Five Tips for Drafting a Premarital Agreement with Elizabeth Hardman | Episode 172

Join Ryan Kalamaya and one of our family law attorneys Elizabeth Hardman in our insightful discussion as they share their top five tips for those contemplating a premarital agreement. We'll shed light on the benefits of such agreements and emphasize the significance of engaging legal counsel to guarantee its validity and enforceability and why discussions about finances are critical before tying the knot, particularly if there are substantial financial differences between the spouses.

Understand the importance of financial disclosure, the risks of rushing the process, and the possible hazards of entering an agreement without full knowledge of your partner's financial situation. They also discuss how courts perceive premarital agreements made on the brink of marriage and the implications of waiving alimony or maintenance. Learn why it's crucial to be prepared to walk away from the agreement or even the wedding if it's not fair, and find out the importance of videotaping the signing of the agreement and maintaining a secure record of it.

What is Divorce at Altitude?

Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.

To subscribe to Divorce at Altitude, click here and select your favorite podcast player. To subscribe to Kalamaya | Goscha's YouTube channel where many of the episodes will be posted as videos, click here. If you have additional questions or would like to speak to one of our attorneys, give us a call at 970-429-5784 or email us at info@kalamaya.law.

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DISCLAIMER: THE COMMENTARY AND OPINIONS ON THIS PODCAST IS FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROVIDING LEGAL ADVICE. CONTACT AN ATTORNEY IN YOUR STATE OR AREA TO OBTAIN LEGAL ADVICE ON ANY OF THESE ISSUES.

Transcript

Ryan Kalamaya: 0:03

Hey everyone. I'm Ryan Kalamaya.

Amy Goshca: 0:05

And I'm Amy Goscha.

Ryan Kalamaya: 0:07

Welcome to the Divorce at Altittude, a podcast on Colorado family law.

Amy Goshca: 0:12

Divorce is not easy. It really sucks. Trust me, I know. Besides being an experienced Divorce attorney, I'm also a Divorce client.

Ryan Kalamaya: 0:20

Whether you or someone considering Divorce or a fellow family law attorney, listen in for weekly tips and insight into topics related to Divorce co-parenting. And separation in Colorado. Welcome back to another episode of Divorce at Altitude. This is your co host, Ryan Kalamaya. This week, we are going to be talking about the top five tips for anyone considering a premarital agreement. And I'm going to be joined by our senior associate, Elizabeth Rose Hardman. She does do drafting and negotiating premarital agreements for our firm and for listeners, they likely know that we've had various other episodes. Most recently, Amy and I did an episode on Kevin Costner's premarital agreement and the challenges. And so we've really focused on the litigation and the risk of premarital agreements. It's something that my practice has a particular emphasis on. And so you see the downsides. of premarital agreements. This episode is going to be a little bit different. We're going to talk about the benefits of a premarital agreement and for those considering whether they're attorneys or more likely parties that are engaged or thinking about getting engaged that are weighing whether or not to have a premarital agreement or a prenup. And so we're going to talk about that. So, Elizabeth before I go on, welcome to the show. Thanks. And we'll have a separate episode on who Elizabeth is. So for those that are interested check out our podcast feed because there will be an episode in particular on Elizabeth's background. But Elizabeth to set the stage for listeners that may not understand what a a prenup is or what are we talking about here in, in Colorado?

Elizabeth Hardman: 2:10

Of course. So a I think most people refer to them as prenuptial agreements. That's the common terminology here in Colorado. We refer to them as the premarital agreement and in Colorado, premarital agreement is an agreement between. Individuals who intend to marry that affirms, modifies or waives a marital right or obligation during the marriage or upon separation or divorce. And so it really helps set the stage for the marriage and create kind of those financial expectations between spouses.

Ryan Kalamaya: 2:47

And I think also it's also helpful for listeners, not only in their marriage, I think it is helpful for people to go into their marriage with a written document about how financially they're going to handle various things or who gets what. There's also a benefit. We don't do estate planning, but if a husband pre deceases a wife, then, if he has kids from another marriage and so there are some benefits to having some certainty. And so maybe could you comment a little bit on that in addition to what you already covered, Elizabeth?

Elizabeth Hardman: 3:24

Certainly. So I think I, I've read a lot of statistics about the impact of finances on, on the marriage. And I've read a bunch of articles recently that really stress that arguments surrounding finances are the second leading cause of divorce. So, I think it can really help parties to sit down, especially when you have really disparate financial circumstances for one spouse to say, okay, how do I make sure I protect assets if this doesn't go well and on the flip side for a spouse who might not have If the same financial background how do I share in, how am I going to be assured that if our marriage is unsuccessful, that I'm going to be okay, that I have some resources to get back on my feet. And I think that does create a lot of stability in the marriage, especially when you're talking about getting kids involved. The pre marital agreements, though, however, you cannot include. Provisions that limit for example, child support or other child related provisions, because that's always going to be modifiable by the court and always going to be, looking at what's in the best interest of the children, I do think it's really important as well to hire an attorney to deal with the estate planning piece who has experience in that realm. Our firm doesn't do that right now, so, we do have referrals in that regard, but you do want to make sure that You know what will happen if you pre decease your spouse and where your resources are

Ryan Kalamaya: 4:56

going, right? And I mean, that's just another example of Knowing your kind of lanes and your specialty. I mean people I think a lot of times I had someone consult with me just recently they'd done the premarital agreement on their own and they had included for example child support or parenting time and unfortunately I had to advise them and These are not enforceable, so we'll get into the tips and one of them will be just as a kind of a preview of obtaining legal counsel, but I think that there are some real benefits both in the marriage where parties have to have that discussion about finances. I was just recently talking to a friend about, that some people get married without having really discussion about whether or not they want to have, children. But, other people, they do go into a wedding or a marriage and they haven't really figured out how they're going to work their finances. And Elizabeth, as you and I have seen through divorce. The process, there are just so many different ways that people handle money. Some will throw everything into a joint account. Some will just maintain completely separate financial lives. I think having that discussion ahead of time through the process of a premarital agreement, because you have to have that discussion in, in advance. I think it is helpful. And, they, I certainly know of friends or, clients who Feel much more certain in their marriage because of a premarital agreement. So there is that benefit. We really talk about, well, this is what happens in a divorce, but, there are circumstances definitely where people have stayed married or have gotten married because they knew of the certainty. So there's some real benefits. To having a premarital agreement. Then you also have the benefit of if they, if the, divorce, happens, the marriage fails that you, it makes it simpler in circumstances where there's a valid agreement, both parties, acknowledge that they. Then have an understanding as to what is going to happen. So any thoughts on that based on your experience dealing with premarital agreements or marital agreements in a divorce, Elizabeth? I

Elizabeth Hardman: 7:15

completely agree with what you're saying. I think with some. Many people that I've talked to when they come to me, they haven't even really thought about how they're going to be splitting expenses, who's going to be paying for what their bank accounts are going to look like. So that's really common. It's just not at the forefront of your mind when you're getting ready to get married and you're starting your life with someone. So, even just having the premarital agreement being the driving force behind you taking the time to sit down with your soon to be spouse and figuring out, okay, what makes sense for us how are we both going to feel comfortable moving forward? I agree with.

Ryan Kalamaya: 7:56

Well, we'll get into the tips. I think the other thing that is worth mentioning is that, generally speaking, in order for there to be a valid agreement, premarital agreement, it needs to be in writing. It needs to be voluntary. And there has to be adequate financial disclosures. And that third point is one of the most kind of overlooked. Aspects that, because it's not like, Elizabeth, if you have a plumber come to your house, or I agree, to do something where there's a written agreement, these are special contracts, they're between people that have, presumably an intimate relationship, and the law recognizes that there is a heightened power Standard and there is a kind of a couple of plus factors that are required in order for these agreements to be valid. So, with that in mind, let's jump into it. Tip number 1 for drafting and negotiating a premarital agreement. What's tip number 1, Elizabeth?

Elizabeth Hardman: 8:56

Tip number 1 is going to be start early. I cannot tell you how many potential clients we have had contact. The firm and they're getting married in a month or less in a few weeks. And they hope to cobble together a premarital agreement really quickly. And I think just really underestimating the work that does go into a premarital agreement and more specifically with what you just referenced, the financial disclosure aspect, and that can be quite time consuming and you want to make sure that each spouse has the time to properly review the other spouses or soon to be spouses disclosures and really analyze those, ask for additional documentation if needed, more information because the last thing that you want To happen down the road is that the agreement is later invalidated because it was a rushed.

Ryan Kalamaya: 9:55

Yeah, from a litigation perspective, one of the questions I ask potential clients when they come to me and they say, I want to get a divorce. And they mentioned a premarital agreement. We talk about what were the circumstances, of the negotiation? How long did it take? And the fact that it happened the day of the wedding or the day before, that definitely gives rise to some opening. It's not mean that it's invalid. It just gives rise to the argument. But I think to your point, Elizabeth. Mistakes happen when things are rushed. And the discussion that occurred between, us our firm and a client negotiating a premarital agreement, it takes some time in terms of, did you think about this? What if you have kids? What if you buy a house? Have you guys talked about that? And a lot of people they haven't had those conversations or they haven't thought about it and we can't have those conversations and turn around a draft and give them their various options of what, can go into an agreement in, a matter of a day or even a week. And so you got to start early in order for there to be a valid agreement. And if you don't, then most likely our firm is not going to take it on. And the reason is that there's just a risk of it being, there being an argument that is going to be set aside. Right, and

Elizabeth Hardman: 11:14

I think in addition to The risk that something might fall through the cracks, be left out so you might have some accidental financial disclosure issue or the fact that the court might just generally look at a premarital agreement that's entered into right before the marriage is a little bit suspect from the start, I think you have to be really careful in situations where there might be an argument by a spouse later down the road that they were coerced or under duress at the time that they signed the premarital agreement. That can get into really fact specific information, but certainly if I'm talking with a client where. There might be if there was any history of domestic violence at all or anything like that's going to be a big red flag, I think, in the court's eyes.

Ryan Kalamaya: 12:05

Great point, Elizabeth. Tip number two?

Elizabeth Hardman: 12:07

Yeah, disclosures. And for that piece, again, we're talking about two people who are about to enter into their marriage together, and to really create an agreement that is fair, there needs to be a full understanding between the two of you as far as, well, what are all the assets and debts that each of you have. It's really important, and in my view, probably one of the easiest ways for. Pre marital agreement to be

Ryan Kalamaya: 12:43

invalidated. Amy and I just had a discussion on an episode on Kevin Costner's divorce, and there was a pre marital agreement, and there's been, it's been all over the news, and one of the arguments was that the disclosures reportedly were off. And so, like you said Elizabeth you have to go through that process and really provide complete disclosures. And the reality is that it's helpful for a number of reasons financial disclosures. One is that the, under the law, that any... property that's owned at the time of the marriage is separate property. And so when you go through that process and you document that separate property then that is helpful in and of itself. But the second thing is that most premarital agreements, or at least, one, one option that I would say is the most common is an agreement that any appreciation or increase on that separate property is. Is remain separate, which is a change from Colorado law. Colorado is pretty unique. We've talked about it on the podcast, in, in multiple episodes about how progressive or how unique Colorado is. But I do think that is probably one of the most common terms. Wouldn't you agree Elizabeth in a premarital agreement about that appreciation on separate property? I do agree with that. Yes. And, you have to know what you're giving up, and you also have to know when you're entering into this agreement when, for example, if you say no maintenance or no alimony, and if, in our hypothetical divorce client, if Eric and Melanie Wolf are negotiating a premarital agreement, if Eric's making a million dollars a year and Melanie says, I'm waiving maintenance, she has to know That he's making a million dollars a year to begin with. And, she also has to know that, he has a business and a lot of people are like, well, duh, like they're, they're presumably they're engaged, they know each other's financial circumstances, but. A lot of times the other party, Melanie, actually doesn't know. And so we have to walk Melanie through that process of, making sure she understands what Eric's financial circumstances are.

Elizabeth Hardman: 14:50

Yes, that is absolutely true. And I, along those same lines, I think what you also see Is one individual themselves might not even realize their own assets especially in the situation where you have people with family trusts and so it's really important to be asking those questions, asking family members, am I a beneficiary of a trust? What does that trust look like? And making sure you get ahead of that so it doesn't become an issue later down

Ryan Kalamaya: 15:18

the line. And I think that kind of a sub tip on this particular point is to make sure that financial affidavit or the financial disclosures they're provided in time. So that kind of relates to our first point, our first tip. But also that there is an acknowledgement or there's a record that those financial disclosures, whether it's included in the agreement or there's an acknowledgement because I've seen cases where the financial disclosure, there was a, an initial or a date and it was after the date of the wedding and that gave rise to extensive litigation or there was a question of whether or not it was or was not, attached because the agreement, Just referenced financial disclosures, but it was unclear as to whether or not, what exactly they were so having the whole document, the whole agreement encompass or include those financial disclosures along with kind of initials or assurance that it was provided at the time of the signing, I think is a related tip.

Elizabeth Hardman: 16:21

I agree. That's really important. And we. We'll create essentially an exhibit that lays everything out, make sure both parties initial that to acknowledge it but I do think that's important and I think one other thing that I've seen as well in a case is make sure to update the disclosures. At the beginning of negotiations if you exchange documents at that point in time, but there's a material change that happens in the value of any of those assets or debts it's really important that you update them before signing because that also can be grounds under the specific circumstances to invalidate

Ryan Kalamaya: 16:57

it. Well that brings us to tip number three, which is?

Elizabeth Hardman: 17:03

That is to seek legal counsel for both parties. This is also a really important one in my view it can really cut against any challenges to the pre marital agreement regarding coercion, duress and just a lack of understanding of the agreement itself. One thing that I think is interesting in Colorado, too is So, the party, if one party to the agreement doesn't have the financial means to obtain their own counsel, but the other party does, the more financially advantageous party really should be the party. Offering to pay for an attorney for the other party.

Ryan Kalamaya: 17:50

I agree. I think, something on related to that is that it is, it makes sense to pick the attorney for, if you're going to be paying for the attorney, if Eric is going to be paying for Melanie's attorney oftentimes Eric will say, pick or I'm going to pick for you, or we'll talk to his attorney and say, who do you work with? Who does these? It's ideal if Melanie just finds her own attorney because then there's no allegations that Melanie's attorney is just like a straw man or certainly have seen that, but I think Eric needs to be prepared to pay for Melanie's attorney if he really wants a valid agreement because I heard a presenter on a CLE for premarital agreements, say that if there is anything that makes an agreement valid, it's having two attorneys involved because, it's really hard to argue that you didn't understand it or that it was unfair or, any of those circumstances because, the judge or any, decider is going to say, well, It sounds like your beef is with your attorney and that is, more of a malpractice claim than, the agreement is invalid. But I think that is a really key point and it's something we don't, our firm does not get involved with any, premarital agreements unless there's going to be attorneys on both sides. Elizabeth, that brings us to our fourth tip on drafting and executing premarital agreements, which is... Tip

Elizabeth Hardman: 19:19

number four is make it fair. I think you see a lot of people want to go into this and like you said, make sure we keep all the appreciation on my severed assets and I want to keep all of my pre existing assets in the future. If you have a huge disparity in financial circumstances between the parties and you don't give some sort of concessions on finances and make sure that the other party is going to be able to survive and not just able to survive, but able to live generally within the lifestyle that you anticipate to be created during the marriage, you could be in some hot water looking at enforceability issues.

Ryan Kalamaya: 20:02

Yeah I totally agree with that. And I think it really depends on the facts and circumstances. So, came in Kanye. They had a premarital agreement. I haven't watched. I think it's on HBO or at max that, the kingdom and Kanye divorce documentary, but. I mean, they both were very well known, Tom Brady and Giselle, like, they both were highly successful. If they're giving up or saying, hey, what's yours is yours and what's mine is mine, that is a different circumstance than if Eric and Melanie Wolfe... Go into a wedding and Eric makes a million dollars and he just met a Melanie and she is a school teacher and they haven't had yet kids she gives up her career in those, it really depends on those circumstances, which I think is to the point of having, legal advice and starting early because we can have those discussions of, Hey, if, if the mom is going to give up her career, that, do you want to provide for that? And it doesn't have to be in child support. As we mentioned, child support, you're not going to have any sort of provision, but it can be that you're going to provide a house or some lump sum payment. One common, thing that we we'll see is for, one to three years of marriage, there might not be a particular amount of payment, but you know, three to five years, there's a payment of a hundred thousand dollars or fill in the blank amount. And so on and so forth, because it acknowledges that disparity in potential earnings and it can, be magnified over time. If you're talking about a 20 year marriage. That can really matter and likewise on maintenance, there could be, Hey, given the circumstances right now, I'm going to pay you 1, 000 a month. And that's, indexed with inflation. That's going to be more likely to be enforceable, even if it's lower than what would happen. Instead of just saying zero, but having it fair, I think. And that the other aspect that I think it relates to is going into. A wedding, if you have just a completely one sided agreement, how do you think that, lands on, the, in the marriage with the understanding that, Hey, I get all of my money. It's just not a great feeling for Melanie Wolf. If she's the one that doesn't have the money and Eric, says you get nothing.

Elizabeth Hardman: 22:26

I completely agree with that I think that this also is important for people to consider that circumstances might change during the marriage. So, when you get married, you might not know if you want to have kids yet. You might not know if one spouse is going to ultimately be a homemaker. And so, I think it's really important, too, for spouses to almost revisit the premarital agreement I don't know, on an annual basis, if not longer. To just make sure that the premarital agreement still is fair given any changed financial circumstances. And if it's not, you can always modify or amend the marital agreement to, to make it fair and to keep that control so it's not just going to be

Ryan Kalamaya: 23:10

invalidated. And to the point of fairness. We've certainly seen agreements where the parties anticipate buying a house together. There might be some difference in the down payment. And you could document that one party, Eric, gets his money back from the down payment, and Melanie gets hers, and then they equally divide it, or they divide it on, per rata share. But we have seen where, it's fair to equally divide it at the time and they, they're going to buy, a house, but if it's just completely, just really one sided then it's. Going to result likely in a challenge and that is you're going into an agreement, presumably to reduce, conflict to reduce certainty. And when you make it so completely 1 sided, you give rise to the very thing that you're trying to do away with. So tip number five, Elizabeth what's our final tip when negotiating a premarital agreement? So our

Elizabeth Hardman: 24:17

final tip is be prepared to walk away either from the wedding or from the premarital agreement. If it's not fair and you can't get fair provisions you need to be ready that those are your options. You can move forward with the wedding without one or. That's it. So, yeah. Sorry.

Ryan Kalamaya: 24:40

No, they judges, what they say whenever someone says, well, I was forced into it. I didn't want to sign it. I was crying. They, they forced me into it. The judge will, say, the response to that is, well, no one forced you to walk down the aisle. And I've heard it where Melanie will say, well, my friends were coming in, my family, I planned this whole wedding. I had so much on the line and I was going to be embarrassed. And all of those things are true and very understandable from like a human perspective of how embarrassing that would be. But no one forced, Melanie to walk down. Now, and she needs to be prepared to say either I am not going to walk down the aisle because I, deserve more in this agreement. Or, the counter is that if she's unwilling to sign it, Eric needs to be prepared to either decide I don't, this is not something I want to, I don't want to get married unless there's a premarital agreement and that might result in them calling off the wedding or breaking up or he might say, you know what, I want to marry Melanie so much that as much as I'd like to have a premarital agreement I'm not, I'm not tied to it. So both parties need to be able or willing to walk away. Right. Anything else that listeners might benefit from Elizabeth with pre marital agreements? I think we've, covered a variety of topics and, there are more than five things that go into. Having a valid premarital agreement, one thing that we like to do is to videotape them because it then shows that people that they, didn't have a gun to their head, it ameliorates the issue on voluntariness because, if there's a later challenge and it shows them kind of laughing about how this will never result in a divorce at the time of the signing on a video, you and that, everyone was there or that there was one person, that, but sometimes it's just not, it's just not going to, it's not practical e signature and having those, documents on file. But, I mean, there's so many different ways that we can, cut this up, but Elizabeth, any other kind of final points that, come to mind?

Elizabeth Hardman: 26:51

Yes, so along the same lines of what you're referencing as far as videotaping the actual signing which I have heard some mixed reviews at CLEs from different judges on that point I, my personal opinion is that it cannot hurt you to do that and it's more Evidence of lack of coercion, but for document keeping purposes, I recommend that any person who is entering into a premarital agreement keep a USB drive that includes the final copy of the premarital agreement, any drafts that you might have had in all of the financial disclosures. that you provided, especially if you provided additional documentation aside from just an exhibit with a list. If you provided tax returns, have that all in that folder. If you can keep it in a safe safety deposit box or someplace that's secure where you will never lose it. That's really important. Believe it or not, we have had situations where a spouse has tried to destroy the only copy of a premarital agreement. And that leaves the spouse who wants to enforce it in a really bad position. So I definitely recommend keeping a good record.

Ryan Kalamaya: 28:10

Or they can't find it. And I think duplication, emailing it to yourself, saving to your Google drive or Dropbox, and then having a USB file and just knowing that you've got that certainty. I, I a hundred percent agreed. So, well, hopefully this has been helpful info for anyone considering a premarital. Agreement and we are entering wedding season. So, congratulations to those that are tying the knot and best of luck going forward and if it includes a premarital agreement, hopefully this information helps. hey everyone. This is Ryan again. Thank you for joining us on Divorce at Altittude. If you found our tips, insight, or discussion helpful, please tell a friend about this podcast. For show notes, additional resources or links mentioned on today's episode, visit Divorce at Altittude dot com. Follow us on Apple Podcasts, Spotify, or wherever you listen in. Many of our episodes are also posted on YouTube. You can also find Amy and. Law or 9 7 0 3 1 5 2 3 6 5. That's aaa.