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Divorce: Keeping Your Separate Property Separate (Part 2)

By Michelle L. Searcy

In my most recent article, I discussed methods of your assuring separate property remains separate in terms of preserving good evidence for use in a dissolution of marriage (divorce) case.  However, Colorado statutes still define marital property as including increases in the value of separate property during the marriage.  Since often separate property consists of investment assets, this results not only in the difficulty in proving pre-marital value but in the possibility of being required to pay the other spouse their share of the increase in value.  In this blog post, I will discuss how parties to a marriage and/or divorce can avoid such difficulties through valid marital agreements.

A valid marital agreement allows you to contract around the statutes defining marital property to protect your interest in your separate property.  The statutes governing marital agreements can be found in sections 14-2-301 to 14-2-313, C.R.S.  You may notice that I am not referencing a “prenuptial” agreement.  Parties may enter a marital agreement prior to getting married but Colorado law also allows parties to a marriage to enter a marital agreement after they marry.  The only time an otherwise valid marital agreement becomes unenforceable is if made in contemplation of divorce.  In other words, if you are involved in a troubled marriage and you believe may be headed for divorce, it likely may be too late to enter into a marital agreement.  

To otherwise assure the enforceability of a marital agreement, it must be signed voluntarily, the parties must have access to legal representation or have knowingly waived that right, and adequate financial disclosures must have been made.  Unlike many forms of contract, a valid marital agreement must be written and signed by the parties.  In other words, to make a marital agreement enforceable, the parties need to have a full understanding of what legal rights and property they are surrendering.

While knowledge is key to a valid marital agreement, some issues cannot be resolved through this method.  Marital agreements cannot be used to pre-determine parenting issues, including child support.  Also, a marital agreement that determines spousal maintenance or alimony may not be enforceable because at the time the marital agreement is sought to be enforced (during a divorce), such provisions must not be unconscionable, as determined by the court.  Thus, if terms of the marital agreement concerning maintenance that may have been fair at the time the parties signed the agreement but events that have happened since mean they are no longer fair, the agreement may not be enforceable with regard to maintenance.  Also, a marital agreement cannot be used to prevent remedies to domestic violence.  For example, a marital agreement cannot be used to prevent a victim of domestic violence from seeking a protection order.  A marital agreement cannot prevent one party from seeking a divorce or legal separation.  On whole, a marital agreement cannot be used to violate public policy.

A marital agreement can, however, be used to protect separate property.  Parties can agree that increases in value remain separate property.  They can agree that income earned after the marriage remains separate.  This includes contracting for maintenance as long as those terms are still fair at the time of a dissolution.  Beyond this, parties can pre-determine what will be considered marital property and how it will be divided in a dissolution.  A marital agreement can also be used as a method to distribute property upon the death of a spouse.  This use of a marital agreement may be helpful in avoiding estate disputes and/or assuring children from prior relationships receive property as intended.

In conclusion, a marital agreement allows people who are getting married or are already married to protect their separate property interests as well as resolving other potentially difficult conflicts in the event of a divorce or death.  Any person bringing significant property into a marriage should consider whether a marital agreement is needed.  Given that a marital agreement requires mutual consent, the ability to keep your property separate is, of course, contingent on the wishes of the other party to willingly sign.