Though not generally common, every so often, I will be presented with a Denver area divorce case in which the parties have entered into a pre-nuptial agreement prior to getting married. With the ever changing landscape of marriage and divorce, people are getting married at a later age. They are getting remarried with the taste of a nasty divorce fresh in their mouths. They are going into marriage with the knowledge that roughly 1 in every 2 marriages end in divorce. Older people marrying have likely already accumulated some assets or wealth prior to exchanging vows. People married once before have already learned the ins-and-outs of property division and how assets are viewed by Colorado divorce courts. In these instances, people ask, “how can I protect myself and my property in the event of a future divorce?” One answer they arrive at is a pre-nuptial agreement. Assuming the potential new husband or wife finds the courage to raise the issue with his or her significant other, a pre-nuptial agreement can be an effective tool for protecting one’s income and assets. Of course, as with any legal issue, there are rules and pitfalls that must be followed or avoided to make sure that agreement will hold water when the time comes to divorce. Hopefully, that time will not come, but one never knows.
In Colorado, pre-nuptial agreements are governed by the Colorado Marital Agreement Act, C.R.S. 14-2-301, et. Seq. Most pre-nuptial agreements primarily deal with issues regarding property and support. Property acquired during the marriage is generally going to be viewed as marital and subject to division in a divorce. Propery owned before the marriage is generally going to be viewed as separate. However, increases in value during the marriage will generally be viewed as marital and subject to division in a divorce. These are the most common issues for which people seek a pre-nuptial agreement, protection of their assets. The other major area in which people seek protection relates to alimony, or more properly, “maintenance.” C.R.S. 14-2-304 sets forth the matters which people can “contract” to in a pre-nuptial agreement. Yes, the term “contract” is used, as that is how a court will generally view such an agreement.
C.R.S. 14-2-304 also sets forth other issues that can be dealt with in a pre-nuptial agreement, such as matters related to wills and inheritance, matters related to attorney fees, matters related to choice of law in terms of which state’s laws will govern interpretation of the agreement, matters concerning your income and property obtained with it, and basically any other issue which can be agreed to, so long as such an agreement does not violate “public policy.”
Under the CMAA, pre-nuptial agreements are deemed to be essentially enforceable contracts, so long as they are drafted in an appropriate fashion. C.R.S. 14-2-307 sets forth certain rules regarding enforceability. A pre-nuptial agreement is not enforceable if is was not entered into “voluntarily.” It may also be deemed unenforceable if there was not a fair and reasonable disclosure of property and debt prior to the agreement being signed. Ensuring that an agreement will be upheld will be discussed further below. Divorce attorneys in Denver will be, or should be, aware of these statutory provisions, whether drafting an agreement or litigating the issue of enforceability.
Other issues to be aware of stemming from C.R.S. 14-2-307 relate to the issue of alimony or maintenance. Parties to a pre-nuptial agreement will often agree to provisions indicating that in the event of a divorce, neither shall pay the other alimony. At the time of a divorce, C.R.S. 14-2-307(2) authorizes a court to assess whether a provision regarding alimony is unconscionable at the time of the divorce, not the time the agreement was entered into. “Unconscionable” essentially means generally means unfair, unreasonable, and unjust. It is a standard which will be subject to a judge’s individual discretion on the issue. As an extreme example, a woman making $1,000,000 per year and married for 20 years should not expect a court to uphold the waiver of alimony set forth in her pre-nuptial agreement when her husband has traditionally made $20,000 per year during the marriage. Courts will view such a scenario as clearly unjust. The main point is that though statute allows people to waive alimony in Colorado, it also gives court jurisdiction to assess and disregard such a waiver. Thus, provisions in a pre-nuptial agreement regarding alimony should not be viewed as absolutely binding by the parties. Case law also suggests that provisions regarding payment of attorney fees at the time of a divorce are also not binding on a divorce court, as a matter of public policy.
Going back to issues of an agreement being voluntary and the proper disclosure of financial information, there are steps people can follow to ensure that their pre-nuptial agreements will hold water, at least as to disposition of property, income, etc. at the time of a divorce:
1. A pre-nuptial agreement should be presented to your future spouse with ample time for him or her to ponder and reflect upon what he or she is signing prior to him or her signing. Don’t have an agreement drafted and present it to your future spouse a few days or a week or two before the wedding. Allow enough time such that a court will be comfortable with concluding there was adequate ability to review and reflect. Though “voluntary” is not defined by statute, timing is a significant factor in determining such.
2. Don’t threaten to call off the wedding if the agreement is not signed. Though you could certainly call off the wedding if the agreement is not executed, don’t threaten it. One could argue that such a threat is similar to coersion or duress. Though not a strong argument, better to be safe than sorry.
3. When providing the agreement to your future spouse, try to do so in writing, such as via an e-mail or fax. That way, you have a documented paper trail as to exactly when you tendered the agreement to him or her, as well as what was tendered.
4. Make sure the agreement not only advises him or her of the right to seek counsel to review the agreement, but that it also recommends that such should be done before signing. If a party has been given the opportunity to review the agreement with an attorney for purposes of learning his or her rights, and particularly if that person does so, it will be extremely difficult for him or her to claim that he or she did not understand the agreement, which can go to whether it was signed voluntarily.
5. Make sure that any agreement has a page, or more, for each party to disclose his or her property, debts, and even income. Make sure that your assets, debt, and income are listed in that section when tendering the draft of the agreement to your future spouse. Dollar amounts don’t have to be exact, down to the penny, but should be more or less correct. Failure to disclose assets can lead to the agreement being unenforceable, whether as to a specific asset or all assets. When dealing with a marriage, there should be nothing to hide. Doing so may come back to bite you later.
6. Try to get the agreement signed before the marriage occurs. The CMAA indicates that an agreement can be entered into before the marriage, or after it occurs. Once the marriage is underway, life changes. Bargaining positions change. This can tie into the issue of voluntariness.
7. A marital agreement entered into after a divorce or legal separation has been filed will not be upheld as a “marital agreement” under the CMAA. It would be likely be viewed as a “Separation Agreement” under C.R.S. 14-10-112, which comes with differing rules.
Pre-nuptial agreements can be complex. Many divorce and custody attorneys in Denver will not draft them because of such. When contacting an attorney to discuss the drafting of a pre-nuptial agreement, keep in mind the suggestions set forth below. Your attorney may not tell you each and every little factor that could affect enforceability. You are now armed with some of that knowledge, regardles of what is said. You want to protect your property in the event of a divorce. Take the time to do it right.