Prenuptial, Postnuptial and Cohabitation Agreements
Grand Junction Estate Planning Attorney
The Use of Prenuptial and Postnuptial Agreements in Estate Planning
In most respects, a Prenuptial Agreement and a Postnuptial Agreement are the same - both essentially accomplish the same result. The most obvious difference is that a Prenuptial Agreement is executed prior to the marriage, whereas a Postnuptial Agreement is executed subsequent to the marriage. Both Agreements (also referred to as "Marital Agreements") define the obligations and financial rights of the parties during the marriage; in the event of a divorce; and in the event of the death of either or both parties.
Traditionally used by couples with previous marriages and/or where there is a disparity of wealth between the parties, these Agreements are becoming more popular among younger, affluent couples with high income and substantial assets. For blended families a Prenuptial or Postnuptial Agreement can be an effective means of reducing family disharmony by removing the uncertainty of how the property is to be divided among the heirs.
Other benefits that make these Agreements a valuable estate planning tool are: (1) the reduction or elimination of the federal estate tax ; (2) the preservation of the Marital Deduction when the first spouse dies; and (3) the ability to provide financially for the surviving spouse.
If marriage and a Prenuptial Agreement are in your future, keep in mind that it is important to execute your Agreement well before the ceremony - probably at least three months. Otherwise, if the marriage fails or if you die, your spouse may argue that the Agreement is void, because he or she was coerced into signing the Agreement to avoid the embarrassment of cancelling the wedding.
Co-Habitation Agreements and Designated Beneficiary Agreements
The Use of Co-Habitation Agreements in Estate Planning
A Co-Habitation Agreement resembles a Prenuptial Agreement except that it addresses the financial rights and obligations of a couple who live together with no intent to marry or who are barred from marriage by statute (i.e. same-sex couples). Typically it addresses issues such as shared expenses, real property, support, expectations and other matters relevant to their relationship and specifies "who gets what" if the relationship ends. With as many as 70% of adult Americans "living together" at some point during their lives, Co-Habitation Agreements are becoming more popular.
It is common for the parties entering into a Co-Habitation Agreement to do so with the intent to keep all property separate. However, Colorado's recognition of common-law marriage has caused more that one unwitting party to find himself/herself in divorce court defending allegations that a common-law marriage exists. A written Co-Habitation Agreement clearly states the parties' intent to live together without the benefits of marriage, thus reducing the likelihood that the claim would stand. A Co-Habitation Agreement also protects the estate of a deceased co-inhabitant from claims of inheritance rights as a "common law" spouse.
Conversely, Co-Habitation Agreements may be designed to protect the interests of and provide security for a party whose contributions to the relationship include the sacrifice of career, time, effort and other non-financial means.
If you are considering a Co-Habitation Agreement it is critical that you first have an open and honest conversation with your partner to discuss your expectations of the relationship, how finances will be handled, define your respective personal obligations and agree on a division of property in the event the relationship ends.
The Use of Designated Beneficiary Agreements in Estate Planning
For unmarried individuals with few assets a less complicated Estate Planning tool is a Designated Beneficiary Agreement. This Agreement designates 16 rights or protections (as defined by statute) including the right to: (1) make funeral arrangements for a deceased partner; (2) inherit property from the other (unless other legal documents are in place that supersede the Agreement); (3) receive death benefits and (4) petition for appointment as conservator, guardian, or personal representative.
Designated Beneficiary Agreements are an effective estate planning tool for co-habiting seniors and same-sex couples as it is enables each partner to make medical decisions for the other in emergencies or during incapacity. In addition, it gives each partner the legal right to visit the other in the hospital or nursing home.
A Co-Habitation Agreement or Designated Beneficiary Agreement will insure that your partner is taken care of in the event of your death or disability and provide peace of mind to both parties.
James A. Littlepage, a Grand Junction Estate Planning attorney, has been assisting non-traditional couples in handling Estate Planning matters since 1993. Mr. Littlepage has prepared over 2,000 estate plans and recently was recognized with a 2015 and 2016 Five Star Estate Planning Attorney℠ award. In 2014, 2013, 2012, 2011 and 2010 he received the Five Star Wealth Manager℠ award, as seen in 5280 and ColoradoBiz magazines. For assistance in Estate Planning for same sex couples, please contact our Grand Junction office.