Why Should I Sign a Pre-Nuptial Agreement?
Colorado’s characterization of marital and separate property makes a pre-nuptial agreement helpful in the event of a divorce. In broad terms, separate property is that which you owned before the marriage. Separate property cannot be divided between the spouses during a divorce. However, any increase in value to separate property during the marriage is considered marital property, which will be split between the spouses.
Although many people think of pre-nups as a tool for a second marriage, there a variety of reasons why you should consider signing one before you get married.
You Own a Business
If you started a business before you got married, chances are you do not want your spouse taking a portion of that value if you get divorced. You will need to demonstrate the value of the business on the date of your marriage, and the value at the time of the divorce. This requires the use of a business valuation expert, which is expensive and time-consuming.
Without a valid pre-nuptial agreement, any increase in value during the marriage can be split by the court. This can result in draining business resources to buy out your spouse, or can result in your spouse getting a larger share of other assets, such as the home, bank accounts, or investment accounts.
You Are Expecting an Inheritance
Property or money that is received as an inheritance is separate property. However, it is easy to “commingle” those funds with marital funds, especially since any interest and dividends are marital property. If you cannot trace the inheritance with certainty, all of it could be considered marital property and divided by the court.
You Are the Beneficiary of a Trust
As with other type of property, any increase to your trust interest is marital property. Trust valuations are expensive, and Colorado law is unsettled on how to divide trust interests in a divorce.
Are you considering a pre-nup? I’m happy to help you decide whether you need one.
