Cohabitation & Domestic Partnership Agreements in Texas for Boomer & Senior Couples
Premarital and post-marital agreements in Texas have a complex history immersed in the community property presumption, the state constitution, statutes and case law. Originally, such agreements were found to be unenforceable. But with amendments to the Texas Constitution, evolving statutes, recent case law, and improved draftsmanship, such agreements are now enforceable under contract law.
For many Boomer and Senior couples, living together is a precursor to marriage; for others because of family issues or commitments, there is no intent to ever marry. The simple fact is, domestic partnership agreements address a wide variety of circumstances, many involving established adults who want to be together but because of prior financial and family commitments prefer to have an applicable contractual agreement for their legal needs.
Many couples choose to live together so they do not lose certain benefits under current rules of social security, military and insurance disability programs, or to stop those benefits from being taken away from their children. In other cases, couples who are divorced, and who may have children, may want to protect certain assets. In situations such as trust funds or inherited funds, beneficiaries simply do not want to place family money at risk. Other couples choose to shelter their own resources from the real or perceived obligations of their partner.
The marital agreement is considered to be a contract under Texas law. The premarital agreement must be in writing and signed by both parties. No actual consideration is required; however, to conform to contractual law, it may be wise to provide benefits for the non-monied party to avoid a later finding of unconscionably, particularly if the financial or physical condition of the non-monied party under the agreement is poor.
Matters that may be dealt with in a premarital agreement include, but are not limited to, the following:
- the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
- The rights and obligations of each of the parties in any of the property of either or both of them whenever or wherever acquired or located;
- The disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
- The modification or elimination of spousal support;
- The making of a will, trust, or other arrangement to carry out the provisions of the agreement;
- The ownership rights in and disposition of the death benefit from a life insurance policy;
- The choice of law governing the construction of the agreement; and
- any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
In post-marital agreements, it has been noted that a fiduciary duty exists that is not present in pre-marital agreements between spouses or prospective spouses. Case law states that a confidential relationship between husband and wife imposes the same duties of good faith and fair dealing on spouses as required of partners and other fiduciaries. However, adverse parties who have retained independent counsel may not owe fiduciary duties to one another. Texas Legislature enacted Section 4.105 with the understanding that married spouses owing fiduciary duties to one another would negotiate and execute post-marital agreements. Notwithstanding these duties, the legislature manifested the strong policy preference that voluntarily made post-marital agreements are enforceable.
Beside a Cohabitation and Domestic Partnership Agreement, what other documents should you supplement for a more complete legal coverage?
- A will with a designated executor to handle execution and distribution of all assets
- A durable financial power of attorney
- A durable medical power of attorney, directive to physicians, and a HIPPAA release form
- Partnership agreement to set out and clarify property rights, define ownership and related issues upon dissolution
Cohabitation, domestic partnership, premarital and post-marital agreements may be as creative as a party determines necessary. However, care must be given to see that such agreements protect the party, keep with public policy, and adhere to current Texas family law and applicable contractual law.
Protecting Your Business with a Prenup or a Postnup
When couples says “I do” one must be thoughtful of the potential consequences to a Small Business owner. A Small Business owner without proper preparation and/or knowledge may soon be saying “our assets” instead of “my assets”. Small Business owners should closely examine their fiduciary duties to their spouse in reference to community assets that may arise when two individuals acquire a marriage license and marry or marry by common law. A small business owner can protect his/her premarital property by keeping it under their control rather than risking community characterization.
Pre-Nuptial agreements are binding technical contracts that safe-guard an individual’s properties, monies, and business belongings in detail. These contracts may be specific, complex, and meticulous. An attorney should be consulted. The Pre-Nuptial agreement can dictate, regulate or mitigate manage next of:
- The entitlements of spousal support
- The inheritance regarding Insurance Policies
- The specific allocation of resources and properties in a Will, Trust, or Business
- The marital property claims in reference to both parties
- The ability to Own, Sell, Purchase, Rent, Mortgage, and Regulate any Separate or Community Properties
If an individual has married before a Pre-Nuptial contract is executed there is still hope and a path to take in order to insure protection of your small business. A Post-Nuptial agreement protects a Small Business owner’s property after the fact and should be utilized if required or desired. The Post-Nuptial agreement is similar to the Pre-Nuptial agreement but more care and specificity is required since some or all an individual’s assets may have taken on the attributes of community property because of the spouse’s inherent property rights after the marriage has taken place.
There are three major Ante-Nuptial agreements:
1.) Partition and Exchange Agreement: This Agreement regulates the financial allocation of a Small Business allowing monies and stock to remain separate property rather than becoming community property over time. It also separates and characterizes each spouse’s future income. The agreement allows Small Business owner’s the ability to have independent control over their business without empowering or including their spouse in decision making or management.
2.) Agreement Concerning Income from Separate Property: The principal feature of this agreement is to protect an individual’s corpus & income that exists or is produced by their Small Business. Even If there is an existing Post-Nuptial agreement that inhibits a spouse from attaining stocks or money within a specific Small Business, the actual income the Small Business produces may become community and the other spouse is entitled to their share upon dissolution of the marriage. This is tricky, for a Small Business owner is right in believing that the property and assets of the business itself is independently theirs, but he/she is wrong in the assumption that the profit made by their business is independently theirs as well. This Agreement allows a Business Owner to control, manage, and personally own all the income that is realized through his/her company. This Agreement must be signed by the owner and his/her spouse and should be as concrete as possible to avoid problems in any type of litigation process.
3.) Complex Estate Planning: Estate planning is helpful and smart. Many Post-Nuptial agreements allow independent properties to modify the community status of property to attain certain tax breaks that are applied to married couples. This may put a smile on a Small Business owner’s face for a while as he/she reaps the benefits of tax-deductions, but if a divorce occurs these tax exemptions could become proof of the existence of community property to be awarded to his/her spouse. Pre and post marital agreements may not be necessary dependent on specific situations, but if they are necessary the agreements will ensure the control of one’s business assets, income, and properties. The law was created to help ensure the protection of people’s premarital rights. If you are a Small Business owner read up on yours rights and avoid not being taken advantage of by a once loving spouse in the future.
Cohabitation and Domestic Partnership Agreements
Premarital and post-marital agreements in Texas have a complex history immersed in the community property presumption, the sate constitution, statutes and case law. Originally, such agreements were found to be unenforceable. But with amendments to the Texas Constitution, evolving statutes, recent case law, and improved draftsmanship, such agreements are now enforceable under contract law.
For some couples living together is a precursor to marriage; for others, there is no intent to ever marry, or the law prohibits the marriage, as in Texas with same sex marriages. The simple fact is, domestic partnership agreements involve a wide variety of circumstances, which may or may not involve the gay or lesbian couple.
Many couples choose to live together so they do not lose certain benefits under current rules of social security, military and insurance disability programs, or to stop those benefits from being taken away from their children. In other cases, couples who are divorced, and who may have children, may want to protect certain assets. In situations such as trust funds or inherited funds, beneficiaries simply do not want to place family money at risk. Other couples choose to shelter their own resources from the real or perceived obligations of their partner.
The marital agreement is considered to be a contract under Texas law. The premarital agreement must be in writing and signed by both parties. No actual consideration is required; however, to conform with contractual law, it may be wise to provide benefits for the non-monied party to avoid a later finding of unconscionability, particularly if the financial condition of the non-monied party under the agreement will be poor.
Matters that may be dealt with in a premarital agreement include, but are not limited to, the following:
- the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;
- the rights and obligations of each of the parties in any of the property of either or both of them whenever or wherever acquired or located;
- the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
- the modification or elimination of spousal support;
- the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
- the ownership rights in and disposition of the death benefit from a life insurance policy;
- the choice of law governing the construction of the agreement; and
- any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
Child support may not be adversely affected by a premarital agreement. Therefore, provisions providing for the elimination of child support upon separation or divorce are unenforceable. However, provisions for private education, college expenses, and choice of residence may be included, but may still be reviewed by a court to determine if they are in keeping with public policy.
In post-marital agreements, it has been noted that a fiduciary duty exists that is not present in pre-marital agreements between spouses or prospective spouses. Case law states that a confidential relationship between husband and wife imposes the same duties of good faith and fair dealing on spouses as required of partners and other fiduciaries. However, adverse parties who have retained independent counsel may not owe fiduciary duties to one another. Texas Legislature enacted Section 4.105 with the understanding that married spouses owing fiduciary duties to one another would negotiate and execute post-marital agreements. Not withstanding these duties, the legislature manifested the strong policy preference that voluntarily made post-marital agreements are enforceable.
Cohabitation, domestic partnership, premarital and post-marital agreements may be as creative as a party determines necessary. However, care must be given to see that such agreements protect the party, keep with public policy, and adhere to current Texas family law and applicable contractual law.
