Property Agreements Made During Marriage

Previously, we wrote about Premarital Property Agreements. We noted there that Texas law broadly supports Marital Property Agreements. Today we will discuss agreements entered into during a marriage^[1], instead of before marrying.^[2]

The Texas family Code states that “At any time, the spouses may partition (divide-up) or exchange (trade) all or part of their community property, then existing, or to be acquired, as the spouses may desire. Property or a property interest transferred to a spouse becomes that spouse’s separate property. The partition or exchange of property may also provide that future earnings and income arising from the transferred property shall be the separate property of the owning spouse.”^[3]

The breadth of that authority allows the spouses to agree, if they choose to, that there will be no community property. Any property which would otherwise be community can be divided, and then awarded to one or the other spouse, as separate property. Going further the income from a spouse’s separate property (such as interest from a Savings Account or Certificate of Deposit (CD), stock dividends, or bond coupon payments), which would ordinarily be community property, can be agreed to be separate property.

The beauty of these agreements is that they can be constructed to leave no property to argue about when a marriage ends, by either death or divorce (and, of course, every marriage eventually ends by one of those means). Of course, not every agreement will dispose of all property and all income, but it can dispose of as much or as little as the spouses wish.

So, you might be asking “what is required for these agreements to become effective?” Well, the answer is “not much; merely an expression of their agreement.” That agreement must be in writing. And, it must be signed by both parties. That is all! No consideration (exchange of something of value between the spouses) is required.

As noted within our previous post regarding premarital property agreements, Texas law favors the enforcement of marital property agreements voluntarily entered into by parties. Accordingly, the only way for a party to such an agreement to avoid that enforcement is for that party to prove that either:

1. It was not voluntarily signed by the party seeking to prevent enforcement;

or

2a. The agreement was unconscionable when it was signed; and

2b. A fair and reasonable disclosure of the property or financial obligations of the other party was not made; and

2c. That disclosure was not waived by the parties to the agreement; and

2d. The party seeking to avoid the enforcement did not have, and reasonably could not have had, adequate knowledge of the property or financial obligations of the other party.

Unless those very narrow exceptions are proved, then the agreement will be enforced by the court, if requested. The Supreme Court of Texas has held that

“Texas has a strong public policy favoring freedom of contract…We have repeatedly recognized that parties shall have the utmost liberty of contracting. And that their contracts, when entered into freely and voluntarily, shall be held sacred and shall be enforced by the courts.” In re Marriage of I.C., 551 S.W.3d 119, 124 (Tex. 2018).

Since there is so much that can be done with these agreements, I recommend that you consult with an attorney who is sufficiently experienced with them, if you are thinking of using one.

That’s all for today. Be sure to check back from time-to-time for more Family Law discussions!

[1] These are sometimes called “Post-Nup’s,” or “Post-Nuptial Agreements.” The Texas Family Code refers to them as “Partition and exchange Agreements.”

[2] As with all of our blog posts, we limit our discussion to the law of Texas.

[3] Texas Family Code section 4.102