Marital Agreements in Colorado - February 2007 - Trust and Estate Law
| Publication year | 2007 |
| Pages | 53 |
2007, February, Pg. 53. Marital Agreements in Colorado - February 2007 - Trust and Estate Law
February 2007
Vol. 36, No. 2 [Page 53]
Trust and Estate Law
Marital Agreements in Colorado
by Constance D. Smith, Constance Beck Wood, Julia Griffith McVey
Trust and Estate articles are sponsored by the CBA Trust and Estate Section. They focus on topics including trust and estate planning and administration, elder law, probate litigation, guardianships and conservatorships, and tax planning.
Article Editors:
David W. Kirch, of David W. Kirch, P.C., Aurora - (303) 671-7726, dkirch@qwest.net; Constance D. Smith, of Rothgerber Johnson & Lyons LLP - (303) 623-9000, csmith@rothgerber.com
About the Authors:
This article addresses premarital and postmarital agreements in Colorado and discusses the history and requirements of marital agreements. A version of this article will be added to the Colorado Estate Planning Handbook in the 2007 Supplement. The 2007 Supplement will be available February 2007 from CBA-CLE.
Marital agreements are becoming more common in estate planning for a number of reasons. Because pre- and postmarital agreements can impact a client's estate plan, it is important for the effective estate planning attorney to be aware of the numerous issues surrounding marital agreements, including the requirements of enforceable agreements and current case law interpreting marital agreements. This article provides a brief historical background of marital agreements and discusses grounds for attacking such agreements. In addition, provisions in marital contracts pertaining to divorce and death issues are analyzed. Finally, practical suggestions for practitioners who prepare marital agreements are provided.
Historical Overview
Modern premarital agreements evolved out of "jointure," an early common law estate in lands intended to provide for the lifetime of a wife on the death of her husband. Until 1970, premarital agreements that addressed issues relating to divorce were void as against public policy.(fn1) Colorado's first case giving validity to premarital agreements that contained divorce provisions was decided in 1975.(fn2) Now, all states and Washington, D.C. accept premarital agreements as a permissible means of contracting between spouses, as long as such agreements are validly made.
Absent an agreement to the contrary, spouses in all states acquire legal or equitable rights in property that are not dependent on which spouse holds legal title. Consequently, marital agreements are available to alter both legal and equitable rights. Reasons for using marital agreements are numerous and include protecting family property from marital claims in a divorce proceeding, protecting property for children from a prior marriage, and protecting business interests or certain assets in the event of divorce or death.
Uniform Premarital Agreement Act
Before 1983, states did not have statutes specifically authorizing premarital agreements. Consequently, courts made decisions about such agreements on a case-by-case basis. In response to the resulting lack of uniformity and due to the increase in demand for these agreements, the National Conference of Commissioners on Uniform State Laws drafted the Uniform Premarital Agreement Act (UPAA) in 1983.(fn3) By 2005, the UPAA was adopted in twenty-five states and the District of Columbia in whole or in part.(fn4) Some states have adopted a modified version of the UPAA, and states that have adopted the UPAA have differing enforceability standards. Thus, uniformity has not been achieved, and this can create issues for "mobile" clients or those who own property in more than one jurisdiction.
The UPAA defines a "premarital agreement" as an agreement between prospective spouses made in contemplation of marriage to become effective on marriage. Parties are allowed to contract on all matters, including divorce. To be valid under the UPAA, these agreements must be in writing, as must any amendments and revocations to the agreement. No additional consideration is required for an agreement to be enforceable - the marriage itself is the consideration. The UPAA does not recognize postmarital agreements.
Colorado Statutes Permitting Marital Agreements
Colorado has two acts that recognize the validity of marital agreements. These are the Colorado Uniform Dissolution of Marriage Act(fn5) and the Colorado Marital Agreement Act (CMAA).(fn6) The CMAA is Colorado's version of the UPAA, and was enacted in 1986. Unlike the UPAA, the CMAA recognizes premarital and postmarital agreements. Colorado marital agreements entered into before July 1, 1986 are governed by prior case law. Part of the CMAA was amended and applies to agreements that became effective on or after July 1, 1996.(fn7)
Requirements for Enforceable Colorado Marital Agreements
To be enforceable in Colorado, a marital agreement must meet the following requirements:
1. A marital agreement must be in writing and must be signed by both parties.(fn8)
2. The parties must enter into the agreement voluntarily.(fn9)
3. Each party to a marital agreement must provide to the other party a fair and reasonable disclosure of his or her property or financial liabilities before executing the agreement.(fn10)
4. The agreement becomes effective on marriage if signed by both parties prior to the marriage, or on the signature of both parties if signed during the marriage.(fn11)
5. After the agreement becomes effective, it can be amended or revoked only by a written agreement signed by both parties.(fn12)
6. A marital agreement may not violate public policy.(fn13)
7. A marital agreement may not adversely affect the right of a child to child support.(fn14)
8. A marital agreement will not be enforceable if any provisions are found to be unconscionable.(fn15) Determination of unconscionability is made at the time of enforcement and not at the time the agreement is signed.(fn16) The burden of proof is on the party challenging the agreement.(fn17)
Grounds for Attacking Marital Agreements
There are several bases on which marital agreements may be invalidated, regardless of when executed.(fn18) These are discussed below.
Unconscionability or Lack of Fairness
Unconscionability of an agreement is decided by a court as a matter of law.(fn19) If the terms of an agreement are so unfair and the parties' bargaining position is so disproportionate as to render the agreement unconscionable, it will be invalidated.(fn20) The current trend of courts is to enforce a premarital agreement, even if it appears to be unfair, when the parties have entered into the agreement voluntarily and there has been adequate disclosure.
Change in Circumstances
Factors considered in determining whether a change in circumstances warrants invalidating an agreement include: (1) the length of marriage; (2) the birth of children; and (3) changes in detrimental reliance on the marriage.(fn21) Some courts find that the underlying state interest in the welfare of divorced spouses outweighs the freedom to contract, and that the state has a valid interest in mitigating potential hardship to a spouse resulting from the breakup of the marriage and a strict interpretation of the agreement.(fn22)
Violation of Public Policy
When terms of an agreement are seen as encouraging divorce or some form of discrimination, a court will invoke public policy as a reason for not enforcing an agreement.(fn23) For example, the Colorado Court of Appeals invoked public policy to invalidate an agreement containing terms that mandated specific religious training for children.(fn24)
Involuntary Execution, Fraud, Duress, or Undue Influence
In determining whether an agreement was entered into voluntarily, courts may look to the absence of independent legal counsel or the length of time between entering the agreement and the marriage."(fn25) To prevail on a claim of fraud, a party must prove that the other party knowingly made false representations with intent to deceive. For duress to void a contract, it must consist of "threats of bodily or other harm or other means amounting to coercion, or tending to coerce the will of another and actually inducing him to do an act contrary to his free will."(fn26) The threat of not marrying is not considered duress.(fn27)
Lack of Independent Legal Counsel
The UPAA does not require that parties have separate legal counsel; no state has this requirement, either. Although no Colorado court has found a marital agreement unenforceable due to lack of legal representation, courts can consider the issue of legal representation when evaluating whether parties knowingly entered into the agreement.
Lack of Financial Disclosure
The UPAA and every state that allows marital agreements require financial disclosure for an agreement to be valid. The amount of disclosure required varies from state to state. The UPAA allows for this disclosure to be waived. However, for Colorado marital agreements, the best practice is to disclose financial status with as much detail as possible, including contingent and prospective assets and liabilities, and to attach such information as exhibits to the agreement.
Property Division on Divorce
One of the most important provisions to a client in a marital agreement is the delineation of marital and separate property in the event of a termination of the...
To continue reading
Request your trial