Prenups: Happily Ever Before
The word “prenup” brings to mind teams of high-powered attorneys negotiating late into the night right before a lavish wedding. Horror stories of tearful fiancées forced to sign a document before walking down the aisle abound in our popular culture, an inconvenient blot on our collective imagination of a fairytale wedding.
In reality, prenups and postnups (both known as “marital agreements” in Colorado) are special contracts that can serve a variety of purposes – and most are signed well before a wedding or after spouses are already wed. In 2014, Colorado modernized its laws governing marital agreements to emphasize what was already best practice: access to legal counsel for both sides and payment of attorney fees, explicit language informing signatories of what rights they may be waiving, allowing both parties reasonable time to understand what they are truly signing, etc.
Many couples enter into marital agreements for narrow issues unique to them. For example, even though Colorado law has long held that a party’s inheritance or existing premarital property will generally not be considered as the property of the marriage if that person ends up in a divorce, the appreciation or gains (if any) on such property are considered property of the marriage and subject to division by a judge. How to calculate the increase in value and arrive at an ultimate dollar figure for such assets is often a significant source of contention and headache for parties, their attorneys, and judges.
Marital agreements provide couples with predictability and peace of mind regarding such matters. A properly executed marital agreement, whether before or after the wedding, can be specific to one or several assets to preserve the entire property’s value at the time of divorce as the owner’s separate property despite any gains in value during the marriage. If one spouse is expecting a large inheritance down the road, or perhaps one spouse is a partner in a business venture that may suddenly become very valuable in the future, parties can also create terms about future wealth that may only be speculative and uncertain at the time the agreement is actually signed – marital agreements are not simply the province of the wealthy but can be creatively utilized when the future is unknown.
Most people also do not realize that marital agreements almost always include terms regarding what happens to property upon the death of a spouse. Without a will, surviving spouses typically inherit all their deceased spouse’s property. A surviving spouse may also choose to take the “elective share” if the share is more valuable than what he or she is receiving from a will. A prenup or postnup can set aside certain property for others or waive elective-share or other rights, which may be especially important for spouses marrying later in life or who have children with a prior spouse.
Whether broad or narrow in scope, marital agreements often also cover terms regarding process or procedure if the parties end up in a divorce or legal separation. Future or current spouses can agree on how financial information is exchanged, who pays what bills, what happens to marital property such as a marital home in the event of a break-up, etc., all in a way that protects their privacy and prevents one side from making hasty litigation-based decisions. Knowing that they have agreed in advance to a certain approach can set the stage for a successful relationship throughout the life of a marriage and afterwards if it ends unexpectedly, and marital agreements should also include provisions about access to attorneys and payment for divorce proceedings. With clear terms spelled out in advance of any potential conflict down the road, marital agreements can counterintuitively provide for greater harmony and even a more successful and long-lasting relationship than marriages without them.
Colorado law complicates matters when it comes to pre-divorce agreements regarding maintenance (spousal support or alimony). A couple can therefore craft unique provisions that allow for additional property for the lower-earning spouse or unique step-up provisions for maintenance depending on the length of marriage. Parties can also choose not to address maintenance at all. To the extent that a marital agreement includes a maintenance provision, or an agreement regarding how attorney fees will be allocated between the parties in the event a divorce occurs, Colorado law is clear that such provision must be looked at by the Court to determine whether or not it is conscionable given the facts existing at the time of the divorce. If the Court finds such provisions unconscionable, they will be stricken. The law also requires a specific waiver of retirement assets when a marital agreement is executed. These provisions should be carefully drafted and reviewed by skilled counsel.
Marital agreements cannot pre-determine a parenting plan for children of the marriage, nor can they set child support. Parenting time must be determined by the Court at the time of the divorce using the “best interests of the child” standard. Child support is the right of the child and is determined based on a number of factors such as the number of overnights that each party will spend with the child, the incomes of both parties, who pays for the children’s health insurance premiums and extraordinary children’s expenses, among other things. In each case, the court will be looking at the facts at the time of the divorce, which may differ substantially from the facts at the time the marital agreement is executed. Thus, marital agreements addressing parenting time and child support are likely to be unenforceable.
While not subject to the same law, similar principles and considerations also apply when unmarried partners wish to define certain rights with a cohabitation agreement that covers claims of common-law marriage or the division of jointly-titled assets, such as a shared bank account or real property. Colorado law does not recognize a right to maintenance from a prior unmarried partner.
The attorneys of Wells Family Law are well-versed in the intricacies and important considerations regarding prenups, postnups, and cohabitation agreements. Whether you are contemplating an agreement with your spouse before or during your marriage, or you looking to have your marriage dissolved and a martial agreement is implicated, we are here to help.