreement, so the appeals court did not even consider that issue. Consulting with an attorney can help ensure the agreement is valid and fair and that you understand its terms. If you are entering a marriage with a high net worth or significantly more assets than your future spouse, an experienced Texas family law attorney can advise you regarding a premarital agreement and represent you as appropriate. Contact McClure Law Group at 214.692.8200.