Property Agreements
I. Nonmarital Cohabitation Agreements
A promise or agreement made on consideration of marriage or nonmarital conjugal cohabitation is not enforceable unless the promise or agreement or a memorandum of the promise or agreement is in writing and signed by the person obligated by the promise or agreement. Tex. Fam. Code § 1.108. See O’Farrill Avila v. Gonzales, 974 S.W.2d 237, 243–44 (Tex. App.—San Antonio 1998, pet. denied) (court enforced written contract between unmarried parents for monthly support and oral agreement to pay mortgage).
Except for the requirement of Tex. Fam. Code § 1.108 that the agreement be in writing, the Family Code makes no provision for nonmarital cohabitation agreements. Sections 4.001 through 4.010 apply to single persons but only those intending to marry. See Tex. Fam. Code § 4.001(1). All other agreements covered within the chapter pertaining to property agreements (sections 4.101 through 4.106 and 4.201 through 4.206) involve married persons.
Even though basic contract law obviously applies, a successful argument that the same degree of confidentiality or fiduciary obligation exists between persons who live together as between those who are married or about to marry could trigger virtually the same burdens of proof as those found in Family Code sections 4.006 and 4.105. See Andrews v. Andrews, 677 S.W.2d 171, 174 (Tex. App.—Austin 1984, no writ).
In drafting contractual agreements between unmarried persons who do not intend to marry, much of the terminology and all the presumptions and marital property concepts become useless and inapplicable.
The following advice on drafting these types of agreements is instructive:
Because the body of law on “marital property” may not apply to these types of agreements, . . . the presumptions and rules which ultimately protect a married party from divestiture of property are not available. Representing clients within this foreign territory requires the draftsman to forget the protections of marital property law and draft provisions which cover ownership, management and division of property acquired by inheritance and gift as well as the property which was owned by each party before the partnership or cohabitation began. There are no assumptions that can be made when drafting an agreement between unmarried persons. The attorney drafting such an agreement must ask extensive questions and seek out the parties’ intent in a much more comprehensive way. The attorney cannot simply use seemingly ubiquitous terms like “separate” and “community” property and expect a court of law to later apply the common definitions which are used for married couples. In fact, as discussed infra, use of these terms might actually invalidate the contract based on stated public policy grounds.
It is wise for any contractual agreement to define terminology where necessary, but specifically for non-marital cohabitation agreements, it is imperative to expressly provide for definitions necessary to reflect the parties’ intent.
Diana S. Friedman, Thomas A. Greenwald, Lynn Kamin, Katherine A. Kinser, Jimmy Vaught, Aaron M.Reimer, The Future of Premarital, Postmarital, and Cohabitation Agreements, State Bar of Tex. Prof. Dev. Program, New Frontiers in Marital Property Law Course 2 (2010).
COMMENT: To minimize future claims of overreaching, the prudent attorney should follow the same strict precautions in executing a cohabitation agreement as in executing a premarital agreement. The attorney should always recommend that both parties employ independent counsel to permit full disclosure and to ensure informed consent and an absence of fraud or duress.
No reported cases relating to enforcement of nonmarital cohabitation agreements under the statute of frauds have been found.
See section 63.26 below concerning agreements to arbitrate.
[Sections 63.3 through 63.10 are reserved for expansion.]
II. Marital Property Agreements
Premarital Agreements: A premarital agreement is an agreement between prospective spouses made in contemplation of marriage to be effective when the parties are married. Tex. Fam. Code §§ 4.001(1), 4.004. The official comment to section 2 of the Uniform Premarital Agreement Act (Family Code section 4.002) refers specifically to a ceremonial marriage rather than an informal marriage; see www.uniformlaws.org/viewdocument/final-act-with-comments-126?CommunityKey=77680803
-bd1c-4f01-a03b-64db132a35fa&tab=librarydocuments.
Partition or Exchange Agreements: Spouses may partition or exchange between themselves all or part of their community property, then existing or to be acquired, in any manner they desire. Property transferred to a spouse by partition or exchange agreement becomes that spouse’s separate property. Tex. Fam. Code § 4.102. The term partition as used in the Family Code contemplates a division of property among the parties, not a complete forfeiture. McBride v. McBride, 797 S.W.2d 689, 692 (Tex. App.—Houston [14th Dist.] 1990, writ denied).
Partition or exchange agreements made on or after September 1, 2005, may also provide that future earnings and income arising from the transferred property will be the separate property of the owning spouse. Tex. Fam. Code § 4.102. (For agreements made on or after September 1, 2003, but before September 1, 2005, the partition or exchange of property includes future earnings and income arising from the property as the separate property of the owning spouse unless the spouses agree in a record that the future earnings and income will be community property after the partition or exchange. Acts 2003, 78th Leg., R.S., ch. 230, § 2 (H.B. 885), eff. Sept. 1, 2003.)
Agreements between Spouses Regarding Income from Separate Property: Spouses may agree that the income or property arising from the separate property that is then owned by one of them, or that may thereafter be acquired, shall be the separate property of the owner. Tex. Fam. Code § 4.103. Partition or exchange agreements made on or after September 1, 2005, may provide that future earnings and income arising from the transferred property will be the separate property of the owning spouse. Tex. Fam. Code § 4.102. (For agreements made on or after September 1, 2003, but before September 1, 2005, the partition or exchange of property includes future earnings and income arising from the property as the separate property of the owning spouse, unless the spouses agree in a record that the future earnings and income will be community property after the partition or exchange. Acts 2003, 78th Leg., R.S., ch. 230, § 2 (H.B. 885), eff. Sept. 1, 2003.)
If a partition or exchange agreement is made retroactive to January 1 of the year in which the suit for dissolution of marriage is filed, the court, in a decree of divorce or annulment, can confirm as separate property the income and earnings from the spouse’s property, wages, salaries, and other forms of compensation received on or after January 1 of the year in which the suit for dissolution of marriage was filed or received in another year during which the spouses were married for any part of the year. Tex. Fam. Code § 7.002(c).
COMMENT: Family Code section 7.002(c) provides statutory authority to the practice of divorcing spouses filing separate tax returns and reporting their individual earnings at the end of divorce as if they were not married any part of that year and thus not having to go through the complication of reporting one half of each other’s income up to the day of divorce. It is unclear whether the Internal Revenue Service or the tax courts will recognize the retroactive effect of such a partition. The wise practitioner will advise the client to consult with a certified public accountant or tax attorney before relying on this statute.
Agreements to Convert Separate Property to Community Property: Spouses may agree that all or part of the separate property owned by either or both of them is converted to community property. Tex. Fam. Code § 4.202.
The Texas Constitution provides as follows:
All property, both real and personal, of a spouse owned or claimed before marriage, and that acquired afterward by gift, devise or descent, shall be the separate property of that spouse; and laws shall be passed more clearly defining the rights of the spouses, in relation to separate and community property; provided that persons about to marry and spouses, without the intention to defraud pre-existing creditors, may by written instrument from time to time partition between themselves all or part of their property, then existing or to be acquired, or exchange between themselves the community interest of one spouse or future spouse in any property for the community interest of the other spouse or future spouse in other community property then existing or to be acquired, whereupon the portion or interest set aside to each spouse shall be and constitute a part of the separate property and estate of such spouse or future spouse; spouses also may from time to time, by written instrument, agree between themselves that the income or property from all or part of the separate property then owned or which thereafter might be acquired by only one of them, shall be the separate property of that spouse; if one spouse makes a gift of property to the other that gift is presumed to include all the income or property which might arise from that gift of property; spouses may agree in writing that all or part of their community property becomes the property of the surviving spouse on the death of a spouse; and spouses may agree in writing that all or part of the separate property owned by either or both of them shall be the spouses’ community property.
In Beck v. Beck, 814 S.W.2d 745, 749 (Tex. 1991), the court held that a premarital agreement entered into before 1980 under Family Code section 5.41 (now section 4.001) was impliedly validated by adoption of the 1980 amendment to section 15 of article XVI. The implied-validation doctrine was applied by the court only to constitutional amendments and not to legislative statutory changes.
§ 63.13Contents of Marital Property Agreements
“Property” is defined as an interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings. Tex. Fam. Code § 4.001(2).
Prospective spouses may contract in a premarital agreement with respect to—
1.the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;
2.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;
3.the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;
4.the modification or elimination of spousal support;
5.the making of a will, trust, or other arrangement to carry out the provisions of the agreement;
6.the ownership rights in and disposition of the death benefit from a life insurance policy;
7.the choice of law governing the construction of the agreement; and
8.any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.
A premarital or marital property agreement, whether executed before, on, or after September 1, 2009, that satisfies the requirements of Family Code chapter 4 is effective to waive, release, assign, or partition a claim for reimbursement under Family Code chapter 3, subchapter E, to the same extent the agreement would have been effective to waive, release, assign, or partition a claim for reimbursement under the law as it existed immediately before September 1, 2009, unless the agreement provides otherwise. Tex. Fam. Code § 3.410.
In a marital property agreement, spouses may partition or exchange between themselves all or part of their community property, then existing or to be acquired, as the spouses may desire. Marital property agreements can affect only community interests in property. To the extent an agreement purports to affect property that was already undisputedly either party’s separate property, the agreement has no effect. Robertson v. Robertson, No. 13-14-00523-CV, 2015 WL 7820814, at *5 (Tex. App.—Corpus Christi–Edinburg Dec. 3, 2015, no pet.) (mem. op.).
Property or a property interest transferred to a spouse by a partition or exchange agreement becomes that spouse’s separate property. Partition or exchange agreements made on or after September 1, 2005, may also provide that future earnings and income arising from the transferred property will be the separate property of the owning spouse. Tex. Fam. Code § 4.102. (For agreements made on or after September 1, 2003, but before September 1, 2005, the partition or exchange of property includes future earnings and income arising from the property as the separate property of the owning spouse unless the spouses agree in a record that the future earnings and income will be community property after the partition or exchange. Acts 2003, 78th Leg., R.S., ch. 230, § 2 (H.B. 885), eff. Sept. 1, 2003.) Only after marriage may parties agree that income or property arising from separate property will be separate property rather than community property. Tex. Const. art. XVI, § 15; Tex. Fam. Code § 4.103.
If a premarital agreement or marital property agreement provides for an obligation to sign an agreed-on release of interests in the other party’s separate property in the event of divorce, that obligation will arise only on a court’s rendering of an order of divorce and not by the mere filing of a petition for divorce. In re Estate of Loftis, No. 07-14-00135-CV, 2015 WL 6447179, at *5 (Tex. App.—Amarillo Oct. 23, 2015, no pet.) (mem. op.) (where husband died while divorce case was pending but before order of divorce was rendered, disposition of property was governed by provisions of parties’ premarital agreement pertaining to dissolution of marriage by death, rather than provisions pertaining to dissolution of marriage by divorce).
Spouses may agree to convert all or part of the separate property owned by either or both spouses to community property. Tex. Fam. Code §§ 4.202, 4.203.
§ 63.13:2Division of Future Earnings
Persons about to marry may partition or exchange between themselves salaries and earnings to be acquired by them during their future marriage. Winger v. Pianka, 831 S.W.2d 853, 858 (Tex. App.—Austin 1992, writ denied). This is true, however, only if the agreement specifically provides for such division. See Fanning v. Fanning, 828 S.W.2d 135 (Tex. App.—Waco 1992), rev’d in part, 847 S.W.2d 225 (Tex. 1993). In Dewey v. Dewey, the court stated, “Since appellant’s income was not expressly listed in the premarital agreement and it was apparently acquired during marriage, it was clearly community property.” See Dewey v. Dewey, 745 S.W.2d 514, 517 (Tex. App.—Corpus Christi–Edinburg 1988, writ denied).
Without express language in a premarital agreement stating that a party’s salary, earnings, income, or employee benefits during the marriage would be the party’s separate property, contributions made to the party’s retirement plan during the marriage were community property, not separate property. McClary v. Thompson, 65 S.W.3d 829, 838 (Tex. App.—Fort Worth 2002, pet. denied). Similarly, the court held that a premarital agreement with the statement that the parties would take all steps necessary to maintain the separate-property character of their property, including earnings, merely expressed their intent and was not sufficient to act as an actual partition, absent a more specific written agreement. Bradley v. Bradley, 725 S.W.2d 503, 504 (Tex. App.—Corpus Christi–Edinburg 1987, no writ).
Premarital agreements will be construed narrowly in favor of the community estate. Williams v. Williams, 246 S.W.3d 207, 211 (Tex. App.—Houston [14th Dist.] 2007, no pet.). In Williams the court stated that the premarital agreement language, “all revenues, increases, and income from such separate property and from their respective personal efforts will be separate property,” considered in the context of the entire agreement, did not convert wages and salaries earned during the marriage into separate property. See Williams, 246 S.W.3d at 214.
§ 63.13:3Division of Income from Separate Property
The Texas Constitution clearly states that prospective spouses and spouses may make certain agreements relating to their marital property. In addition, spouses (but not prospective spouses) may enter into written agreements recharacterizing as separate property the income or property from separate property. Tex. Const. art. XVI, § 15.
Historically, courts have strictly adhered to the language of the constitution and thus have refused to enforce premarital agreements that attempted to prospectively partition income from separate property. Contrary to the Fanning decision, the Fourteenth Court of Appeals upheld a premarital agreement dividing income from separate property on the grounds that courts should “validate the intent of the parties and . . . uphold premarital agreements against constitutional challenges unless the language of the agreement forecloses that choice.” See Dokmanovic v. Schwarz, 880 S.W.2d 272, 275 (Tex. App.—Houston [14th Dist.] 1994, no writ).
COMMENT: Despite the Dokmanovic decision, it is still a better practice to have the parties, following their marriage, execute an additional partition and exchange agreement reaffirming that income from separate property will remain separate to conform to the literal wording of the Texas Constitution.
§ 63.13:4Provisions Relating to Children
Premarital property agreements that adversely affect child support are prohibited. Tex. Fam. Code § 4.003(b). However, the official comment to section 3 of the Uniform Premarital Agreement Act (Family Code section 4.003) indicates that an agreement could include provisions such as those relating to the upbringing of children (see www
.uniformlaws.org/viewdocument/final-act-with-comments-126?CommunityKey=
77680803-bd1c-4f01-a03b-64db132a35fa&tab=librarydocuments); examples might include attendance at private school, residency, funding of a trust, or funds for college expenses. Presumably, some child-related agreements could be found to be a violation of public policy and therefore prohibited by section 4.003(a)(8).
Provisions relating to support of children from a prior marriage are frequently contained in premarital agreements and would not be in violation of public policy as between the parent and stepparent. In Ex parte Hall, prospective spouses Craig and MaryAnna entered into a prenuptial agreement calling for Craig to pay MaryAnna’s living expenses throughout their marriage, as well as the reasonable expenses for maintenance and support of her two children by her former spouse. Ex parte Hall, 854 S.W.2d 656, 657 (Tex. 1993) (orig. proceeding). The trial court entered temporary orders requiring Craig to pay temporary support, based solely on the prenuptial agreement, of $23,982.75 per month. Craig was held in contempt for nonpayment and filed a writ of mandamus to the Texas Supreme Court. The court held that Craig’s failure to pay temporary spousal support and temporary child support for his stepchildren, pursuant to a court order, which was based on a prenuptial agreement, is not enforceable by contempt but could be enforceable under a breach-of-contract theory. Ex parte Hall, 854 S.W.2d at 657. The court stated that an obligation that the law imposes on spouses to support one another and on parents to support their children is not considered a “debt” within Texas Constitution article I, section 18, but a legal duty arising out of the status of the parties. However, a person may also contract to support his or her spouse and children, and that obligation, to the extent it exceeds his or her legal duty, is a debt. The contract may be enforced by an order requiring payment of the support as agreed, but to the extent the obligation is a debt, it is enforceable only by ordinary processes of law. Ex parte Hall, 854 S.W.2d at 658.
COMMENT: There is neither statutory authority for nor prohibition against married persons including child-related provisions in a postnuptial agreement, but there is no reason to think that courts would treat postnuptial agreements differently from premarital agreements in this regard.
Spousal support is recognized as a subject appropriate for premarital property agreements. See Tex. Fam. Code § 4.003(a)(4). The official comment to section 3 of the Uniform Premarital Agreement Act (Family Code section 4.003) notes that there is a split among states about whether provisions in marital property agreements relating to spousal support will control when the parties divorce. It further states that “the better view and growing trend is to permit a premarital agreement to govern this matter if the agreement and the circumstances of its execution satisfy certain standards.” See www
.uniformlaws.org/viewdocument/final-act-with-comments-126?CommunityKey=
77680803-bd1c-4f01-a03b-64db132a35fa&tab=librarydocuments. Since the Texas spousal support statutes have been enacted, no cases have addressed this issue.
COMMENT: When Texas adopted the Uniform Premarital Agreement Act in 1987, the legislature eliminated the following language from the Uniform Act:
If a provision of a premarital agreement modifies or eliminates spousal support and that modification or elimination causes one party to the agreement to be eligible for support under a program of public assistance at the time of separation or marital dissolution, a court, notwithstanding the terms of the agreement, may require the other party to provide support to the extent necessary to avoid that eligibility.
Certainly, an argument could be made that an unconditional waiver of maintenance violates public policy in circumstances in which an award of alimony could be based on a conviction or a no-contest plea to criminal family violence charges or if the waiver of spousal maintenance would force a former spouse to require governmental assistance.
No specific mention of spousal support, maintenance, or alimony is contained in the Family Code sections relating to postnuptial agreements.
Premarital and marital property agreements must be made “without the intention to defraud pre-existing creditors.” Tex. Const. art. XVI, § 15. The Family Code does not expressly address provisions in premarital agreements relating to the rights of preexisting creditors. However, section 4.106(a) regarding marital agreements states, “A provision of a partition or exchange agreement made under this subchapter is void with respect to the rights of a preexisting creditor whose rights are intended to be defrauded by it.” Tex. Fam. Code § 4.106(a). Further, section 4.206(a) contains the following language to protect the rights of preexisting creditors: “A conversion of separate property to community property does not affect the rights of a preexisting creditor of the spouse whose separate property is being converted.” Tex. Fam. Code § 4.206(a).
Little case law exists as to the rights of creditors with regard to premarital and marital property agreements. However, in Calmes v. United States, the court upheld a Texas premarital agreement in light of the Internal Revenue Service’s attempts to levy on the wife’s personal earnings. See Calmes v. United States, 926 F. Supp. 582, 584 (N.D. Tex. 1996). The IRS sought to levy against the wife’s salary to satisfy a tax deficiency for the years 1984–89 owed by her husband. However, before their marriage in September 1989, the parties entered into a premarital agreement providing that their separate property remain separate and that their respective employment income remain their separate property. Thus, when the IRS attempted to levy on the wife’s wages, she argued that her separate property could not be attached to satisfy her husband’s separate debt. The IRS, on the other hand, argued that the agreement’s characterization of the wife’s earnings “is void as to the United States, as it was entered into in an effort to hinder, delay or defraud the defendant, a preexisting creditor.” Calmes, 926 F. Supp. at 585.
After a thorough review of Texas community property law, as well as the rights of spouses and persons about to marry to enter into marital property agreements, the court found the Calmes’s agreement to be a valid premarital agreement under Texas law. The court then looked at the IRS’s argument that the agreement was void as an attempt to defraud a “preexisting creditor.” Calmes, 926 F. Supp. at 585.
The court found in favor of Susan Calmes and against the IRS for a wrongful levy:
The premarital agreement effectively exchanged the community interests in the personal service income between the parties. Therefore, under Texas law, Jack N. Calmes never had, and does not now have, a community property interest in half of Susan Calmes personal service income. Additionally, the premarital agreement was not a fraudulent transfer which the United States may set aside by virtue of its status as a preexisting creditor.
Calmes, 926 F. Supp. at 592 (emphasis added).
A different result was reached in In re Hinsley, 201 F.3d 638 (5th Cir. 2000), a bankruptcy case brought by the bankruptcy trustee against the husband and wife. In 1989, the parties executed partition agreements that purported to divide their community estate into separate property, pursuant to Family Code section 4.102. The partition agreements were at issue because the husband filed for bankruptcy on August 10, 1995, and the bankruptcy trustee sought to reach assets assigned to the wife in the partition. In holding that the partition of the community estate with a Texas debtor and his nondebtor wife was void as fraudulent, the court noted Family Code section 4.106(a), which provides, “A provision of a partition or exchange agreement made under this subchapter is void with respect to the rights of a preexisting creditor whose rights are intended to be defrauded by it.” In re Hinsley, 201 F.3d at 642. The court observed that Texas courts have not addressed whether actions brought under Family Code section 4.106 must meet the requirements of the Texas Uniform Fraudulent Transfer Act (Tex. Bus. & Com. Code § 24.005). The court held that the burden in Family Code section 4.106 cases should be the same as that of Texas Business and Commerce Code section 24.005 cases. In re Hinsley, 201 F.3d at 643.
The court noted that section 24.005(b) of the Texas Business and Commerce Code lists eleven nonexclusive badges of fraud that may be used to prove the fraudulent intent of the transferor and the bankruptcy trustee contended that eight of the badges of fraud were present because of the conduct of the Hinsleys. The court further noted that one of the Texas Uniform Fraudulent Transfer Act’s badges of fraud is whether the transferor received consideration reasonably equivalent in value to the asset transferred (see Tex. Bus. & Com. Code § 24.005(b)(8)) and stated that “[i]ntangible, non-economic benefits, such as preservation of marriage, do not constitute reasonably equivalent value.” In re Hinsley, 201 F.3d at 643. In essence, the court held there was a failure of consideration. The Hinsleys’ partition agreements were held to be void with respect to the rights of the preexisting creditors, who were defrauded. In re Hinsley, 201 F.3d at 644.
Parties can waive their rights, including statutory homestead rights, by means of a marital property agreement. See Hunter v. Clark, 687 S.W.2d 811, 816–17 (Tex. App.—San Antonio 1985, no writ).
Federal law preempts the waiver of rights to survivor benefits in ERISA-qualified plans by persons about to marry in a premarital agreement. The federal Employee Retirement Income Security Act (ERISA) statute expressly provides that it supersedes state laws regulating qualified employee benefit plans. 29 U.S.C. § 1144(a). Thus, state law is preempted generally in that area of regulation. It has been routinely held that a waiver of rights to survivor benefits in an ERISA-qualified plan in a premarital agreement is ineffective, allowing the surviving spouse to receive survivor benefits even though others may be named as beneficiaries with the plan administrator. See, e.g., Hurwitz v. Sher, 789 F. Supp. 134 (S.D.N.Y. 1992), aff’d, 982 F.2d 778 (2d Cir. 1992); Zinn v. Donaldson Co., 799 F. Supp. 69 (D. Minn. 1992).
However, spouses can waive rights to retirement benefits in marital agreements. See the discussion in section 63.23 below.
§ 63.14Formalities for Premarital Agreements
Consideration: Premarital agreements, which require no consideration, must be in writing and signed by both parties. Tex. Fam. Code § 4.002. See Ruiz v. Ruiz, No. 04-16-00016-CV, 2016 WL 7445121, at *3 (Tex. App.—San Antonio Dec. 28, 2016, no pet.) (mem. op.) (Mexican marriage certificate showed parties selected separate-property regime but was not signed by parties, and no signed marriage application was offered in evidence; thus certificate did not meet requirements of valid and enforceable premarital agreement under Texas law).
Amendment and Revocation: After marriage, a premarital agreement may be amended or revoked only by a written agreement signed by the parties. The amended agreement or the revocation is enforceable without consideration. Tex. Fam. Code § 4.005. However, if parties divorce and remarry each other, the marital property agreement relative to their first marriage will not be effective as to their second marriage. Marshall v. Marshall, 735 S.W.2d 587, 592 (Tex. App.—Dallas 1987, writ ref’d n.r.e.).
§ 63.15Formalities for Agreements between Spouses and Partition or Exchange Agreements
No Consideration: Agreements to partition or exchange community property and agreements between spouses concerning income or property from separate property must be in writing and signed by both spouses. Tex. Fam. Code § 4.104. The Family Code specifically provides that such an agreement executed on or after September 1, 2005, is enforceable without consideration. Tex. Fam. Code § 4.104; Acts 2005, 79th Leg., R.S., ch. 477, §§ 2, 4 (H.B. 202), eff. Sept. 1, 2005. However, former spouses cannot enter into a partition or exchange agreement and must have mutual consideration for an agreement to be enforceable. McClain v. McClain, No. 13-15-00449-CV, 2017 WL 1455089, at *3 (Tex. App.—Corpus Christi–Edinburg Apr. 20, 2017, no pet.) (mem. op.). Under the provisions of the Texas Constitution, there could be situations in which spouses agree that one spouse may have all the income from his or her separate property as separate property without any benefit to the other spouse. See Tex. Const. art. XVI, § 15.
For agreements made before September 1, 2005, the consideration for partition or exchange agreements would generally be the division of community property between the parties’ separate estates. See McBride v. McBride, 797 S.W.2d 689 (Tex. App.—Houston [14th Dist.] 1990, writ denied). No judicial approval of a partition and exchange agreement is required. Patino v. Patino, 687 S.W.2d 799, 801 (Tex. App.—San Antonio 1985, no writ). The document must state the intent of the parties to enter into an agreement to partition community property. Collins v. Collins, 752 S.W.2d 636, 637 (Tex. App.—Fort Worth 1988, writ ref’d) (tax returns characterizing income as separate rather than community not partition agreement). A valid agreement must contain language setting out an agreement to partition property. A forfeiture of all rights to property does not constitute a partition. McBride, 797 S.W.2d at 692 (“As we understand it, the term ‘partition’ as used in the Family Code contemplates a division of property among the parties, not a complete forfeiture.”). See In re Hinsley, 201 F.3d 638 (5th Cir. 2000), in which the court held a failure of consideration in a partition agreement caused the agreement to be a fraudulent transfer adversely affecting the rights of preexisting creditors, thus making the partition agreement void with respect to the rights of the preexisting creditors.
Amendment and Revocation: Although there is no specific statutory reference, postnuptial property agreements may be revoked or amended only by written agreement signed by the parties.
§ 63.16Formalities for Agreements between Spouses to Convert Separate Property to Community Property
An agreement to convert separate property to community property must be in writing and signed by the spouses, identify the property being converted, and specify that the property is being converted to the spouses’ community property. The agreement is enforceable without consideration. Tex. Fam. Code § 4.203(a). An agreement to convert separate property to community property must contain warning language, prominently displayed in bold-faced type, in capital letters, or underlined. If the agreement contains the required warning language, it is rebuttably presumed to provide a fair and reasonable disclosure of the legal effect of converting separate property to community property. See Tex. Fam. Code § 4.205(b). An agreement that fails to comply with these requirements is void. See Robertson v. Robertson, No. 13-14-00523-CV, 2015 WL 7820814, at *7 (Tex. App.—Corpus Christi–Edinburg Dec. 3, 2015, no pet.) (mem. op.).
§ 63.17Burden of Proof for Enforcement
Burden of Proof: In cases involving agreements signed after September 1, 1987, the burden is on the party resisting enforcement of a marital property agreement to prove that it should not be enforced. The Family Code sets out the elements that must be proved to avoid enforcement of various types of property agreements. Tex. Fam. Code § 4.006 (premarital agreements), § 4.105 (marital agreements), § 4.205 (agreements to convert separate to community). Parol evidence may be used to prove the existence of a premarital agreement. See Jurek v. Couch-Jurek, 296 S.W.3d 864 (Tex. App.—El Paso 2009, no pet.).
Statutory Defenses: The Family Code sets out the exclusive remedies and defenses available to enforce marital property agreements signed after September 1, 1993. See Tex. Fam. Code §§ 4.006(c), 4.105(c). Cases involving enforcement of agreements signed before that date are governed by the law in effect at the time the agreement was signed. Marsh v. Marsh, 949 S.W.2d 734, 738 (Tex. App.—Houston [14th Dist.] 1997, no writ) (citing Acts 1993, 73rd Leg., R.S., ch. 136, § 3 (H.B. 1274)).
Common-Law Defenses: Common-law defenses regarding the enforcement of contracts may still be available to attack pre–September 1, 1993, agreements. The three most frequently used common-law defenses are fraud, duress, and overreaching. See Matelski v. Matelski, 840 S.W.2d 124, 129 (Tex. App.—Fort Worth 1992, no writ) (“[n]o duress unless there is a threat to do some act which the party threatening has no legal right to do . . . of such character as to destroy the free agency of the party. . . [and] overcome his will and cause him to do that which he would not otherwise do”); Citizens Standard Life Insurance Co. v. Muncy, 518 S.W.2d 391, 394 (Tex. App.—Amarillo 1974, no writ) (setting out elements of fraud).
Voluntariness: A property agreement is not enforceable if the party against whom enforcement is sought proves that he did not execute the agreement voluntarily. Tex. Fam. Code § 4.006(a)(1) (premarital agreement), § 4.105(a)(1) (marital agreement), § 4.205(a)(1) (agreement converting separate property to community property).
“ ‘Voluntary’ means done by design or intentionally or purposely or by choice or of one’s own accord or by the free exercise of the will. A voluntary act proceeds from one’s own free will or is done by choice or of one’s own accord, unconstrained by external interference, force or influence.” Prigmore v. Hardware Mutual Insurance Co. of Minnesota, 225 S.W.2d 897, 899 (Tex. App.—Amarillo 1949, no writ).
Evidence of fraud and duress can provide proof of involuntariness in a premarital agreement. A party is not required to prove an “express direct threat or coercion” to establish that an agreement was involuntarily signed. Moore v. Moore, 383 S.W.3d 190, 195–96 (Tex. App.—Dallas 2012, pet. denied). There can be no duress unless there is a threat to do some act that the demanding party has no legal right to do; there must be some illegal exaction or some fault or deception; the restraint must be imminent and such as to destroy the free agency without the present means of protection. Spring Branch Bank v. Mengden, 628 S.W.2d 130, 134 (Tex. App.—Houston [14th Dist.] 1981, writ ref’d n.r.e.); see In re Marriage of Lehman, No. 14-17-00042-CV, 2018 WL 3151172, at *3 (Tex. App.—Houston [14th Dist.] June 28, 2018, no pet.) (mem. op.) (financial inability to support children not duress in signing premarital agreement).
Although mental incapacity is a common-law contract defense, which should not be available to defeat a statutory postmarital agreement, it is relevant to the question of whether the agreement was voluntarily executed. See Sanders v. Sanders, No. 02-08-00201-CV, 2010 WL 4056196 (Tex. App.—Fort Worth Oct. 14, 2010, no pet.) (mem. op.).
Unconscionability: An agreement will not be enforced against a person who can prove that the agreement was unconscionable at the time it was signed and that, before execution of the document, the person was not provided a fair and reasonable disclosure of the property or financial obligations of the other party; did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party. Tex. Fam. Code §§ 4.006(a)(2), 4.105(a)(2).
Unconscionability of the agreement is a matter of law for decision by the court. Tex. Fam. Code §§ 4.006(b), 4.105(b); Pletcher v. Goetz, 9 S.W.3d 442, 445 (Tex. App.—Fort Worth 1999, pet. denied).
No definition of “unconscionable” is offered in the statute. Citing Pearce v. Pearce, 824 S.W.2d 195, 199 (Tex. App.—El Paso 1991, writ denied), a postnuptial agreement case, the Marsh court stated that Texas courts have addressed unconscionability on a case-by-case basis, “looking to the entire atmosphere in which the agreement was made.” Marsh, 949 S.W.2d at 740. Further, the Marsh court quoted the general discussion in Wade v. Austin, 524 S.W.2d 79 (Tex. App.—Texarkana 1975, no writ), to the effect that the trial court must look to the entire atmosphere; the alternatives, if any, that were available to the parties at the time the contract was made; the nonbargaining ability of one party; whether the contract is illegal or against public policy; and whether the contract is oppressive or unreasonable:
[T]he fact that a bargain is a hard one does not entitle a party to be relieved therefrom if he assumed it fairly and voluntarily. A contract is not unenforceable on the ground that it yields a return disproportionate to the expenditures in time and money, where there has been no mistake or unfairness and the party against whom it is sought to be enforced has received and enjoyed the benefits.
Wade, 524 S.W.2d at 86; see also Fanning v. Fanning, 828 S.W.2d 135, 145–46 (Tex. App.—Waco 1992), rev’d in part, 847 S.W.2d 225 (Tex. 1993), in which the court also looked to Wade for guidance regarding whether an agreement was unconscionable. The trial court found—and the appeals court agreed—that a postnuptial partition agreement was unconscionable as it related to Mrs. Fanning, considering the circumstances (recited at length in the appeals court’s decision) surrounding the agreement’s execution.
In Fazakerly v. Fazakerly, a prenuptial agreement entered into between husband and wife was attacked after the husband’s death on the basis of unconscionability. Fazakerly v. Fazakerly, 996 S.W.2d 260 (Tex. App.—Eastland 1999, pet. denied). The court held that “[t]he mere fact that a party made a hard bargain does not allow him relief from a freely and voluntarily assumed contract; parties may contract almost without limitation regarding their property.” Fazakerly, 996 S.W.2d at 265.
The official comment to section 6 of the Uniform Premarital Agreement Act (Family Code section 4.006) instructs attorneys to look to commercial and contract law to define the term unconscionable. See www.uniformlaws.org/viewdocument/final-act-with
-comments-126?CommunityKey=77680803-bd1c-4f01-a03b-64db132a35fa&tab
=librarydocuments. In addition, the Pletcher court stated that since neither the legislature nor the supreme court has defined “unconscionable” in the context of marital property agreements, appellate courts have turned to the commercial context for guidance in evaluating “unconscionability.” Pletcher, 9 S.W.3d at 445. The Texas Deceptive Trade Practices–Consumer Protection Act defines an unconscionable act as an act that, to a consumer’s detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree. Tex. Bus. & Com. Code § 17.45(5). A showing that the resulting unfairness was glaringly noticeable, flagrant, complete, and unmitigated has been required. Chastain v. Koonce, 700 S.W.2d 579, 584 (Tex. 1985); see also Griffith v. Porter, 817 S.W.2d 131, 136 (Tex. App.—Tyler 1991, no writ).
Because the court determines whether an agreement was unconscionable when it was made as a matter of law, the court of appeals will independently evaluate the evidence considered by the trial court. Marsh, 949 S.W.2d at 739 (citing Daniel v. Daniel, 779 S.W.2d 110 (Tex. App.—Houston [1st Dist.] 1989, no writ)). Mere unfairness does not rise to the level of unconscionability. Chiles v. Chiles, 779 S.W.2d 127, 129 (Tex. App.—Houston [14th Dist.] 1989, writ denied). In holding that the presumption of enforceability of a premarital agreement had not been defeated, the Marsh court stated that the fact that the premarital agreement was signed shortly before the wedding does not make the agreement unconscionable, that the fact that a party was not represented by independent counsel is not dispositive, that the fact that the agreement was “one-sided” does not support a finding of unconscionability, and that the fact that a party denied reading the agreement before signing it is not grounds for voiding the contract. Marsh, 949 S.W.2d at 741–42.
Inadequate Disclosure and No Waiver: As previously indicated, if a party can prove that an agreement was unconscionable when it was signed, he must additionally prove that there was inadequate disclosure of the other party’s property or financial obligations; that the complaining party did not have, or reasonably could not have had, adequate knowledge of the other’s property or financial obligations; and that the complaining party had not waived disclosure of financial information from the other party. Tex. Fam. Code §§ 4.006(a)(2), 4.105(a)(2). The court found in Fanning that Mrs. Fanning did not have adequate disclosure of Mr. Fanning’s property or financial obligations when she signed a postnuptial partition agreement prepared by Mr. Fanning. The evidence revealed that Mr. Fanning wanted to keep Mrs. Fanning ignorant of his financial dealings because he feared a criminal investigation. He kept no documents in their home, and Mrs. Fanning did not know how much money was in his accounts, how much money Mr. Fanning made, or how much property he owned. Fanning, 828 S.W.2d at 146.
Lack of Fair and Reasonable Disclosure: An agreement to convert property to community property is not enforceable if the spouse against whom enforcement is sought proves that he or she did not receive a fair and reasonable disclosure of the legal effect of converting the property to community property. Tex. Fam. Code § 4.205(a)(2). An agreement that contains the required warning statement is rebuttably presumed to provide a fair and reasonable disclosure of the legal effect of converting separate property to community property. See Tex. Fam. Code § 4.205(b).
§ 63.19Enforcement of Premarital Agreements
Enforcement of premarital agreements is governed by Family Code section 4.006. See Tex. Fam. Code § 4.006. This provision (formerly section 5.46), as amended in September 1993, eliminates the common-law remedies or defenses such as fraud, duress, and overreaching formerly available in these cases. The 1993 amendment, however, applies only to enforcement of agreements that were executed on or after September 1, 1993. The use of common-law remedies as defenses in suits involving agreements executed before September 1, 1993, will be governed by the law in effect at the time the agreement was executed by the parties. (See Marsh v. Marsh, 949 S.W.2d 734, 738 (Tex. App.—Houston [14th Dist.] 1997, no writ), citing Acts 1993, 73rd Leg., R.S., ch. 136, § 3 (H.B. 1274), which states, “This Act takes effect September 1, 1993, and applies only to an agreement executed on or after that date. An agreement executed before that date is governed by the law in effect at the time the agreement was executed, and the former law is continued in effect for that purpose.”)
Case law before the Marsh decision on the subject of enforcement and which law controls in a specific case is misleading. The Texas Supreme Court has held that the law in effect at the time the divorce decree is signed determines the enforceability of a premarital agreement. Sadler v. Sadler, 769 S.W.2d 886, 886–87 (Tex. 1989) (per curiam). Although in Sadler the same law regarding enforcement of premarital agreements was in effect at the time the parties’ premarital agreement was signed and at the time the divorce decree was signed, the courts in Chiles v. Chiles, 779 S.W.2d 127 (Tex. App.—Houston [14th Dist.] 1989, writ denied), and Grossman v. Grossman, 799 S.W.2d 511 (Tex. App.—Corpus Christi–Edinburg 1990, no writ), followed the Sadler language even though in each of those cases the law had changed between the time the parties’ agreements were executed and the time the divorces were granted.
Void Marriages: If a marriage is determined to be void, an agreement that would otherwise have been a premarital agreement is enforceable only to the extent necessary to avoid an inequitable result. Tex. Fam. Code § 4.007. See In re Ja.D.Y., No. 05-16-01412-CV, 2018 WL 3424359, at *6 (Tex. App.—Dallas July 16, 2018, no pet.) (mem. op.).
Statute of Limitations: A statute of limitations applicable to an action asserting a claim for relief under a premarital agreement is tolled during the marriage of the parties to the agreement. Equitable defenses limiting the time for enforcement, including laches and estoppel, are available to either party. Tex. Fam. Code § 4.008.
Other Jurisdictions: Premarital agreements executed in and valid under the laws of another state may be enforced in Texas as long as they are not against the fundamental policy of Texas. Rathjen v. Rathjen, No. 05-93-00846-CV, 1995 WL 379322, at *8 (Tex. App.—Dallas May 30, 1995, writ denied) (premarital agreement valid under Hawaiian law enforceable in Texas). This also is true of premarital agreements executed in other countries. See Fraccionadora v. Delgado, 632 S.W.3d 80, 90 (Tex. App.—El Paso 2020, no pet.) (choice of separate property regime on Mexican marriage certificate enforceable in Texas).
Declaratory Judgments: Declaratory judgments have been used to bolster the enforceability of marital property agreements. A reaffirmation after marriage will still be necessary to provide that the income from separate property will be the separate property of a spouse. The purpose of a declaratory judgment in this situation is to obtain a court order stating that the marital property agreement is enforceable, constitutional, and not unconscionable. Declaratory judgments are discussed in section 61.10 in this manual.
COMMENT: There is some question as to whether the filing of suit for declaratory judgment in such a circumstance requests relief that a court may be unable to grant, on the basis that there is no justiciable controversy between the parties. See Texas Ass’n of Business v. Texas Air Control Board, 852 S.W.2d 440, 444 (Tex. 1993); Boorhem-Fields, Inc. v. Burlington Northern Railroad Co., 884 S.W.2d 530, 539 (Tex. App.—Texarkana 1994, no writ).
§ 63.20Enforcement of Marital Property Agreements
Enforcement of marital property agreements is governed by Family Code section 4.105. See Tex. Fam. Code § 4.105. This provision (formerly section 5.55), as amended in September 1993, eliminates the common-law remedies or defenses such as fraud, duress, and overreaching formerly available in these cases. The 1993 amendment, however, applies only to enforcement of agreements that were executed on or after September 1, 1993.
Courts will scrutinize marital property agreements more closely than premarital agreements because spouses owe each other special fiduciary duties. See Marsh v. Marsh, 949 S.W.2d 734, 739 n.4 (Tex. App.—Houston [14th Dist.] 1997, no writ).
In Daniel v. Daniel, 779 S.W.2d 110 (Tex. App.—Houston [1st Dist.] 1989, no writ), the court held that the common-law defenses were still viable after the 1987 amendments to former Family Code section 5.55, now section 4.105. That decision is moot after the 1993 amendment, which specifically prohibits use of common-law defenses in challenging postnuptial agreements executed after September 1, 1993.
§ 63.21Enforcement of Agreement to Convert Separate Property to Community Property
An agreement to convert separate property to community property is not enforceable if the spouse against whom enforcement is sought proves that the spouse did not (1) execute the agreement voluntarily or (2) receive a fair and reasonable disclosure of the legal effect of converting the property to community property. Tex. Fam. Code § 4.205(a). The agreement is rebuttably presumed to provide a fair and reasonable disclosure of the legal effect of converting separate property to community property when the agreement contains prescribed warning language prominently displayed in bold-faced type, in capital letters, or underlined. See Tex. Fam. Code § 4.205(b).
Burden of Proof: The burden of proof is on the party resisting enforcement of an agreement to convert separate property to community property to prove that the party did not execute the document voluntarily or that the party did not receive a fair and reasonable disclosure of the legal effect of converting separate property to community property. See Tex. Fam. Code § 4.205(a). If an enforcement proceeding occurs after the death of the spouse against whom enforcement is sought, the proof required by Family Code section 4.205(a) may be made by an heir of the spouse or the personal representative of the estate of the spouse. Tex. Fam. Code § 4.205(c).
§ 63.22Waiver of Disclosure of Financial Information
In many cases, spouses or prospective spouses entering into marital property agreements also sign documents waiving further disclosure of financial information from their partners. Execution of such a waiver effectively limits the party who wants to avoid enforcement of a marital property agreement to an argument that the agreement was not voluntarily signed.
COMMENT: In light of the words “before signing the agreement” in Family Code section 4.006(a)(2) and the words “before execution of the agreement” in section 4.105(a)(2), a waiver of disclosure of financial information should be signed, dated, and time stamped before execution of the agreement.
§ 63.23Waiver of Retirement Benefits
Despite the provisions of the Family Code, federal law dictates that future spouses cannot waive survivor retirement benefits of the other future spouse in ERISA-qualified plans. The federal Employee Retirement Income Security Act (ERISA) broadly preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA. 29 U.S.C. § 1144(a). A law “relates to” an employee benefit plan when the law has “a connection with or reference to such plan.” Shaw v. Delta Airlines, Inc., 463 U.S. 85, 96–97 (1983).
However, married persons can waive an interest in survivor benefits. ERISA provides that a spouse’s waiver of rights to “qualified joint and survivor annuity” and the “qualified preretirement survivor annuity” is not valid unless the waiver (1) is in writing, (2) either names the alternative beneficiary or states that the employee spouse may designate an alternative beneficiary without further consent of the nonemployee spouse, and (3) “acknowledges the effect” of the waiver itself and is witnessed by a plan representative or a notary public. 29 U.S.C. § 1055(c)(2).
Although not specifically dealing with premarital or postmarital agreements, the United States Supreme Court has addressed the issue of whether the terms of 29 U.S.C. § 1056(d)(1), barring the assignment or alienation of benefits, “invalidated the act of a divorced spouse, the designated beneficiary under her ex-husband’s ERISA pension plan, who purported to waive her entitlement by a federal common law waiver embodied in a divorce decree that was not a QDRO.” Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 129 S. Ct. 865, 868 (2009). The Supreme Court held that “such a waiver is not rendered invalid by the text of the antialienation provision, but that the plan administrator properly disregarded the waiver owing to its conflict with the designation made by the former husband in accordance with plan documents.” Kennedy, 129 S. Ct. at 868.
In Manning, which interpreted the Texas Family Code, the court held that federal common law applied to the dispute. Manning v. Hayes, 212 F.3d 866 (5th Cir. 2000). The court held that a named ERISA beneficiary may waive entitlement to the proceeds of an ERISA plan providing life insurance benefits if the waiver is explicit, voluntary, and made in good faith. The court concluded that the language in the premarital agreement was not an adequate waiver. Manning, 212 F.3d at 874.
A premarital agreement is interpreted as any other written contract. In re Marriage of I.C. & Q.C., 551 S.W.3d 119, 122 (Tex. 2018). In I.C., the wife sought rescission of a premarital agreement containing a forfeiture provision that stated “if [wife] seeks to invalidate some or all of this Agreement, or seeks to recover property in a manner at variance with this Agreement, then [wife] shall forfeit” the specified cash payment of five million dollars. In upholding the forfeiture, the court further stated that the interpretation of an unambiguous contract is a question of law for the court.
Attorney’s fees are recoverable for breach of a premarital agreement. See In re Marriage of Veldekens, No. 14-16-00770-CV, 2018 WL 2727837, at *5 (Tex. App.—Houston [14th Dist.] June 7, 2018, no pet.) (mem. op.) (attorney’s fees award upheld for wife’s defense of premarital agreement when husband breached agreement by claiming wife’s separate property).
§ 63.25Recording and Notice to Creditors
Marital property agreements may be recorded among the deed records in the county in which a party resides and in the county in which the real estate affected is located. An agreement serves as constructive notice to a good-faith purchaser for value or a creditor without actual notice only if the instrument is acknowledged and recorded in the county in which the real property is located. Tex. Fam. Code § 4.106(b).
A conversion of separate property to community property may be recorded in the deed records of the county in which a spouse resides and of the county in which any real property is located. Form 63-10 in this manual, Community Interest Special Warranty Deed, may be used to add the spouse in the records and avoid the need of recording the entire conversion agreement. A conversion of real property is constructive notice to a good-faith purchaser for value or a creditor without actual notice only if the agreement to convert the property is acknowledged and recorded in the deed records of the county in which the real property is located. The conversion of separate property to community property does not affect the rights of a preexisting creditor of the spouse whose separate property is being converted. Tex. Fam. Code § 4.206.
If a party seeks to avoid arbitration and asserts that the contract containing the agreement to arbitrate is not valid or enforceable, notwithstanding any provision of the contract to the contrary, the court must try the issue promptly and may order arbitration only if the court determines that the contract is valid and enforceable against the party seeking to avoid arbitration. Even if the contract is found valid and enforceable, the court may stay arbitration or refuse to compel arbitration on any other ground. These provisions do not apply to a court order, a mediated settlement agreement, a collaborative law settlement agreement, a written settlement agreement reached at an informal settlement conference, an agreed parenting plan, or any other agreement between the parties that is approved by a court. Tex. Fam. Code §§ 6.6015, 153.00715.
[Sections 63.27 through 63.30 are reserved for expansion.]
The following website contains information relating to the topic of this chapter:
Uniform Premarital Agreement Act (§§ 63.11, 63.13:4, 63.13:5, 63.18)
www.uniformlaws.org/viewdocument/final-act-with-comments-126?
CommunityKey=77680803-bd1c-4f01-a03b-64db132a35fa&tab=
librarydocuments