Do I Really Need a Colorado Prenuptial Agreement?

Maybe not. Seriously – a prenup is not for everyone, so before spending money, consider whether you really need a Colorado prenuptial agreement. They cost money to prepare (including possibly having a pay the other party’s legal fees when your fiancé cannot afford a lawyer), and the message a pre nup sends to your fiancé – planning for a divorce when you are not even married yet – may not be the most romantic beginning to your life together.

So unless you really need a prenup, it is probably not worth getting one. Read on for a summary of what a prenuptial agreement can do for you. Or, for a more in-depth analysis of prenup clauses and requirements, see our Prenuptial Agreements article in the Colorado Family Law Guide. Finally, you could just book a consult with a Colorado prenuptial agreement attorney to discuss your specific needs.

I’ll never forget a consultation I had early in my family law career – a young Army private who had just arrived at Fort Carson wanted a prenuptial agreement. Going through his circumstances, he had no assets other than a few hundred dollars in the bank and some used furniture, no debts, and no expected inheritance – just a remote possibility of a military retirement in about 19 years’ time (unlikely because he was not planning on making the military a career). His buddies convinced him that a prenup was the way to go, but after consulting with me, he wisely realized that he would spend more on legal fees than the value of all his worldly possessions.

What is a Prenuptial Agreement?

If you are reading this, you probably have a pretty good idea of what a prenuptial agreement is. Under Colorado’s Uniform Premarital and Marital Agreements Act (UPMAA), a premarital agreement (the legal term for a prenup) is an agreement between people who intend to marry which determines their marital rights and obligations upon the death of one spouse, divorce, or even during the marriage. See C.R.S. 14-2-302(5).

You can enter into a prenuptial agreement after marriage, but they are known as postnuptial agreements (the statutory term is “marital agreements”) and are governed by the same law.

Practically speaking, a prenup means agreeing in advance of marriage to all or part of the financial settlement which will happen at death or divorce.

Why a Prenup?

“If you do get married, get a prenup. It’s not about money at all. It’s about having a document that states how you’ll dissolve your marriage while you still have a shred of respect for each other.”

That quote is from Alec Baldwin, based upon the experiences of his bitter divorce from Kim Basinger. Or consider that Donald Trump, who has ample experience with marriage, divorce and protecting wealth, swears by premarital agreements: “My comeback would have been totally impossible had I not had fully executed and well-drawn prenuptial agreements.”

Protect Premarital Assets at Divorce

If you are a regular person with modest assets and expecting a typical inheritance years down the road, read the division of marital estate articles in the Colorado Family Law Guide to see what to expect should your pending marriage end in dissolution. Simply put, each spouse will receive:

• His/her separate property which was separately titled,
• About half of the marital assets and debts. Marital assets means property acquired during the marriage (except gifts), and it includes the increase in value and income on separate property.

If you are okay with this outcome, as most spouses are, then there’s no need for a prenuptial agreement. You can protect the principal portion of your premarital property by keeping it separately-titled, and your spouse will receive about 1/2 of the increase in value.

But if you would like more protection than that – you have significant investments, real estate, or a family business, and you want to ensure you receive not just the principal, but the increase in value, then you need a Colorado prenuptial agreement.

Protect Inheritances/Gifts Received During Marriage

If your family has significant wealth, then a prenup could help protect that wealth upon death or divorce. As with premarital property, as long as you keep any inheritance or gift received separately-titled, then the principal portion of it remains separate property. But that the increase in value will be marital property.

So if during marriage you inherit $100K of Apple shares, and five years later at divorce those same shares are now worth a half million, the original $100K is set aside as your separate property, and the $400K increase is marital. That means you owe your spouse $200K to buy out his half of the marital equity, even for purely passive appreciation due to market forces which would have happened with or without the marriage.

Having a prenup can prevent this outcome by defining as separate property the increase in value, and not just the principal amount.

Protect Children from Prior Relationship

More couples are getting divorced and remarrying, and that also means remarrying later in life, after each is already established financially, and after each has children from their prior marriage or relationship they wish to protect.

A prenup is not just for divorce – it can also ensure that your children are protected upon your death by passing your wealth onto the next generation instead of a spouse who may have her own means and not need the extra money from you.

Reduce Fights

Refer back to the Alec Baldwin quote above – a prenup removes uncertainty, and allows the spouses to reach financial agreements at a time when both of them love and respect each other, rather than waiting until after a bitter breakup and taking your chances in court. A dissolution of marriage is already emotionally traumatizing, a prenuptial agreement gives you less to fight about at divorce, so each spouse can start moving on sooner.

Avoid Costly Litigation

This ties in with avoiding fights – the less there is to fight about at divorce, the less each spouse has to spend paying family law attorneys to battle on issues which could have been avoided with a prenup.

A prenuptial agreement cannot completely eradicate all chances of litigation – not only could a spouse with “buyer’s remorse” still try to challenge even the most “bulletproof” of prenups, despite low odds of prevailing, but a judge must determine whether a maintenance provision is unconscionable at the time of divorce. This means even the best-drafted alimony provision will be second-guessed by the judge, or simply found unfair due to changes in the spouses’ lives since it was drafted.

For more information, see our article on attacking and defending prenuptial agreements in the Colorado Family Law Guide.

What Can I Do With a Prenuptial Agreement?

Prenuptial Agreements can determine rights of spouses upon death or dissolution of marriage in the following areas:

• Property rights – define separate vs marital property, and even mandate an equal division of the marital estate (rather than an “equitable” division Colorado courts are required to do.
• Allocate liabilities – define separate vs marital debts, and determine how they will be divided.
• Spousal maintenance upon divorce – either have a waiver of alimony, or establish alimony guidelines which are higher or lower than the Colorado alimony guidelines, as long as the amount is not unconscionable at the time of divorce.
• Attorney’s fees upon divorce – either set forth how they will be paid, or that each spouse will pay their own. As with spousal maintenance, however, an attorney fee provision in a prenup can only be enforced if it is not unconscionable.
• Other terms – as long as they do not violate public policy, a premarital agreement can include a host of other financial terms – include lump sum payments to a spouse during the marriage or at death/divorce. One spouse will fund the other’s IRA during marriage. Determine how household expenses are shared during marriage. Provide for payment of nursing home expenses. Provide support for kids through college (without an agreement, child support in Colorado otherwise ends at 19). Provide for stepchildren or the other spouse’s extended family. Determine which spouse can live in a shared residence upon separation. Discuss with your Colorado prenuptial agreement attorney what you want to accomplish, and discuss whether it can be done.

What Can a Prenuptial Agreement Not Do?

Generally, a prenuptial agreement can determine the spouses’ financial arrangements, and as indicated above, there is a lot of room for maneuver. But there are limits on what can be included in the agreement, and the following terms are generally not enforceable:

• Parenting – the court may decide to follow what the parties put in a prenup, particularly if they had good reason for doing it, but ultimately child custody clauses will not be enforced if they are not in the children’s best interests.
• Child support – a premarital agreement cannot establish support to the detriment of the child (i.e. provide for less than Colorado’s guideline child support), but can provide for more support, have support continue beyond the normal emancipation age of 19, or include college expenses.
• Spousal Maintenance – a prenup is not enforceable if the alimony provision is unconscionable at the time of enforcement. So if there is a big income disparity, a complete waiver of maintenance is more likely to be set aside than a maintenance scale which provides for the poorer spouse, albeit it with lower amounts and for less time than the Colorado guidelines.
• Violate Public Policy – a clause which is contrary to public policy is not enforceable. No further guidance is provided in the statute, but typically the more a prenup tries to control the behavior of a spouse, the less likely a provision is to be enforced. Infidelity clauses, for example, are likely not enforceable in a no-fault divorce state like Colorado, and any other clause which attempts to “punish” misconduct or allocate money on the basis of one spouse’s behavior is of questionable legality.

Basic Prenuptial Agreement Approaches

In general, the more affluent party will have in mind the goal of protecting his/her premarital property or expected inheritance, so there are a few broad areas of similarity in most Colorado prenuptial agreements, depending upon how far that spouse wants to push things.

Protect Premarital or Separate Assets

Pretty much every prenup we’ve seen has some protection for premarital or separate assets, including defining the income or appreciation on separate property as separate property.

Sometimes a person will want to protect a very specific asset, such as a family business, and avoid the risk of being forced to go into debt upon divorce to keep the business, or to split it up. Or a spouse is beneficiary of a family trust, and wants to ensure that the investment earnings remain separate property.

Other people have a portfolio of premarital assets – a house, investments and retirement accounts. And rather than having to share any gains on them, a prenup can ensure that spouse keeps his/her increases in value.

Because the protection of separate property and the income/appreciation on separate property are the most common prenuptial agreement clauses we see in Colorado, they are generally not controversial. Their commonality means these clauses are not viewed as overreaching, which means a smoother process while negotiating them, and the agreement is less likely to meet with an objection by the other party’s attorney.

Define Income During Marriage as Separate Property

Many times, the more affluent spouse will want to go a step further, and define all of each spouse’s income during the marriage (i.e. wages, not just gains on separate property) as also belonging to that spouse, as long as the funds are kept separately-titled. Only if the spouse chooses to jointly title assets (including having a prenup provision depositing certain funds into a joint account to pay family expenses) will they become marital – otherwise, what’s mine remains mine, including the fruits of my labor.

These clauses are still reasonably common in Colorado prenups, but they may be starting to push things a bit as they tend to diminish the concept of marriage as an equal partnership. So be ready for more pushback from your fiancé, and even if you have a signed agreement, if your spouse feels like the agreement was unfair or overreaching, it could lead to residual distrust during marriage (note – not psychologist, just my speculation).

Define Financial Responsibilities During Marriage

A premarital agreement which defines the spouses’ income as their separate property will typically have provisions requiring payment or sharing of marital expenses during marriage, and set up joint accounts for the payment of common bills.

Spousal Maintenance Waiver or Schedule

At the risk of beating a dead horse, while a prenup can determine alimony, if the provision is unconscionable at the time of enforcement (i.e. at divorce), it will not be enforceable. But as long as it’s somewhat fair, a prenuptial agreement in Colorado can define spouses’ alimony rights, including a waiver of alimony.

FAQ – Colorado Prenuptial Agreements

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