A divorce is an unsettling upheaval, dividing a family’s dynamics into two parenting-time schedules and one or both spouses moving into new homes. In addition, Colorado’s divorce law requires the division of what is often years or decades of combined assets. So, how do you protect your family wealth or heirlooms during a Colorado divorce?
Under Colorado 14-2-201. Property ownership, the law defines a spouse’s separate property in part as follows:
“…Property that comes to him or her by descent, devise, or bequest, or the gift of any person except his or her husband or wife…”
Separate property, including inherited assets, is not subject to division under the above law; however, there are some common pitfalls that can give a spouse a claim to a portion of a separate asset, including family wealth.
Fair and Equitable Distribution of Marital Property In Colorado
Colorado’s divorce laws do not require the exact 50/50 division of marital property, but instead seek “fair and equitable” distribution of assets acquired during the marriage. Under this law, all property that spouses accumulate during the marriage is subject to division and fair distribution between spouses.
While each spouse may retain their separate property, there are circumstances under which one spouse may have a valid claim on a portion of the other spouse’s property, including family wealth and inheritance. This occurs through commingling assets, which often happens as a matter of course during marriage. A prenuptial contract protects each spouse from gaining access to the other spouse’s separate assets through commingling.
Avoid Co-mingling Separate Assets, Such as Family Wealth, Inheritance, or Heirlooms
Commingling assets is a common, almost unavoidable outcome of marriage. Commingling occurs when one spouse has access to the other spouse’s property and other assets. For example, if one spouse inherits a house, it is their separate property under Colorado law. But what if the other spouse spends time, talent, or money to improve the home’s value?
This gives the other spouse a valid claim to half of the property’s improved value. Similarly, if the owner of the inherited home refinances it and pays a mortgage from a joint account, their spouse has a legitimate claim to a portion of the home’s value. Improving the value of other inherited property, such as antiques and heirlooms, also commingles the asset.
Commingling also occurs when one spouse grants the other spouse access to financial accounts, including those generated from family wealth or inheritance.
File a Well-Executed Prenuptial or Postnuptial Agreement to Protect Family Wealth
When one spouse has access to the other’s financial accounts and family property, they have the right to claim a portion of the account’s value during a Colorado divorce. The best way to protect family wealth during a divorce is to prepare for the possibility of a future divorce before the marriage by filing a prenuptial agreement in Denver.
In other cases, the spouses may choose to sign a post-nuptial agreement during their marriage, for instance, after one spouse receives a substantial bequest from family inheritance. An experienced prenuptial agreement attorney prepares a contract with meticulous language to protect family wealth by retaining it as separate property during the marriage. An enforceable prenuptial or postnuptial agreement must be willingly signed by both parties.
While a well-executed prenup or post-nuptial agreement is the best way to protect family wealth from a divorce, it’s also possible to protect family assets from commingling by keeping separate financial accounts and only using funds from the inherited wealth or the owner of the asset’s income to improve the asset’s value. Contact our family lawyer for a free, confidential consultation at our Denver office.