Division of Assets, Alimony & More
While there are a million things to plan when a couple decides to marry, often the most difficult to discuss with your future partner is the possible need for a prenuptial agreement. While this subject is not the most romantic or exciting part of wedding planning, a couple contemplating marriage in Colorado may need to consider entering into a prenuptial agreement, or a contract before marriage.
Prenuptial agreements address property and financial issues in the event of the couple’s subsequent divorce. These agreements are typically signed when one party has, or expects to have, substantial property or income, but this is not always the case. Prenuptial agreements may also be contemplated when one spouse has considerable pre-marital debt. These agreements can provide reassurance for those who enter into marriage that in the event of their later divorce, their pre-marital assets will not be divided, and they won’t be burdened with their spouse’s pre-marital debt.
Prenuptial agreements can offer peace of mind during marriage and can minimize hostilities over dividing up assets and liabilities in the event of a divorce. Given the permanent effects marital agreements can have, both parties should have the agreement drafted and reviewed by an attorney so that all possible consequences are fully understood. These agreements should also be prepared as far in advance of the wedding to avoid a spouse later claiming that they felt forced to enter into the agreement on the eve of marriage, which could potentially result in the agreement being found null and void.
What are the Requirements of a Valid Prenup?
Are you and your potential, soon-to-be spouse considering a prenuptial agreement, but have no idea how one is valid within the State of Colorado? Obviously, no one enters into a marriage thinking that they’ll eventually end up getting divorced; however, divorces happen, and prenuptial agreements are a way to simplify the divorce process if and when that time comes.
Section 14-2-301, et seq., C.R.S., also known as the “Colorado Marital Agreement Act,” governs the requirements for a binding prenuptial agreement. However, given that a prenuptial agreement is an agreement between two soon-to-be spouses, it is a contract, and, therefore, also governed by contract law. That being said, here are the requirements for a valid, fully enforceable prenuptial agreement:
Separate counsel and adequate representation;
- Written agreement;
- Voluntarily signed by both spouses;
- Full disclosure of assets and liabilities by both spouses (before signing the agreement); and
- Not in violation of any limitations.
This first requirement is more so a suggestion. There is no absolute requirement that both spouses be represented in the drafting and signing of a prenuptial agreement. However, when both parties are represented by an attorney, it decreases the chances that the prenuptial agreement will be rendered invalid if a spouse decides to challenge it at divorce.
When you retain an attorney to draft a prenuptial agreement, it is important to keep in mind that the attorney cannot represent both you and your soon-to-be spouse as it presents a conflict of interest. As such, your soon-to-be spouse should be informed of the advisable of seeking independent representation. If your soon-to-be spouse decides not to consult with an attorney, the prenuptial agreement should include language reflecting that they had the opportunity to obtain legal advice and that a decision not to take advantage of that opportunity was made freely and independently.
A prenuptial agreement will be rendered unenforceable if a party against whom enforcement is sought proves they did not have access to independent legal representation. § 14-2-309(1)(b), (2), C.R.S. A spouse will be deemed to have had access to independent legal representation if they made a free and reasoned decision not to consult with a lawyer and the spouse had the time and financial means to do so.
This requirement is short and simple. According to section 14-2-303, C.R.S., any prenuptial agreement must be in writing. This requirement is absolutely mandatory and there are no exceptions.
Just as a prenuptial agreement must be in writing, both soon-to-be spouses must sign the agreement, and they must do so voluntarily. This means that neither party can coerce the other into signing the prenuptial agreement; otherwise, the agreement will be rendered invalid.
One of the better ways to protect yourself from an argument that the agreement was not signed voluntarily, we recommend that both soon-to-be spouses signed the prenuptial agreement at an appropriate time. There is no established rule for when to sign the agreement, but neither party should sign it on the day of the wedding or too close to that day. The closer it gets to the date of the wedding, the more it will look as though one party was coerced into signing it in order to proceed with the ceremony. As such, we recommend that the soon-to-be spouses sign the agreement at least one month prior to wedding day.
This is, perhaps, the most important requirement. For a prenuptial agreement to be enforceable, the spouses must, prior to execution of the agreement, provide one another with a fair and reasonable disclosure of each one’s respective property and financial obligations. § 14-2-307(1)(a), (b), C.R.S. If there is not full disclosure, it can be a complete bar to enforcement of the prenuptial agreement. In fact, it is a statutory defense to the enforcement of a prenuptial agreement that a spouse did not receive adequate financial disclosure before signing the agreement. § 14-2-309(1)(d), C.R.S.
A spouse receives adequate financial disclosure if they receive a reasonably accurate description and good-faith estimate of the value of all property, liabilities, and income of the other party; or has adequate knowledge or a reasonable basis for having adequate knowledge of the description and estimated value of the property liabilities and income of the other. § 14-2-309(4)(a), (c), C.R.S.
In order to accomplish this, we recommend that both soon-to-be spouses complete financial affidavits, which list all assets, debts, and other liabilities, and then provide supporting documentation for each item listed. This documentation includes bank statements, mortgage statements, appraisals of real property, Kelley Blue Book values, etc.
While a prenuptial agreement is a great way to establish the parameters of what will happen at divorce. For example, a prenuptial agreement can have provisions regarding the following:
- The rights and obligations regarding nonmarital (separate) and/or marital property;
- The acquisition, disposition, management, and control of any property;
- Disposition of property upon separation, divorce, or death of either spouse;
- Determination, modification, or elimination of spousal maintenance;
- The making of a will, trust, or other arrangement;
- Ownership rights in and disposition of the death benefit from a life insurance policy; and
- The rights, obligations, and benefits available or to be available under an employee benefit or retirement plan (except to the extent federal law may prevent such agreement).
§ 14-2-301(1)(a), C.R.S.
You may notice what is not included on this list: child custody and child support. A prenuptial agreement cannot “adversely affect the right of a child to child support,” meaning a parent cannot contractually reduce or eliminate a future child support obligation. § 14-2-304(3), C.R.S. Additionally, in Colorado, the court makes decisions for child custody based upon the child’s “best interests.” As such, any provision in a prenuptial agreement regarding child custody or child support will be unenforceable and a court will pay no attention to it.
Like child custody and child support, there are a few other limitations to be aware of. Provisions in a prenuptial agreement cannot:
- Limit or restrict a remedy available to a victim of domestic violence;
- Purport to modify the grounds for a court-decreed legal separation or marital dissolution;
- Penalize a party for initiating a legal proceeding leading to a legal separation or marital dissolution; or
- Violate public policy.
§ 14-2-310(2), C.R.S.
Similarly, provisions within a prenuptial agreement which relate to the determination, modification, limitation, or elimination of spousal maintenance or the waiver or allocation of attorney fees are unenforceable if, when the spouses are divorced, such provisions are unconscionable. § 14-2-309(5), C.R.S. “Unconscionable” means unfair, unreasonable, and unjust. In re Marriage of Christen, 899 P.2d 339 (Colo. App. 1995). Even though a prenuptial agreement can include provisions regarding spousal support or maintenance, it is possible that such provisions will not be enforceable at the time of the divorce, particularly if one of the spouses has been a stay-at-home parent or receives substantially less income than the other spouse. As such, it is best to proceed with caution in including any provisions regarding spousal maintenance.
Having a prenuptial agreement can prove quite useful at divorce. A well-drafted prenuptial agreement can help simplify the divorce process significantly. However, a prenuptial agreement is not for everyone, and, more importantly, it can prove to be more hassle than help if poorly-written. If you are considering entering into a prenuptial agreement with your soon-to-be spouse, we recommend you speak with a Denver prenuptial agreement lawyer at Divorce Matters®. To schedule your consultation, call 720-542-6142.