{"id":13099,"date":"2025-04-25T06:00:38","date_gmt":"2025-04-25T11:00:38","guid":{"rendered":"https:\/\/legaltalktexas.hammerle.com\/?p=13099"},"modified":"2025-06-18T11:53:10","modified_gmt":"2025-06-18T16:53:10","slug":"significant-limitations-texas-marital-agreements","status":"publish","type":"post","link":"https:\/\/hammerle.com\/legaltalk\/legal-talk\/significant-limitations-texas-marital-agreements\/","title":{"rendered":"Love and Consequences: Significant Limitations on Texas Marital Agreements"},"content":{"rendered":"

Let\u2019s talk about the law of unintended consequences, shall we?<\/span><\/p>\n

Sue and Sam, both Texas widowers with children, fall in love and decide to marry. They have some conflicting feelings, however.<\/span><\/p>\n

Sue wants to preserve her assets and earnings for her children after her death. She also wants to be protected from paying Sam\u2019s debts.\u00a0\u00a0<\/span><\/p>\n

Sam wants the same thing.<\/span><\/p>\n

They do some internet research and decide that they want a \u201ccommunity free\u201d marriage. To do that, they execute a <\/span>marital agreement<\/span><\/a> \u2013 permitted in Texas since 1980 \u2013 with the goal of insulating their separate estate from the claims of the other spouse and that spouse\u2019s creditors and heirs.<\/span><\/p>\n

What could possibly go wrong? Let\u2019s see\u2026<\/span><\/p>\n

What You Need to Know About a \u201cCommunity Free\u201d Marriage<\/span><\/h2>\n

Required Support<\/span><\/h3>\n

Each spouse still has a legal duty to support the other spouse for necessaries. This duty cannot be waived by a marital agreement. That means if Sam must go into the hospital and does not have the money to pay the bill, then Sue is responsible for it. Likewise, if Sue is short on money and needs new clothes, then Sam is on the hook for the bill.<\/span><\/p>\n

Child Support<\/span><\/h3>\n

If they have children together, then their agreement cannot limit either\u2019s child support obligations.<\/span><\/p>\n

Filing Taxes<\/span><\/h3>\n

If they choose to file joint income tax returns, then they each remain jointly and severally liable for the tax liability arising from that year\u2019s tax.<\/span><\/p>\n

Business Liabilities<\/span><\/h3>\n

If they are in <\/span>business<\/span><\/a> together or take some type of joint action, then each remains liable for the other person\u2019s acts. That is because each spouse is considered an agent of the other spouse.<\/span><\/p>\n

Pre-Existing Creditors<\/span><\/h3>\n

Their agreement does not protect them from a pre-existing creditor if their intent in making the agreement was to defraud that creditor. They could also be liable to creditors under the Uniform Fraudulent Transfer Act. This is a nightmarish law (for debtors, at least) that invalidates transfers involving actual or constructive fraud.<\/span><\/p>\n

ERISA Laws<\/span><\/h3>\n

Their agreement cannot protect them from <\/span>ERISA laws<\/span><\/a>. Let\u2019s look at this more closely. If Sam is working, then Sue is entitled to be the beneficiary of his plan benefits. This can be waived by a properly drafted agreement executed after marriage, but cannot be waived before marriage.<\/span><\/p>\n

Tax Consequences<\/span><\/h3>\n

There may be adverse tax consequences. They may lose a step-up in basis in property upon the death of the first spouse. For example, if Sue and Sam owned community property, then the entire property gets a new income tax basis when the first of them dies. As an example, let\u2019s say Sue and Sam own 100 shares of stock. If Sam died, the entire 100 shares would get a step-up in basis.<\/span><\/p>\n

But suppose, before Sam\u2019s death, they enter into a marital agreement that gives 50 shares to Sue as her separate property and 50 shares to Sam as his separate property. When Sam dies, only his 50 shares get a step-up in basis. This could be a huge disadvantage to Sue if the stock value had increased significantly.<\/span><\/p>\n

Additions to a \u201cCommunity Free\u201d Marriage<\/span><\/h2>\n

Now that we know what Sue and Sam cannot accomplish with a marital agreement, let\u2019s look at some things they can do:<\/span><\/p>\n