Prenuptial and Postnuptial Agreements
What’s the Difference?
A prenuptial agreement is entered into prior to marriage and takes effect at the time of marriage. A postnuptial agreement is entered into after marriage (but prior to separation or divorce) and takes effect when executed.
Do I Need a Prenuptial Agreement?
Just as life insurance protects your family if disaster strikes, a prenuptial agreement can help protect you and your children should your marriage fail. Unless you have a prenuptial agreement, the Colorado divorce statute (namely, the Uniform Dissolution of Marriage Act) will determine what rights you have in case of separation or divorce and Colorado probate law (Colorado Probate Code) will dictate the rights of your surviving spouse, and your heirs, should you die while married.
Prenuptial or postnuptial agreements are commonly used to protect the appreciation on separate property from being claimed by the new spouse or to keep property acquired during the marriage separate. If you are remarrying and have children from the previous marriage, a prenuptial agreement can help ensure that your assets and heirlooms are distributed according to your overall estate plan, rather than according Colorado divorce or probate laws. If you own a business, a prenuptial agreement is a means of ensuring that your spouse does not become an unwitting or unwelcome partner in the company if you divorce or if you die while married.
Aren’t Prenuptial Agreements Just for the Wealthy?
Premarital agreements are for anyone interested in identifying and resolving legitimate issues relating to your finances, estate plans and operation of your business. A marriage is fundamentally a partnership. Why would you enter into the most important partnership of your life-your marriage-without a plan to avoid problems that can be easily foreseen should your partnership fail? A well-drafted prenuptial agreement can also save money, time and emotional pain by helping avoid a legal battle if the marriage does not succeed as you both have planned.
What Issues Can be Included?
Prenuptial and postnuptial agreements are merely written agreements between spouses or prospective spouses for resolving any number of issues that arise if the parties divorce or one spouse dies.
- Maintenance: whether it is waived, set at a predetermined amount, based on years of marriage, etc.
- Disposition of assets: who gets what in case of divorce? Whether assets acquired after the marriage are kept separate; whether future appreciation on existing assets are separate property; how to apportion pension funds, retirement benefits or other intangible assets.
- Inheritance: protect the rights of children from previous marriages to keep the family heirlooms, college fund accounts, business interests, etc.
- Life Insurance: who owns the policy? How are the proceeds distributed upon death?
- Trust Accounts: provide for educational expenses or other needs of children and family members.
- Waiver of Rights Upon Death: a common provision in prenuptial or postnuptial agreements designed to prevent probate laws or prior wills from trumping the terms of the prenuptial or postnuptial agreement.
- Alternative Dispute Resolution: a provision requiring the complaining party to mediate or arbitrate any dispute and preventing him or her from filing a costly lawsuit.
- Attorney’s fees: who pays for attorney’s fees if one party unsuccessfully challenges the terms of the prenuptial or postnuptial agreement? (Subject to review for unconscionability at the time the provision is enforced).
What Issues Cannot be Included?
By law, certain issues cannot be included in a prenuptial or postnuptial agreement. Generally, the parties may not agree to waive one party’s statutory right to child support or to child custody (including physical custody, parenting time and decision-making authority). The parties may agree on proposed terms as to these issues, however, subject to the court’s later approval.
Are Prenuptial and Postnuptial Agreements Enforceable?
Generally, yes. Clarity is key: the court is legally prohibited from considering evidence beyond the four corners of the written prenuptial or postnuptial agreement if the language is complete and unambiguous on its face.
To be enforceable, a prenuptial agreement or postnuptial agreement must be written and must be signed by each party. Unlike traditional contracts, no consideration (value) must be exchanged to make the agreement enforceable. Courts will enforce prenuptial agreements or postnuptial agreements unless one party proves (1) he or she did not voluntarily sign the agreement or amendment, or (2) the other party did not make a “fair and reasonable” disclosure of his or her property or obligations.
Whether an agreement was voluntarily signed is based on the “totality of circumstances,” and may include an analysis of whether both parties had time to review and consider the agreement, whether both parties had independent legal counsel, the general sophistication of the parties, whether a party understood the rights he or she waived, and whether the agreement protects children other than those of this marriage.
Failure to disclose a particular asset and obligation does not render a prenuptial or postnuptial agreement invalid as long as the disclosures are not materially misstated. On a practical level, the so-called “Dead Man’s Statute” limits the ability of the surviving spouse to prove that the deceased spouse failed to reasonably disclose his or her assets. Click here to learn more on “Prenuptial Agreements and the Dead Man’s Statute”.
The court may refuse to enforce a specific provision of prenuptial or postnuptial agreement if that term is unconscionable at the time of enforcement. “Unconscionable” means, not fair, reasonable or just as construed by the court. However, agreements as to property division are not reviewed for unconscionability. In other words, you get what you bargained for when it comes to property division.
Call us today for a free consultation to determine whether a prenuptial or postnuptial agreement makes sense for you.