One of the most contentious divorce legal issues divorcing couples face is deciding how to split the couple’s assets. One way to protect oneself in a dispute is to maintain sole ownership over some of those assets. In other words, it is possible to prevent some assets from becoming the property of both partners in the first place, and thus eliminate any basis for having to divide them in the event of a divorce.
In Colorado, a judge generally decides whether an asset is the separate property of a single spouse or if it is marital property that belongs to both husband and wife. Most property that a spouse obtains during a marriage is viewed as marital property. In general, though, property and funds that one owns prior to a marriage remains separate property after marriage. Also, inheritance, payments for pain and suffering from an injury suit, and gifts from third parties are also considered separate property, even if a person does acquire them during a marriage.
Putting aside separate property (in a separate bank account, for example) makes it easy to identify in the event that the marriage ends and asset division becomes an issue. It is also possible for the owner to maintain exclusive control of the property, or even keep the property secret, thus ensuring that it does not get used without the owner’s permission.
It is important to remember, though, that while a spouse may set separate property aside, the owner must still disclose the property in a divorce proceeding. Furthermore, it can look suspicious if the owner makes extensive use of secret funds during the marriage for that person’s own benefit (taking luxury vacations without one’s spouse, for example). As a practical matter, this type of behavior can make it tougher to defend the position that the property is truly separate, as opposed to mere marital property that one wrongfully hid and spent.
Source: Forbes, “Pros and cons of keeping a secret fund in case you divorce,” Jeff Landers, Feb. 14, 2013