Prenuptial and Postnuptial Agreements

Because there are no cases that have gone up on appeal concerning the new prenuptial agreement and postnuptial agreement laws, there is uncertainty concerning enforcement of prenuptial and postnuptial agreements under the new law.

• Signing a Postnuptial Agreement When a Divorce or Legal Separation Case is Pending:The new postnuptial agreement law does not apply to an agreement between spouses who intend to obtain a marital dissolution or court-decreed legal separation which resolves their marital rights or obligations, and is signed when a proceeding for marital dissolution or court-decreed legal separation is anticipated or pending. In other words, if a divorce or legal separation case is about to be filed or is filed, the agreement that is signed before the case is filed or while the case is filed is NOT considered to be a postnuptial agreement.
• New Law Applies to Civil Unions: Prospective parties to a civil union and present parties to a civil union may contract to make an agreement relating to the civil union that includes any of the rights and obligations that may be included in a marital agreement.
• Principles of Law and Equity Apply: Unless displaced by a provision in the Uniform Premarital and Marital Agreements Act, principles of law and equity supplement the new prenuptial and postnuptial agreement laws. This new part of the law may lead to a great deal of uncertainty concerning whether a judge can throw out and negate a prenuptial or postnuptial agreement simply becase the judge is applying principles of equity (fairness).
• Agreement Must be in a Record and Signed: A premarital agreement or marital agreement must be in a record and signed by both parties. The agreement is enforceable without consideration. “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. This new part of the law seems to allow prenuptial and postnuptial agreements to be maintained on paper or in a computer record.
• When an Agreement is Unenforceable: (1) A premarital agreement or marital agreement is unenforceable if a party against whom enforcement is sought proves:
  1. The party’s consent to the agreement was involuntary or the result of duress;
  2. The party did not have access to independent legal representation;
  3. Unless the party had independent legal representation at the time the agreement was signed, the agreement did not include a notice of waiver of rights (as described in the new law) or an explanation in plain language of the marital rights or obligations being modified or waived by the agreement; or
  4. Before signing the agreement, the party did not receive adequate financial disclosure.

This part of the law is a significant departure from the old prenuptial and postnuptial agreement laws. In the past, whether a party had a lawyer review the agreement was irrelevant when it came to enforcement. Now, the agreement is unenforceable unless the parties each had a lawyer or there was notice of a waiver of the right to a lawyer.

• Independent Legal Representation: A party has access to independent legal representation if:

a.  Before signing a premarital or marital agreement, the party has a reasonable time to:

(I)   Decide whether to retain a lawyer to provide independent legal representation; and

(II)   Locate a lawyer to provide independent legal representation, obtain the lawyer’s advice, and consider the advice provided; and

b.  The other party is represented by a lawyer and the party has the financial ability to retain a lawyer or the other party agrees to pay the reasonable fees and expenses of independent legal representation.

No one knows what will be considered a “reasonable time” to decide whether to have a lawyer, locate a lawyer, obtain advice, and consider the advice provided. Furthermore, the amount of time that is considered “reasonable” will be considered by the judge reviewing enforcement of the agreement on a case by case basis. If one party had a lawyer when the prenuptial agreement or postnuptial agreement was signed, and the other party did not, then a judge who has to decide enforcement issues concerning the agreement will have to decide on a case by case basis whether the party with the lawyer had the financial ability to retain a lawyer for the party without a lawyer.

• Waiver or Rights: A party to a prenuptial or postnuptial agreement is allowed to waive certain rights, but there now has to be a notice contained in the agreement. A notice of waiver of rights requires language, conspicuously displayed, substantially similar to the following, as applicable to the premarital agreement or marital agreement:
  • If you sign this agreement, you may be:
  • Giving up your right to be supported by the person you are marrying or to whom you are married.
  • Giving up your right to ownership or control of money and property.
  • Agreeing to pay bills and debts of the person you are marrying or to whom you are married.
  • Giving up your right to money and property if your marriage ends or the person to whom you are married dies.
  • Giving up your right to have your legal fees paid.

Even if those rights are stated in the prenuptial or postnuptial agreement, the waivers might not be enforced by a court unless the language is “conspicuously displayed.” Since the Uniform Premarital and Marital Agreements Act is a new law, it remains to be determined what “conspicuously displayed” means in the eyes of a judge.

• Adequate Financial Disclosure: A party has adequate financial disclosure if the party:

1. Receives a reasonably accurate description and good-faith estimate of value of the property, liabilities, and income of the other party; or
2. Has adequate knowledge or a reasonable basis for having adequate knowledge of an accurate description and good-faith estimate of value of the property, liabilities, and income of the other party.

One of the mysteries that will need to play out in the future is the timing on the financial disclosure or the timing on having “adequate knowledge or a reasonable basis for having adequate knowledge.” For example, if parties start negotiating a prenuptial or a postnuptial agreement a month before it is signed, and provide their financial disclosures a month before signing, do the disclosures have to be updated on the day of signing? No one knows how a judge will decide these issues.

• Unenforceable Terms: The new Uniform Premarital and Marital Agreements Act says:

A marital agreement or amendment thereto or revocation thereof that is otherwise enforceable….is nevertheless unenforceable insofar, but only insofar, as the provisions of such agreement, amendment, or revocation relate to the determination, modification, limitation, or elimination of spousal maintenance or the waiver or allocation of attorney fees, and such provisions are unconscionable at the time of enforcement of such provisions. The issue of unconscionability shall be decided by the court as a matter of law.

In other words, even if a marital agreement meets all of the enforceability tests (for example, it was voluntary, it was not entered into based on duress, the parties had independent legal representation, etc.), the postnuptial agreement may be unenforceable concerning waivers of maintenance (also called “alimony” or “spousal support”) and payment of attorney fees in the event of a dissolution of marriage or legal separation.

However, notice that this part of the new law quoted above concerning enforceability relates only to “marital agreements” and does not reference premarital (prenuptial) agreements. It is unknown whether the legislature intended to omit premarital agreements from this “unenforceability” section, or whether it was an oversight. In general, Colorado law presumes the legislature meant what was said.

• Agreement and Effect on Children, Domestic Violence, Penalties and Public Policy: The new law makes it clear that a prenuptial agreement or postnuptial agreement cannot:

1. Adversely affect a child’s right to support;
2. Limit or restrict a remedy available to a victim of domestic violence (other than as provided for in the Uniform Premarital and Marital Agreements Act);
3. Purport to modify the grounds for a court-decreed legal separation or marital dissolution available under law of this state (other than as provided for in the Uniform Premarital and Marital Agreements Act);
4. Penalize a party for initiating a legal proceeding leading to a court-decreed legal separation or marital dissolution; or
5. (e) Violate public policy.

Furthermore, a term in a premarital agreement or marital agreement which defines the rights or duties of the parties regarding custodial responsibility is not binding on the court. “Custodial responsibility” means parental rights and responsibilities, parenting time, access, visitation, or other custodial right or duty with respect to a child.

CONCLUSION

Marital agreements (prenuptial agreements and postnuptial agreements) signed after July 1, 2014 are subject to the new laws discussed in this article. Those new laws create considerable uncertainty concerning enforcement of such agreements in some ways, while adding a layer of protection for a party who might not be able to afford to have a lawyer review the agreement. Parties should enter into prenuptial and postnuptial agreements with a full understanding of the risks and benefits of entering into these agreements.