marital agreement

Pre and Post Nuptial Agreements in Colorado

What is a Marital Agreement?
Pre- and postnuptial agreements (marital agreements) are important tools for couples to manage their assets and avoid conflict, both before and during their marriage and as part of the process of separating if the marriage ends. Prenuptial agreements are contracts executed prior to marriage and post-nuptial agreements are contracts made between the spouses during the marriage, that allow the parties to agree to and delineate the division of assets should a legal separation, divorce or death occur. These agreements are legally binding contracts which can protect both parties by creating a plan that if conscionable will be enforceable and predictable – thereby taking the potential conflict out of the difficult process of separating.

Every couple should consider a marital agreement as a potential tool to enable them to plan for the future, protect their assets and avoid conflict. Couples who do not have a marital agreement are subject to the provisions of the Colorado Uniform Dissolution of Marriage Act, which will determine their rights in the case of separation or divorce; and the Colorado Probate Code, which will determine the rights of the surviving spouse and other heirs, upon death if proper estate planning has not been completed.

How Colorado Law Works for Couples without a Marital Agreement
Individuals that are married and living in Colorado have statutory rights if the marriage terminates by divorce. Colorado law defines two types of property that can exist during the marriage. Separate property is the property owned prior to the marriage, and all property received by gift or inheritance during the marriage. Marital property includes all property earned by either spouse during the marriage, including deferred compensation; and all income and appreciation on separate property, whether realized or not – regardless of how the property is titled.
When a couple divorces in Colorado, each party keeps his or her separate property – if it was kept separate during the marriage and not co-mingled with marital property. If the parties cannot reach an agreement about the division of property during a divorce, the court is directed to divide the marital property in the proportion that it deems just after considering all relevant factors.

In addition to dividing marital property, a divorce court can award maintenance if it finds that one of the parties lacks sufficient income or property to provide for his or her reasonable needs. The amount and length of a maintenance order is determined by the court’s just determination after considering all relevant factors. Colorado courts have been unpredictable in awarding maintenance and thus it could have a significant financial impact on both parties.
Why Should Couples Consider Marital Agreements
Marital agreements can be used to define the parties’ rights in regards to the appreciation of separate property and all marital property accrued during the marriage. Couples who have children from previous marriages are able to provide for these children and protect their inheritance in the event of a divorce from a subsequent spouse. If one of the spouses owns a business, a marital agreement can ensure that the new spouse does not become entangled in the company should a separation occur.
Marital agreements identify, define, and resolve legitimate issues related to the couples’ finances, estate plans and business interests – while the parties are free of the emotional turmoil created during a separation process. Advantages of premarital agreements for both parties include:
Avoiding litigation costs
Protecting against fears of family members such as children from previous marriages
Protecting family assets
Protecting business assets
Protecting against creditors
Predetermined and thus predictable disposition of property

Contents of a Colorado Prenuptial Agreement
A marital agreement may address the following issues:
1. Spousal Maintenance: whether it is waived, set at a predetermined amount, based on years of marriage, etc.
2. Division of property and debts: whether assets acquired after the marriage are kept separate; whether future appreciation on existing assets are separate property; how to apportion pension funds, retirement benefits or other intangible assets.
3. Inheritance: a spouse may agree to waive his or ability to take an elective share of the estate thereby protecting children from a previous marriages’ legacy.
4. Rights and obligations under insurance policies, employee benefit plans, and other assets such as these.
5. Waiver of Rights Upon Death: a common provision in prenuptial or postnuptial agreements designed to prevent probate laws or prior wills from trumping the terms of the prenuptial or postnuptial agreement.
6. Alternative Dispute Resolution: a provision requiring the complaining party to mediate or arbitrate any dispute and preventing him or her from filing a costly lawsuit.
7. Attorney’s fees: who pays for attorney’s fees if the parties are unable to abide by the terms of the agreement.
If the parties have children during the marriage, a marital agreement cannot legally bind either party to agreements made regarding child support, physical custody, parenting time and decision-making authority. The parties may agree on proposed terms for these issues but these terms would be subject to the court’s later approval.

What does a Marital Agreement do?
A marital agreement allows the engaged or married couple to negotiate around Colorado law in order to define separate property and marital property. By means of a marital agreement you can define separate property to include all income from and appreciation on your separate property. You can also protect your earned income by defining that as separate property, so that assets purchased or investments made with your earned income will remain your separate property upon divorce. Thus, by altering the definitions of separate property and marital property from those provided by statute, you can protect not only the core of your separate property which you amassed prior to your marriage, but also the earnings from and appreciation on that property. If you wish to restrict your spouse’s rights upon divorce to your earned income, including retirement benefits, you can do that as well.
Spouses can waive their rights to maintenance payments in a marital agreement or they can agree to a certain amount of maintenance to be paid to the less wealthy spouse in the event of a divorce. However, if at the time of a divorce, the court determines that the spousal maintenance terms in the agreement are unconscionable, the court can render that portion of the prenuptial null and void.

Finally, a marital agreement can allow couples to determine what rights a surviving spouse will have upon the first spouse’s death. For example, in many marital agreements, each spouse waives his or her right to reject the terms of the others’ will and elect to take up to half of the estate outright (depending on the length of the marriage). Such a waiver ensures that the estate plan of the first spouse to die will be honored by the surviving spouse.

Why Couples Choose to Alter Spousal Rights Provided by Law.
Couples choose to alter their statutory rights for a number of reasons. Some people simply wish to have certainty as to property rights and maintenance payments upon a potential divorce. By entering into a marital agreement, they eliminate much of the financial uncertainty associated with a divorce. A fairly negotiated marital agreement can provide some assurance to the wealthier spouse as to the extent of the financial impact of a divorce and provide the less wealthy spouse with some guarantee to his or her entitlement to property distribution and maintenance.

People who have children from a previous marriage may wish to protect their assets for these children’s benefit. A marital agreement that addresses the rights of a surviving spouse can protect the deceased spouse’s estate for the benefit of children from a previous marriage as well.

Sometimes parents encourage their adult children to enter into a marital agreement in order to protect assets owned by the child that were accumulated by previous generations. Usually, a wealthy family wants to ensure that assets that have been gifted to adult children do not become vulnerable to the spouse in a divorce situation.

Enforceability of a Marital Agreement.
Colorado adopted the Colorado Marital Agreement Act in 1986. This statute allows the waiver of statutory property and maintenance rights of spouses either before or during a marriage. Thus, the general statutory rule is that marital agreements are valid and binding contracts. However, one party can have the agreement voided if he or she did not sign it voluntarily or if the other party did not provide a fair and reasonable disclosure of his or her property and financial obligations.

When one spouse challenges the validity of a prenuptial, the court will look at several factors to determine whether the agreement should be enforced. The two most important factors the court considers are the adequacy of the financial disclosure and whether either party was under duress when signing the agreement. Full and complete disclosure of all assets is required prior to the signing of the prenuptial agreement because a party cannot knowingly waive rights unless he or she has sufficient information about the potential value of those rights. Duress is reviewed as a question of fact and the court may consider factors such as the timing of the agreement (i.e., was the spouse forced to sign it right before the wedding, etc.) and whether each spouse had
independent counsel. It is extremely important that both parties have their own legal adviser during the preparation and execution of a marital agreement.

Seniors Getting Married - Estate Planning Considerations

Seniors getting married and estate planning.

Seniors getting married and estate planning.

People are getting married later in life.  Marriages, with one or both spouses being seniors, retired, and  having grown children, have become quite common. And while its fantastic to know that love can blossom at any age and usually children and grandchildren are happy that their parents have companions to spend their later years with, these marriages require unique estate planning considerations.  

Estate planning for later life marriages is complicated for a number of reasons. These "senior" marriages can directly impact the inheritance of the children and other family members on both sides. Remarriages also can affect a spouse’s right to alimony payments from a prior spouse, retirement benefits, social security benefits, health insurance, and the spousal medical care obligations. Its important for both spouses to clearly address who their assets are intended to benefit, whether it’s the new spouse, the children and families or a trust – both while the spouses are alive, upon the death of one of them, and when both die.

Other considerations that should be addressed as a part of the estate planning process should include whether long-term care insurance is needed; should income and assets be blended or kept separate; how the primary residence is treated both during life, and upon the death of one spouse, and then both spouses; is a post or prenuptial agreement necessary or advisable as part of the estate planning process; how do the parties wish to pay for future medical expenses (for example, is it advisable to deplete the assets of one spouse first).

People in later year marriages also should consider the conflicts that could arise between the spouse and children should agents named for medical and general powers of attorney need to act. The best way to avoid this is to think these conflicts through in the planning phase and coordinate the choice of fiduciaries in the documents – with the fiduciaries having a clear understanding of the spouse’s agreements to the later life marriage concerns, as delineated above.

Colorado Law and Pre- and Postnuptial Agreements.

What is a Marital Agreement? Pre- and postnuptial agreements (marital agreements) are important tools for couples to manage their assets and avoid conflict, both before and during their marriage and as part of the process of separating if the marriage ends. Prenuptial agreements are contracts executed prior to marriage and post-nuptial agreements are contracts made between the spouses during the marriage, that allow the parties to agree to and delineate the division of assets should a legal separation, divorce or death occur. These agreements are legally binding contracts which can protect both parties by creating a plan that if conscionable will be enforceable and predictable – thereby taking the potential conflict out of the difficult process of separating.

Every couple should consider a marital agreement as a potential tool to enable them to plan for the future, protect their assets and avoid conflict. Couples who do not have a marital agreement are subject to the provisions of the Colorado Uniform Dissolution of Marriage Act, which will determine their rights in the case of separation or divorce; and the Colorado Probate Code, which will determine the rights of the surviving spouse and other heirs, upon death if proper estate planning has not been completed.

How Colorado Law Works for Couples without a Marital Agreement Individuals that are married and living in Colorado have statutory rights if the marriage terminates by divorce. Colorado law defines two types of property that can exist during the marriage. Separate property is the property owned prior to the marriage, and all property received by gift or inheritance during the marriage. Marital property includes all property earned by either spouse during the marriage, including deferred compensation; and all income and appreciation on separate property, whether realized or not - regardless of how the property is titled. When a couple divorces in Colorado, each party keeps his or her separate property - if it was kept separate during the marriage and not co-mingled with marital property. If the parties cannot reach an agreement about the division of property during a divorce, the court is directed to divide the marital property in the proportion that it deems just after considering all relevant factors.

In addition to dividing marital property, a divorce court can award maintenance if it finds that one of the parties lacks sufficient income or property to provide for his or her reasonable needs. The amount and length of a maintenance order is determined by the court’s just determination after considering all relevant factors. Colorado courts have been unpredictable in awarding maintenance and thus it could have a significant financial impact on both parties. Why Should Couples Consider Marital Agreements Marital agreements can be used to define the parties’ rights in regards to the appreciation of separate property and all marital property accrued during the marriage. Couples who have children from previous marriages are able to provide for these children and protect their inheritance in the event of a divorce from a subsequent spouse. If one of the spouses owns a business, a marital agreement can ensure that the new spouse does not become entangled in the company should a separation occur. Marital agreements identify, define, and resolve legitimate issues related to the couples’ finances, estate plans and business interests – while the parties are free of the emotional turmoil created during a separation process. Advantages of premarital agreements for both parties include: Avoiding litigation costs Protecting against fears of family members such as children from previous marriages Protecting family assets Protecting business assets Protecting against creditors Predetermined and thus predictable disposition of property

Contents of a Colorado Prenuptial Agreement A marital agreement may address the following issues: 1. Spousal Maintenance: whether it is waived, set at a predetermined amount, based on years of marriage, etc. 2. Division of property and debts: whether assets acquired after the marriage are kept separate; whether future appreciation on existing assets are separate property; how to apportion pension funds, retirement benefits or other intangible assets. 3. Inheritance: a spouse may agree to waive his or ability to take an elective share of the estate thereby protecting children from a previous marriages’ legacy. 4. Rights and obligations under insurance policies, employee benefit plans, and other assets such as these. 5. Waiver of Rights Upon Death: a common provision in prenuptial or postnuptial agreements designed to prevent probate laws or prior wills from trumping the terms of the prenuptial or postnuptial agreement. 6. Alternative Dispute Resolution: a provision requiring the complaining party to mediate or arbitrate any dispute and preventing him or her from filing a costly lawsuit. 7. Attorney’s fees: who pays for attorney’s fees if the parties are unable to abide by the terms of the agreement. If the parties have children during the marriage, a marital agreement cannot legally bind either party to agreements made regarding child support, physical custody, parenting time and decision-making authority. The parties may agree on proposed terms for these issues but these terms would be subject to the court’s later approval.

What does a Marital Agreement do? A marital agreement allows the engaged or married couple to negotiate around Colorado law in order to define separate property and marital property. By means of a marital agreement you can define separate property to include all income from and appreciation on your separate property. You can also protect your earned income by defining that as separate property, so that assets purchased or investments made with your earned income will remain your separate property upon divorce. Thus, by altering the definitions of separate property and marital property from those provided by statute, you can protect not only the core of your separate property which you amassed prior to your marriage, but also the earnings from and appreciation on that property. If you wish to restrict your spouse's rights upon divorce to your earned income, including retirement benefits, you can do that as well. Spouses can waive their rights to maintenance payments in a marital agreement or they can agree to a certain amount of maintenance to be paid to the less wealthy spouse in the event of a divorce. However, if at the time of a divorce, the court determines that the spousal maintenance terms in the agreement are unconscionable, the court can render that portion of the prenuptial null and void.

Finally, a marital agreement can allow couples to determine what rights a surviving spouse will have upon the first spouse's death. For example, in many marital agreements, each spouse waives his or her right to reject the terms of the others' will and elect to take up to half of the estate outright (depending on the length of the marriage). Such a waiver ensures that the estate plan of the first spouse to die will be honored by the surviving spouse.

Why Couples Choose to Alter Spousal Rights Provided by Law. Couples choose to alter their statutory rights for a number of reasons. Some people simply wish to have certainty as to property rights and maintenance payments upon a potential divorce. By entering into a marital agreement, they eliminate much of the financial uncertainty associated with a divorce. A fairly negotiated marital agreement can provide some assurance to the wealthier spouse as to the extent of the financial impact of a divorce and provide the less wealthy spouse with some guarantee to his or her entitlement to property distribution and maintenance.

People who have children from a previous marriage may wish to protect their assets for these children's benefit. A marital agreement that addresses the rights of a surviving spouse can protect the deceased spouse's estate for the benefit of children from a previous marriage as well.

Sometimes parents encourage their adult children to enter into a marital agreement in order to protect assets owned by the child that were accumulated by previous generations. Usually, a wealthy family wants to ensure that assets that have been gifted to adult children do not become vulnerable to the spouse in a divorce situation.

Enforceability of a Marital Agreement. Colorado adopted the Colorado Marital Agreement Act in 1986. This statute allows the waiver of statutory property and maintenance rights of spouses either before or during a marriage. Thus, the general statutory rule is that marital agreements are valid and binding contracts. However, one party can have the agreement voided if he or she did not sign it voluntarily or if the other party did not provide a fair and reasonable disclosure of his or her property and financial obligations.

When one spouse challenges the validity of a prenuptial, the court will look at several factors to determine whether the agreement should be enforced. The two most important factors the court considers are the adequacy of the financial disclosure and whether either party was under duress when signing the agreement. Full and complete disclosure of all assets is required prior to the signing of the prenuptial agreement because a party cannot knowingly waive rights unless he or she has sufficient information about the potential value of those rights. Duress is reviewed as a question of fact and the court may consider factors such as the timing of the agreement (i.e., was the spouse forced to sign it right before the wedding, etc.) and whether each spouse had independent counsel. It is extremely important that both parties have their own legal adviser during the preparation and execution of a marital agreement.

© 2012 Tanya Shimer All Rights Reserved.

Estate Planning Basics: What should be covered in any estate plan

Tibetan couple in Dharamasala, India
Tibetan couple in Dharamasala, India

Foundational Planning – the Basics

The foundation of all estate plans contains:

Last Will or a Revocable Living Trust,

a Financial Power of Attorney,

a Medical Power of Attorney, and

a Living Will.

The combination of these documents allows you to designate how your assets and health will be managed if you ever become disabled.  Further, the Last Will or Revocable Living Trust provides for the distribution of your assets upon your death – to the individuals or organizations you choose and in the manner you decide.

The foundational planning of the Inca in Peru.
The foundational planning of the Inca in Peru.

A good estate plan with careful planning should allow you to:

During life:

--Manage and enjoy your assets as completely as possible

--Transfer assets to the next generation while minimizing transfer tax upon the transfer or at death.

--Meet your charitable or religious contribution goals

If you become disabled:

--Have at least one primary and one alternate financial decision maker legally recognized and ready to assist you.

--Have at least one primary and one alternate medical decision maker legally recognized and ready to assist you

Upon death:

--Designate who will receive your assets at your death

--Specify how those individuals will receive your assets

--Designate a guardian and trustee for your minor children

--Minimize any transfer taxes

--Ideally and with careful planning, replace any value lost to taxes

Why do I need a will?

Wills are important.  A will ensures that whatever personal belongings and assets you  have will go to family or beneficiaries you designate. Without a will, the court makes these decisions.

If you have children, a will ensures that your wishes regarding your children will be clear.  You will be able to designate a guardian for your children's daily care.   By completing a will, you will also be able to name a trustee who will be responsible for taking care of your financial resources for your children until they are adults.

Depending on the size of your estate, careful estate planning in a will can create significant tax benefits.  If you have a will and other foundational estate planning documents taken care of you will also avoid subjecting your family and loved ones to confusion and anxiety at a difficult because your wishes will have already been made clear to them.

What does a will allow me to do?

In your will, you can name:

Your beneficiaries. You may name beneficiaries (family members, friends, spouse, domestic partner or charitable organizations, for example) to receive your assets according to the instructions in your will. You may list specific gifts, such as jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets (any assets that your will does not dispose of by specific gift).

A guardian and trustee for your minor children. You may nominate a person to be responsible for your child’s personal care if you and your spouse die before the child turns 18. You may also name a trustee—who may or may not be the same person—to be responsible for managing any assets given to the child, until he or she is 18 years old or older, depending on your wishes.

A personal representative. You may nominate a person or institution to collect and manage your assets, pay any debts, expenses and taxes that might be due, and then distribute your assets to your beneficiaries according to the instructions in your will. Your personal representative serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your personal representative carefully.

Asset protection/tax planning. A properly designed estate plan should:

-- protect your assets, your person, and your business from a possible future disability;

--protect your assets from liability during and after your life;

--distribute your assets tax efficiently at your death; and

--ensure that assets left to young beneficiaries are left inside of a structure such as a trust that will provide management and protection of these assets for them.

Special needs planning.  Planning for a family member with special needs is often a difficult endeavor for families and is especially important for families with significant assets.  Many planning techniques are available to ensure that a loved one with special needs is provided for without jeopardizing their ability to receive the public benefits they need and to protect them from fraud.

© 2012 Tanya Shimer All Rights Reserved.

Once my estate plan is done, what do I do with my documents to ensure safe keeping?

Its important to store your legal documents I a safe place where your representatives can find them.

Its important to store your legal documents I a safe place where your representatives can find them.

Many clients have asked how to care for their estate planning documents once they are completed, I suggest the following:

1. Originals. The originals are very important. They should remain in your care and control, and neither I nor anyone else should be entrusted with them. Your original signed will should be kept in a safe place, preferably in a fireproof safe or safe deposit box. Your original powers of attorney can be kept in your reference notebook. In addition, any old/former documents—including any copies—should be destroyed. Many clients ask whether copies of former estate planning documents should be retained “just in case.” The answer is no. All such documents should be destroyed to avoid any confusion as to their validity.  Use your best judgment in storing and protecting these documents.

2. Reference Set. If I did your estate plan, you have been provided with a reference set of your documents in your binder. These are yours to be read and to which you may refer with any questions or concerns. The unsigned copy of your will in this binder is not to be signed or presented as a valid document—you have only one valid, executed will. If you decide to provide anyone with a copy of your will, be sure to copy the unsigned, reference will and not the original, signed will. With the quality of today’s copiers, I do not wish to be presented with a document purporting to be an original and have any questions as to whether or not it is the original or a copy.

3. Copies for Agent. You should provide your agents with copies of your executed Powers of Attorney, both General and Medical. This will enable them to have the documents and act upon them without the necessity of obtaining copies once a disability or other unfortunate circumstance occurs.

4. Copies for Physicians. You should also provide your physicians with copies of your executed Medical Power of Attorney and Living Will. They will then be able to keep these important documents in your files so that your agents will not have to search for them in the event of illness or accident.

5. Copies for Home. For clients living alone, especially aged clients, I recommend that copies of your Medical Powers and Living Will be kept in a readily accessible location such as your refrigerator or freezer in the kitchen, along with a note on the refrigerator door indicating that the documents may be found inside. First responders are taught to check the refrigerator door for important medical and pharmacological information. Finding the Medical Power of Attorney and Living Will along with other such information will make their treatment decisions easier, and better insure that your dignity is protected.

© 2012 Tanya Shimer All Rights Reserved.