So, you’re getting hitched in the Lone Star State! Whether you plan to say “I do” under a canopy of trees in the Texas hill country, a historic hotel in a big Texas town, or in a rustic barn on a ranch hidden from city lights, your wedding will be memorable. Congratulations on your engagement! But you’re here now, because you’re asking smart questions and planning for your financial future before merging lives with your fiancé. I just might congratulate you again! Being intentional about your future and having important conversations with your partner now will save you from financial stress and complications in the future. How is property divided in Texas? Does a prenup override Texas law? Keep reading to find the answers to your questions and more!
How is property divided in Texas without a prenup?
Texas is a community property state. This means that all assets acquired during the marriage, regardless of who earned it, are divided in a way the court deems “just and fair” (FAM §7.006). What does that mean? Texas courts generally divide community property equally upon divorce. However, sometimes when deciding how to distribute assets, courts will consider the circumstances of the marriage, such as earning capacities, length of the marriage, who is at fault in the divorce, contributions throughout the marriage, and misappropriation of marital funds.
The Texas Family Code governs the division of property upon divorce and establishes that there is a presumption of community property. This means that property possessed by either spouse during the marriage or upon the divorce is presumed to be community property (Texas Family Code § 3.003). Types of assets that can be classified as community property include, but are not limited to, income, real estate, bank accounts, retirement accounts, and investments.
Separate Property, on the other hand, is property a spouse acquires outside of the marriage. It’s usually made up of assets a party acquired before marriage, not during. Section 3.006 of the Texas Family Code states that if title to a property confirms that it was acquired prior to marriage, that asset will be classified as separate property and is exempt from the community property presumption (Texas Family Code §3.006). Separate property includes, but is not limited to:
- Property acquired prior to marriage
- Inheritance received during marriage
- Property specifically classified as separate in the prenup
- Gifts clearly given to one spouse during the marriage
- Personal injury compensation minus any loss of earning capacity during marriage (Texas Family Code §3.001)
Can a prenup override Texas community property law?
You bet it can! Texas gives a lot of credibility and respect to written contracts signed voluntarily by both parties. For example, say you get married in your 20s and you don’t have a prenuptial agreement in place. After a few years of marriage and plugging away at your office job, your career starts to take off and eventually hits the stratosphere! You’re bringing in ten times the income you earned back in your twenties. Thirty years after marrying you spouse, you two dissolve the marriage. A court will likely divide all the assets you and your spouse acquired during the marriage equally between you two. This means that the income you received, the appreciation on retirement accounts, investments, etc. during your marriage will likely be divided equally.
Now, let’s say you and your partner signed a prenup that specifically classified all earned income and appreciation on retirement accounts during marriage as separate property… you can guess where this is going. Upon divorce, pending the validity and enforceability of your prenup, the income earned and the appreciation on your retirement accounts during your 30-year-marriage will likely avoid being distributed upon divorce. They were earmarked as separate property and therefore won’t be divided.
If you’re about to say “I do,” but first want to ensure that your financial future is protected, a prenup is probably the right choice for you.
Can I keep my assets separate throughout marriage without a prenup?
This is a great question. You can attempt to keep your separate assets separate throughout your marriage, but that is very challenging to do. Have you heard of the term, commingling? Commingling is when separate property is mixed with community property during marriage to the point where the separate property cannot be traced back to its origin. When this happens, the separate property loses its character and becomes community property.
This is a common occurrence in marriage since couples merge lives and oftentimes share everything from expenses to experiences. Depositing money from a separate bank account into a joint bank account, using separate funds to pay for marital expenses, even using a portion of your inheritance for a down payment on a marital home could alter the original separate property classification of an asset and make it community property.
So, you can attempt to keep your separate property separate throughout marriage, but without a prenuptial agreement, your separate assets are at risk.
What is required for a valid prenup in Texas?
It is critical that your prenuptial agreement meets Texas’s requirements for validity to ensure it’s enforceable in court. By following the guidelines set by Texas law, a prenup should provide clarity regarding each party’s financial situation and provide certainty regarding how assets and debts will be distributed in the future if the marriage were to be dissolved. According to Section 4 of the Texas Family Code, to be valid in the state of Texas, prenuptial agreements must:
- Be in writing
- Be signed voluntarily by both parties
- Include fair and reasonable disclosure of financials (Texas Family Code §4.006)
Texas will uphold a prenup if it abides by the above requirements. However, a prenuptial agreement may be held unenforceable if a party contesting it proves that the agreement was not signed voluntarily, or that it was extremely one-sided (i.e., unconscionable) at the time of signing.
To prove that the prenup was unconscionable at signing, the contesting party must prove that:
- They were not provided fair and reasonable financial disclosures before signing the prenup
- They did not expressly and voluntarily waive, in writing, their right to further disclosure of the financials, and
- They did not have, or reasonably could not have had, adequate knowledge of the financial situation of the other party (Texas Family Code §4.006)
Before signing your prenuptial agreement it’s important that your agreement meets the standards set by Texas law. Using a well-trusted online prenup platform such as HelloPrenup or hiring a family law attorney experienced in drafting prenups would be a wise decision.
Wrapping up this Texas-sized topic
Generally, since Texas is a community property state, assets owned by either party during the marriage are split 50-50. In a divorce, Texas courts generally divide community property assets equally, regardless of who earned the assets. Separate property is immune from disbursement. A prenuptial agreement overrides Texas laws regarding community property, and the agreement that the parties make regarding classification of their assets will be honored by a court if the prenup is valid and enforceable. So with that in mind, you’ve now educated yourself on the ins and outs of Texas community property and the peace of mind a prenup can provide. I hope you found the clarity you came here seeking and can confidently two-step your way towards a productive financial conversation with your future spouse!
Jourdan Stewart is Legal Operations Attorney at HelloPrenup, and a Texas licensed attorney. Jourdan is experienced in drafting prenuptial agreements, and her legal expertise extends to other aspects of family law, business law and entertainment law. Jourdan earned her law degree from Pepperdine University, her MBA from The Acton School of Business, and her BBA from Baylor University. Jourdan’s favorite aspect of legal practice is helping clients fully understand and achieve their goals. She finds great satisfaction in tailoring solutions to each client’s unique set of wants and needs. When she’s not practicing law, Jourdan can be found in nature with her two children and their dog, Stewey.
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