Just like divorce law, the each state has its own rule governing the creation and enforceability of a prenuptial agreement. While many people view these agreements as admitting that the marriage will not last, statistics show that there’s no difference in marriages with these agreements, and marriages without them, when it comes to whether or not a couple will get divorced. Frankly, in many cases, a prenuptial agreement makes a lot of sense.
What is a Prenuptial Agreement?
As stated on our divorce page, Colorado is a separate property state. Property is divided into two categories: separate property and marital property. Anything that is categorized as separate property is not part of the divisible, marital estate, while marital property is. When a couple creates a prenuptial agreement, they are essentially agreeing that, in the event of a divorce, certain assets are going to be separate property, and therefore will not be divisible.
So long as something is not prohibited by law, a prenuptial agreement can contain just about anything you could imagine. Here are a few examples of things people oftentimes put into their agreements:
- A division of the assets acquired during the marriage.
- A division, or allocation of spouse’s employee benefit or retirement plan.
- A division of debts.
- Life insurance.
- Rights to manage marital property.
- An amount of spousal support, or alimony, and also the duration.
- Protection of premarital assets, which could include preserving an estate for inheritance purposes.
Division of Marital Assets
This particular part of a prenuptial agreement looks very similar to a separation agreement the parties would sign in the event of a divorce. Parties can agree on division of asset types (i.e. real estate, jewelry, vehicles), if they don’t have any assets at the time of the agreement. The couple can get as creative or detailed as they want.
Division of Retirement Plans, or Employee Benefits
Just like dividing the martial property, couples can agree on how retirement or employment benefits get divided up. They could agree to a 50/50 split, or a payout for a finite period of time. The couple might even decide to offset the retirement account with another asset, such as a house. or some other account.
Division of Debts
Just like agreeing to a property division, a couple can agree on a division of their debts, which could include car loans, mortgages, personal loans, and credit cards. Once again, the sky is the limit as far as figuring out how to divide what. Keep in mind that if the couple eventually decides to get divorced, this agreement will smooth the process along, and save expenses later, assuming the parties can agree to the terms of the prenup.
Couples can also agree that if there’s an alimony payment, or something else of that nature, that the paying party needs to carry a life insurance policy in order to secure the alimony should that party pass away.
Rights to Manage the Marital Property
The parties can also make a determination that one of them is more apt at managing a property or a business. They could include a provision in their prenuptial agreement that covers this particular aspect as well.
Spousal Support or Alimony
In Colorado, if you filed for divorce on or after January 1, 2014, there’s a statute that gives guideline calculations for spousal support. However parties are free to contract around this statute with their own provision on spousal support.
Protection of Premarital Assets
This is the biggest reason parties enter into prenuptial agreements. Many times couples come together with significant assets, and they don’t want to worry about those assets getting co-mingled, and possibly sucked into the marital estate, to be divided under the statute. One thing people don’t realize, when they are looking getting a prenuptial agreement, is that separate property, or property that a party acquires prior to the marriage, does not get divided when there’s a divorce. However, the increase in value of that asset, such as an increase in equity on a home, or an increase in the cash value of a life insurance policy or retirement account, during a marriage is considered marital property.
The prenuptial agreement is designed to cover those increases in value. However, the other big reason people enter into prenuptial agreements is to protect their heirs. Many times older couples, with significant assets, will get married, and they want to protect their premarital assets in the case of a death of one or both of the parties. A prenuptial agreement will do this, and make sure that the wishes of the deceased party are met.
Getting your Prenup Done Correctly
If you decide you want to get a prenuptial agreement, you need to make sure that everything is done correctly. If not, then one of the parties can come back and get the agreement voided by a court. In 2014, Colorado passed the Uniform Premarital Agreement Act (UPAA), which gives clear guidelines as to what is required in a “valid” prenuptial agreement.
First, the agreement needs to be in writing, and then signed by each party. The rest of the requirements are summed up most easily in determining whether something inappropriate was done. There are three things that will void a prenuptial agreement:
- A party agreed to the terms involuntarily or under duress.
- A party did not have access to legal representation prior to signing the agreement.
- Financial information was not disclosed to the other party.
Duress or Involuntary Agreement
There are several things that go into whether or not an agreement was involuntary. However, the most common reason a court finds that one of the parties signed the agreement involuntarily is when the other party refuses to marry until the agreement is signed. Really wanting to marry, the other party will agree to the prenup.
Duress is a bigger issue. It occurs when one party uses physical or psychological harm or threats to force the other party sign the agreement. The threatened party needs to fear for his or her physical or psychological safety for judges to find that duress was present.
No Legal Representation
Each party is entitled to seek independent legal advice prior to signing a prenuptial agreement. However, if a party puts a severe time limit on the amount of time the other party is entitled to seek legal advice before the offer to marry is reneged (such as less than 24 hours), or the day prior to the wedding, a court is likely to find that independent legal advise was not reasonable.
Non-Disclosure of Financial Information
Prior to completing the prenuptial agreement, the parties must disclose, at a minimum, descriptions and estimates of their property, debt, and income. If this is not done, then, once again, the prenuptial agreement will be declared void.
If you are seriously considering a prenuptial agreement, it is imperative that you confer with a competent attorney who has experience dealing with these agreements. Not having the proper attorney could mean the difference between your agreement being valid or not. Our law firm offers low cost consultations, and experienced attorneys, who can help you through the entire process.