Protecting Your Assets During Divorce: Common Pitfalls and Smart Solutions

Divorce can be a challenging and emotional process, but understanding how to protect your assets can alleviate some of the stress. Colorado law treats marital property as belonging to both spouses, making the division process complex. With the right strategies and preparation, you can minimize financial risks and safeguard what matters most to you.

What Happens to Assets During Divorce?

One of the most common questions people have when facing a divorce is how their assets will be divided. Colorado is an equitable distribution state, meaning that marital assets are divided fairly, but not necessarily equally, during divorce proceedings. Marital property includes any assets acquired during the marriage, regardless of whose name is on the title or account.

Separate property, on the other hand, includes assets owned before the marriage or received as an inheritance or gift specifically to one spouse. However, even separate property can become marital property if it is commingled.

Why Hiding Assets Is a Dangerous Game

Some individuals may consider hiding assets to protect them from being divided. This is a risky tactic with serious consequences. Hiding marital property is illegal and can lead to accusations of perjury, as financial disclosures in divorce are made under oath.

If undisclosed assets are discovered after the divorce is finalized, the settlement can be reopened, potentially altering the distribution of assets and debts. Instead of resorting to deceptive practices, it’s crucial to approach the process with honesty and transparency.

How to Protect Separate Property

If you want to retain control over certain assets, keeping them separate is essential. Separate property must remain in clearly identifiable accounts or under sole ownership. For example:

• Maintain separate accounts for inheritance or pre-marital assets.
• Keep titles for real estate or vehicles in your name alone.
• Avoid depositing separate funds into joint accounts.

Even minor instances of commingling—such as depositing inherited funds into a joint checking account—can transform separate property into marital property. Once this happens, the origin of the funds may no longer be distinguishable, and you could lose ownership.

The Role of Prenuptial and Postnuptial Agreements

One of the most effective ways to protect assets is by creating a prenuptial or postnuptial agreement. These legal documents clearly define how assets will be divided in the event of a divorce.

Prenuptial agreements are made before marriage, while postnuptial agreements are created during the marriage. Both can outline which assets are considered separate and how marital property will be distributed. Without these agreements, the default laws of Colorado will apply, which might not align with your preferences.

The Risks of Commingling Assets

Commingling occurs when separate assets are mixed with marital assets, making it difficult to determine ownership. Common examples of commingling include:

• Depositing separate funds into a joint account.
• Using separate property to pay for marital expenses.
• Adding a spouse’s name to the title of a separately owned property.

These actions create ambiguity, which can complicate asset division during a divorce. If funds or property are commingled, it may be considered marital property and subject to division.

Gifts and Inherited Assets: A Gray Area

Gifts and inherited assets can also be problematic. While they are generally considered separate property, the way they are handled can impact their classification. For instance, if parents gift money to one spouse for a down payment on a home, it may remain separate property if explicitly designated as such. However, if the funds are given to both spouses or deposited into a joint account, they could become marital property.

Clear documentation and careful management of gifted or inherited assets are critical to ensuring their separate status.

When to Consult a Family Law Attorney

Divorce is a highly personal and complex process, and asset division requires careful attention to detail. A skilled family law attorney can help you navigate the legal landscape, ensuring that your rights and interests are protected.

An attorney can review your situation, explain your options, and help you create a strategy to safeguard your assets. Whether it’s drafting a prenuptial agreement, identifying separate property, or avoiding commingling pitfalls, professional guidance can make all the difference.

Take Control of Your Financial Future

If you’re concerned about protecting your assets during divorce, now is the time to act. Proper planning and legal advice can help you avoid common mistakes and achieve a fair outcome.

Schedule a free case evaluation today at www.newleaf.family or call 720-605-0665.