A prenuptial agreement can accomplish a number of goals, some of which are set forth below.
(See Kim’s article in the Colorado Lawyer from March 2014)
Preservation of estate plans
Many people who get married have children from a prior relationship. Sometimes, the spouse with children will want some portion of his or her property to go to the children, instead of the new spouse. However, a marriage can completely or partially defeat the estate plan. That is because a spouse will have a legal right to make a claim against the estate of a deceased spouse for a share of estate assets if the will does not give the surviving spouse a certain portion of the estate. If this happens, a surviving spouse may receive parts of the deceased spouse’s estate that the deceased spouse in fact willed to his or her children. In other words, if a surviving spouse does not like what he or she was given in the deceased spouse’s will, the surviving spouse can make a claim to more, at the expense of the actual beneficiaries in the will.
A prenuptial agreement can prevent this from happening.
Changing the rules of dissolution
A prenuptial agreement can also give spouses different rules in the event of a divorce than the rules provided by the state. For example, the state has given couples rules for how property and debt will be divided in the event of a divorce. If couples do not like those particular rules, they can make their own with a prenuptial agreement.
To illustrate, assume Husband and Wife marry. At the time of marriage, Wife has been living in her home for 6 years, and has built up equity in that home. Husband and Wife decide to make that their home. Wife puts Husband’s name on the title of the home. Assume Husband and Wife divorce 3 years later. Under the state’s rules, if Husband and Wife divorce, Husband will likely receive half of the equity in the home, even though it was not Husband who built up the equity.
If that does not seem fair to Husband and Wife, they can come up with different rules with a prenuptial agreement.
Decreasing the costs of dissolution
One of the reasons that divorce can be so expensive is that the state’s rules for divorce are not completely clear. As a result, judges have a lot of discretion in deciding how property and debt will be divided. People can cut down on the costs of divorce by making rules that are very clear, and therefore taking some of this discretion away from judges.
Prerequisites to an enforceable prenuptial agreement
In order to be enforceable, a prenuptial agreement must be in writing and have been voluntarily signed by both of the parties, and there must be a full disclosure of the assets and debts of each party before the agreement is signed. There should also be a full disclosure of each person’s income. Each party must have access to legal representation before the agreement is signed. If each party is not represented, there must be standard language in the agreement that advises the parties that:
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