Colorado's New Uniform Premarital & Marital Agreements Act, 0314 COBJ, 2014, March, Pg. 57
| Author | Susan L. Boothby, Kim Willoughby |
Trust and Estate Law
Colorado's New Uniform Premarital and Marital Agreements Act
Susan L. Boothby, Kim Willoughby
Trust and Estate Law articles are sponsored by the CBA Trust and Estate Section. Topics include trust and estate planning and administration, probate litigation, guardianships and conservatorships, and tax planning.
Coordinating Editors
David W. Kirch, of David W. Kirch, P.C., Aurora—(303) 671-7726, dkirch@dwkpc.net; Constance D. Smith, of Fairfield and Woods P.C.—(303) 894-4474, csmith@fwlaw.com
About the Authors
Susan L. Boothby is a shareholder at Berenbaum Weinshenk, PC, where she practices in the areas of estate planning and probate— (303) 592-8315, sboothby@bw-legal.com. Kim Willoughby is the principal of Willoughby & Associates, where she practices in the areas of domestic relations and estate planning—(303) 839-1770, kim @willo ughbylaw.com.
This article outlines Colorado's new Uniform Premarital and Marital Agreements Act, which takes effect July 1, 2014. The new Act conforms the model act to Colorado case law in most respects. However, it adopts new procedural protections for parties to a premarital or marital agreement.
In 2013, the Colorado Legislature enacted House Bill 13-1204, the Uniform Premarital and Marital Agreements Act (Uniform Colorado Act), which is Colorado's version of the Uniform Premarital and Marital Agreements Act promoted by the National Conference of Commissioners on Uniform State Laws.1 The new Uniform Colorado Act repeals and reenacts with amendments the Colorado Marital Agreement Act, CRS §§ 14-2-301 et seq. It takes effect July 1, 2014. Also effective July 1, 2014, a waiver of a marital right or obligation on the death of a spouse is unenforceable unless the waiver is contained in a premarital or marital agreement that is enforceable under the Uniform Colorado Act.2
Before discussing how the new Uniform Colorado Act will impact the enforcement of new and existing premarital and marital agreements, a short review of the development of Colorado statutes relating to premarital and marital agreements is critical. As a result of evolving standards, the date the premarital or marital agreement was signed may determine whether certain defenses can be raised to challenge its enforceability.
Three Standards for Enforceability of Premarital and Marital Agreements
Colorado now has three standards for the enforceability of premarital and marital agreements, each applied depending on when the agreement was entered into. The strictest standard is the standard created by the new Uniform Colorado Act. However, Colorado's version of the Uniform Premarital and Marital Agreements Act is not as stringent as the act that was drafted by the National Conference of Commissioners on Uniform State Laws.
Agreements Entered Into Before July 1, 1986
In the context of divorce, before 1986, there were no Colorado statutes regarding premarital or marital agreements. The Colorado Supreme Court first upheld the enforcement of a premarital agreement in divorce proceedings in In re Marriage of Franks.3
Four years later, in In re Marriage of Ingels,4 the Colorado Court of Appeals considered a challenge to the validity of a premarital agreement on the grounds, inter alia, that the premarital agreement was unconscionable at the time of signing. The court of appeals directly addressed the issue of unconscionability, inferring but not holding that such ground for invalidating a premarital agreement is cognizable.5 However, it determined that under the facts of Ingels, the agreement was not unconscionable. In holding that the parties would be "held to their bargain," the court pointed out that the terms of the agreement were not "so unfair," financial disclosures were made to the wife, the wife was a skilled businesswoman with a masters degree in marketing, and she voluntarily signed the agreement.6 Although the court alluded to the fact the wife was not represented by an attorney, that was considered as merely one of several factors indicating that the agreement was entered into knowledgably.7
Also in 1979, in In the Marriage of Stokes, the court of appeals held that a valid premarital agreement, unlike a separation agreement, could not be successfully challenged as unconscionable at the time of divorce.8 The decision of Stokes was followed a year later by the Colorado Court of Appeals decision in Estate of Lebsock,9 where the court held that premarital agreements may be deemed unenforceable as to property issues if the agreement was determined to be unconscionable at the time of termination of the marriage by death.[10]
The Colorado Supreme Court considered Stokes and Lebsock to be in conflict with one another "regarding the application of an unconscionability test to ante nuptial agreements."11 The Colorado Supreme Court resolved the conflict in Newman v. Newman,12 holding that property provisions of a premarital agreement are not subject to review for unconscionability at the time of divorce. Rather, parties seeking to invalidate a premarital agreement can do so only if they can demonstrate nondisclosure, fraud, or overreaching at the time the agreement was made.13
However, maintenance provisions of the same agreement may become "voidable for unconscionability occasioned by circumstances existing at the time of the marriage dissolution."14 Newman held this was so even if the premarital agreement "is entered into in good faith, with full disclosure and without any element of fraud or overreaching."15
Agreements Entered Into on or After July 1, 1986 and Before July 1, 2014
In 1983, the National Conference of Commissioners on Uniform State Laws adopted the Uniform Premarital Agreement Act (UPAA 1). As a response to the possible enactment of UPAA 1 in Colorado, the Colorado Legislature enacted the Colorado Marital Agreement Act, effective for agreements entered into on and after July 1, 1986.
In its review of the legislative history of the Colorado Marital Agreement Act, the Colorado Supreme Court stated that the 1986 Act "was to codify in a single statute Colorado's then-existing case law and statutes in order to prevent the adoption of the Uniform Premarital Agreement Act in Colorado."16 The Colorado Marital Agreement Act followed Newman by codifying the holding that a court may review maintenance terms of a premarital or marital agreement for conscionability at the time of enforcement, but may not review other terms of the agreement if the agreement was signed voluntarily and with reasonable disclosure.17
Among other differences between UPAA 1 and the Colorado Marital Agreement Act, the Colorado Marital Agreement Act allowed enforcement of post-marital agreements in addition to premarital agreements, codifying the Colorado case law that an agreement entered into after marriage will be upheld unless fraud, concealment, or failure to disclose material information can be established.18 Later case law distinguished agreements entered into during marriage while a divorce is being contemplated, and held that these agreements must also pass the test of conscionability.[19] These agreements are held to the standard of separation agreements.20 As separation agreements, they may include provisions regarding children and, if otherwise enforceable, child-related agreements will be enforceable.21
The Colorado Marital Agreement Act codified several requirements for an enforceable premarital or marital agreement:
1) a premarital or marital agreement must be in writing and signed by both parties CCRS 55 14-2-302(1) and -303));
2) a premarital or marital agreement must be entered into voluntarily (CRS § 14-2-307(1)(a));
3) each party must provide to the other a fair and reasonable disclosure of his or her property or financial liabilities before executing the agreement (CRS § 14-2-307(l)(b));22
4) a premarital or marital agreement may not violate public policy (CRS § 14-2-304(l)(i));23 and
5) a premarital or marital agreement may not adversely affect the right of a child to child support (CRS § 14-2-304(3)).
Agreements Entered Into on or After July 1, 2014
In 2010, the National Conference of Commissioners on Uniform State Laws appointed a committee to draft a new uniform act to set forth standards for determining the enforceability of premarital and marital agreements. This resulted in the adoption of the Uniform Premarital and Marital Agreements Act (UPAA 2) in 2012.24 Colorado and North Dakota are the only states that have adopted UPAA 2 at this time.25
Major differences between UPAA 1 and UPAA 2 are found in the enforcement sections. UPAA 2 provides additional "due process in formation, on one hand, and certain minimal standards of substantive fairness, on the other."26 As will be explained later in this article, the Colorado Legislature adopted all of the due process protections of UPAA 2.
Importantly, however, the Colorado Legislature did not adopt any new substantive fairness standards found in UPAA 2. Thus:
> UPAA 2 had an alternative provision to allow an inquiry into whether the premarital or marital agreement was unconscionable at the time of signing or whether enforcement of a term would result in serious hardship for a party because of a material change in circumstances arising after the agreement was signed.27 This alternative was not adopted by the Colorado Legislature.
> UPAA 2 requires spousal support "to the extent necessary to avoid eligibility for programs of public assistance."28 The Uniform Colorado Act allows an inquiry of whether a waiver or agreement about spousal support would be...
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