10 Reasons Why Premarital Agreements Make Sense

By Rebecca C. Alexander
Law Offices of Rebecca C. Alexander, PC

It goes without saying, but every marriage eventually comes to an end. Marriages either end by divorce or when the first spouse dies.

People marry at different times in life, one time or multiple times, and in all kinds of economic conditions. What people expect of their marriages varies dramatically depending on their values and personal circumstances. Marriage is not a “one-size-fits-all” proposition. Here are 10 good reasons to have a premarital agreement:

1. Create certainty regarding property at the end of the marriage. Each state imposes different default rules upon married people with respect to the division of property at the end of a marriage by death or divorce. The disposition of property for a couple who is married in one state but later moves to another will be governed by the law of the state where the couple resides at the time of death or divorce. Few couples know about these rules as they move from one place to another. Premarital agreements allow couples to establish certainty with respect to how their property will be handled at the end of their marriage by replacing the default rules with their own agreements that reflect their values and ideals. These agreements can later be changed only with the consent of both parties.
2. Protect family-owned or closely held businesses. Premarital agreements can eliminate expensive and time-consuming battles over the valuation of business interests by specifying the disposition of such business interests irrespective of value. Litigation surrounding business interests during divorce proceedings can be disruptive to the business operations and can drag family members into the divorce. By protecting interests in family-owned or closely-held businesses, one can also provide a measure of comfort to family members and business associates that their livelihoods will not be disrupted by an individual’s death or divorce.
3. Specify how marital property will be divided in the event of divorce. Colorado law provides for the equitable distribution of marital property “in such proportions as the court deems just” after considering a variety of factors. Often, the courts interpret this to mean “equally” in the absence of unusual circumstances. A premarital agreement can remove the uncertainty of an “equitable” distribution by specifying that marital property will be divided equally or in some other agreed upon ratio in the event of divorce, thus simplifying the divorce process if it is to occur.
4. Protect family legacies and provide assurance to older generations with accumulated wealth. Many families who have accumulated wealth want it to be available for future generations. The more they protect their wealth for their lineal descendants, the longer the family money will likely last. Family members who are related by marriage are seldom afforded the same access to family wealth. Premarital agreements can serve an important role in implementing an extended family’s wealth preservation goals and can make parents more comfortable passing their wealth to their married children.
5. Protect children from prior marriages. Couples who marry later in life may want to protect their assets for their adult children from previous marriages. Similarly, where there are young children from a prior marriage, the couple may want to specify which parent is responsible for that child’s financial needs or one spouse may want to protect his/her assets for the benefit of their child.
6. Address complex legal issues that arise in divorces that involve trust interests. Colorado law surrounding beneficial interests in trusts in the context of divorce proceedings is complicated, problematic and subject to change. Premarital agreements can protect beneficial interests in trusts and greatly simplify divorce proceedings in that regard.
7. Provide security for a “less-propertied” spouse. Premarital agreements do not need to be “all or nothing” contracts. Premarital agreements can provide financial security for a less-propertied spouse, which can ease a common concern that they will be left out in the cold after a long marriage.
8. Reduce conflict between adult children and a surviving stepparent. Often spouses in a second or third marriage wish to provide for each other in the event of their death. This can create animosity between the surviving spouse and the deceased spouse’s adult children from a previous marriage. Setting forth commitments and mutual understandings around death in a premarital agreement can help to reduce that animosity and preserve the relationships established between adult children and their surviving stepparent.
9. Simplify and reduce the bitterness and expense that often accompanies divorce. Because the couple agrees on what is fair to them at a time when they are getting along, and because they can create certainty with respect to issues that are often litigated in divorce proceedings, premarital agreements can reduce the complexity, bitterness and expense of divorce proceedings and preserve the parties’ resources for life after marriage.
10. Foster open communication. The negotiation of a premarital agreement can be an invaluable tool for fostering open and honest communication about finances and parties’ expectations and values surrounding marriage. These communications may prevent later disagreements and can strengthen the marriage.

Postnuptial agreements are also valid in Colorado, as long as they are entered into at a time when the couple intends to remain married, although they are sometimes more difficult to negotiate unless both spouses are completely aligned with the goals of the agreement.

– Rebecca Alexander is the founder of the Law Offices of Rebecca C. Alexander, LLC, where her practice is focused on premarital agreements and assisting families with discussions regarding multi-generational wealth stewardship.