What is a Postnuptial Agreement?
While settling in from vacation last week, I received a call from a potential client. She related her husband and her went to a meeting with her financial planner prior to having children, and both signed a prenuptial agreement. She explained they each had quite a bit of money when they married, and agreed that if they divorced, they would each get to keep the money that they brought into the marriage. With two children, she said that they were now considering entering into a postnuptial agreement, which would essentially update their prenuptial agreement.
Postnuptial Agreements are not filed with the court and are not a matter of public record like prenup agreements are . They are considered a private contract between the parties and are not enforceable in all states. Unlike a prenuptial agreement, a postnuptial agreement is entered into by two people who are already married. A prenuptial agreement is entered into by two people prior to marriage occurring, whereas a postnuptial agreement is entered into after a marriage has already occurred. Postnuptial agreements are not allowed in certain states such as New York. Colorado is a postnuptial agreement friendly state and Colorado courts uphold such agreements in almost all circumstances.
Legal Requirements of Postnuptial Agreements in Colorado
In Colorado, the legal requirements and conditions that must be satisfied for a postnuptial agreement to be valid and enforceable include the following: (1) the agreement must be in writing; (2) the agreement should be signed voluntarily and free from coercion or duress on the part of a spouse; (3) the terms of the agreement must be fair and reasonable at the time of execution and at the time enforcement is sought; (4) each spouse must make a full and fair disclosure of all relevant information pertaining to assets and liabilities before executing the agreement; and (5) each spouse should seek independent legal counsel prior to entering the agreement.
In addition to these requirements, Colorado law has certain provisions that are not subject to alteration by a postnuptial agreement. The most common of these are child related issues. Courts have acknowledged that a postnuptial agreement cannot, at least implicitly, waive or limit a parent’s obligations regarding the financial and emotional needs of minor children.
Those provisions concerning child support and the allocation of parental rights and responsibilities may be addressed in a postnuptial agreement, but the provisions of such an agreement are not binding upon a court. A court reviewing a postnuptial agreement that attempts to address child issues will always look first to the best interests of the child in determining the allocation of parental responsibilities or the appropriate amount of child support.
Advantages of a Postnuptial Agreement in Colorado
A postnuptial agreement in Colorado can offer significant benefits for couples who are willing to engage in the negotiation and drafting process. These benefits may include:
Protection Against Future Divorce Litigation: As the saying goes, "the best time to plant a tree was twenty years ago. The second best time is now." The same can be said about a postnuptial agreement. Any couple that is evaluating their marriage, or even just their finances, can benefit from a discussion about how things would occur in the event the marriage does not go a long term. A strong postnuptial agreement can help avoid contentious litigation that can occur in a divorce.
Pre-empting Points of Contention: In the same vein, the process to draft and negotiate a postnuptial agreement can force the couple to confront issues they would rather avoid discussing. The result of that confrontation can be that anything that might be a point of contention between the parties is dealt with in advance with an agreement that was reached through joint effort. Sometimes the result is that the parties decide to avoid a certain topic for now, but that they will address it in the future if it should become necessary.
Protection Against Spousal Malpractice: Understanding marital finances is not like the classic movie "The Blind Side," where Sandra Bullock’s character recognized the horrendous financial contract her son signed. Most people would recognize a bad agreement if it were put in front of them. Unfortunately, many asset distribution agreements reached during a divorce are simply not in either parties’ interest to sign. Typically, neither party is happy with the numerous choices before them. But in order to move on, one signs an agreement neither likes in the hopes that they will not be stuck with it forever. A postnuptial agreement can eliminate the need to sign a bad agreement years down the road.
Protecting Children: How money will be spent to benefit the kids (including college costs) can be addressed in a postnuptial agreement. If there is an agreement about how money will be spent to secure a home environment for children, the risk is lowered that the parents may enter into a disagreement on that point, and in doing so, place their children in the middle of a dispute.
Reassurance for Cohabitating Couples: Many engaged couples put off any thought about postnuptial agreement. Even married couples don’t review their finances and agree how property will be divvied up. For some people, however, keeping their personal possessions for themselves is very important. A postnuptial agreement can help assure a couple that if things were to come to an end, they wouldn’t lose everything.
Common Provisions of Colorado Postnuptial Agreements
In Colorado, many postnuptial agreements address the following important issues:
A. Division of Assets and Debt
Postnuptial agreements in Colorado often contain a complete list of the couples’ assets and debts as well as the value of those assets and debts. Those assets are then divided between the spouses on a percentage basis in the event of divorce. Property and includes property owned by one party prior to marriage or during the marriage but acquired by the party alone, property (such as gifts or inheritance) that the parties agree should be each party’s separate property, property owned by the parties jointly, debts of one or both parties, and debts that are joint.
B. Spousal Maintenance/Alimony
Spouses often include postnuptial agreements in Colorado with an agreement regarding whether spousal maintenance or alimony will be paid from one spouse to the other.
C. Child Support and Parenting Time
Though it is generally not advisable to put a complete financial plan for child support in your postnuptial agreement because their children’s needs and circumstances can change over the years, many couples include a basic visitation schedule or a general approach to visitation.
D. Financial Disclosures and Legal Advice
The Colorado postnuptial agreement includes a disclosure of the couple’s finances. In addition, they typically include an acknowledgment that each spouse has had an opportunity to seek independent legal counsel and has either done so or waived that right. Also included is mutual waiver of any claim for alimony and any tort claims or other claims not arising out of the marriage itself. When both parties work together to resolve their issues in a Colorado postnuptial agreement, many times they discuss and come up with creative solutions that they might not have been able to work out with divorce lawyers and in litigation.
Difficulties and Restrictions
Challenges and Limitations of Postnuptial Agreements in Colorado
Despite the flexibility and various advantages of postnups, they aren’t without their own set of challenges and limitations. The foremost among these is the fact that, unlike a prenup, a postnup may require full financial disclsoures from both parties if the agreement relates to anything besides alimony and property division. This means that the sole purpose of a postnuptial agreement may not always be to stay on amicable terms and avoid a drawn-out, costly divorce. On the other hand, a postnuptial agreement may be executed in hopes of initiating a productive discussion about a couple’s finances. While this may be helpful in some instances, some couples may simply find it difficult to discuss touchy topics until the marriage itself has ended. In addition, while these types of agreements usually aren’t invalidated after a few years of marriage, some courts are gradually making them less enforceable. If a court believes that a spouse’s financial situation has drastically changed since the agreement was made , it may choose not to uphold the terms of the agreement. For instance, if one spouse becomes disabled making him or her unable to financially contribute to the state of the couple’s finances in the same way, the previous agreement may no longer apply in full. Signing a postnup under these circumstances risks the chance that a court may still require both parties to uphold the agreement even if the agreement itself constitutes an unfair arrangement for one spouse. Lastly, while a postnuptial agreement can function like a well-written prenuptial agreement in Colorado, it doesn’t have the full legal effect of a prenup. In some cases, a court may not uphold the terms of a postnuptial agreement even when the agreement is deemed entirely fair for both spouses if it means forcing a low-earning spouse to leave the marriage on less than equal terms. In such cases, a correct prenup that has been properly signed and notarized offers more protection than a postnup.
How to Formulate a Colorado Postnuptial Agreement
If you believe a postnuptial agreement might be the right choice for you, consult an attorney who’s well-versed in both Colorado family law and postnuptial agreements. He or she can explain fully how a postnuptial agreement may help you; when it makes sense; and what to consider when drafting one.
As was mentioned above, your postnuptial agreement must be executed in the same way as a prenuptial agreement. That means that at a minimum, the following five criteria apply: If your postnuptial agreement doesn’t meet these five criteria, a Colorado court might ultimately find that it can’t be enforced. Therefore, it’s best to work with an attorney who’s familiar with the requirements in advance to drafting an enforceable postnuptial agreement.
Once you’ve decided that a postnuptial agreement is the right choice for you, you might be interested in how to go about crafting one. Any skilled Colorado family law attorney can guide you through this process. Generally, draftspersons begin by discussing which assets will be distributed to each spouse in the event of divorce, and determining whether other provisions will make sense in your situation.
When drafting a postnuptial agreement, the focus is on achieving fairness and on addressing and whether property will be divided in the event of death. In certain situations, couples may also need to address spousal support and some other issues; however, it’s not always warranted.
The two most important things to keep in mind when drafting a postnuptial agreement in Colorado are that the terms must be fair, and that everything must be disclosed. If either requirement is not met, a Colorado court might ultimately invalidate the postnuptial agreement.
When to Pursue a Postnuptial Agreement
Postnuptial agreements can serve a useful purpose for couples experiencing significant change. Some of the most common include the following situations:
Birth of a child: A new child can shift the family’s financial landscape and priorities, making a postnuptial agreement a good idea. Consider a case in which one spouse- an attorney- has built a successful law practice prior to marriage and continues to thrive in his career. His wife, who has a high paying job of her own, takes a leave from the workforce for a year to care for the couple’s newborn. While she may be fully capable of returning to work after maternity leave, her salary potential and future opportunities could be diminished if she is out of the workforce for a long period of time. With a postnuptial agreement, both spouses can agree to retain the value of their separate assets if they later divorce.
Sale of a business: If you’re one of the fortunate business owners who see their company prosper, your postnuptial agreement can protect you from having to divide half the value of that company with a soon to be ex-spouse .
Increased household income: Generating significant income from multiple sources can pose a challenge for couples who haven’t planned ahead. You may want to create an agreement that helps to protect your assets in the event of a divorce. In addition, it’s important to think about the children: you may want to specify in writing how much of your income will be set aside for future college expenses.
Estate planning: If you have children from a previous relationship or are considering having children in the future, a postnuptial agreement can protect your children from being left out of your will. Think of it as an additional layer of protection for your estate plan.
Business and bankruptcy: A postnuptial agreement may incent a spouse to work in the business and not try to file bankruptcy for the sole purpose of defeating his or her spouse’s equitable distribution of marital assets, to avoid splitting the business down the middle.