Protecting your financial investment in a home purchased shortly before marriage involves understanding the concepts of separate property, tracing, and the importance of a marital agreement. Here are some things to consider:

Separate Property:

Under Colorado law, any property acquired before the marriage is considered separate property C.R.S. § 14–10–113. This means that if you purchase the house before you are legally married, your down-payment and initial financial contributions are considered your separate property. Nevertheless, the presumption is that all property during a divorce is marital, so you need to prove that your contribution is separate property.

Tracing:

To ensure that your initial contributions are recognized as separate property in the event of a divorce, you will need to trace the funds. Tracing involves keeping clear, detailed records of the source of the funds used for the down-payment and closing costs. This can include bank statements, receipts, and any other documentation that proves the money came from your separate funds before the marriage.

Appreciation on the Investment:

Even if you successfully trace the funds and establish that your down-payment is separate property, any appreciation in the home’s value during the marriage may be considered marital property. This means that the increase in value, even if it stems from your initial separate investment, could be subject to division between you and your spouse upon divorce.

Marital Agreement:

The most effective way to protect your investment and the appreciation on the property is through a marital agreement, commonly known as a prenuptial agreement. A prenuptial agreement is a legally binding contract entered into by both parties before marriage, outlining the ownership of assets and how they will be divided in the event of a divorce. In your situation, a prenuptial agreement can specify that the down-payment and any appreciation in the home’s value attributable to your separate property remain yours.

If you would like to speak to one of our family law attorneys in more detail please contact us at (303) 688-0944. For more information on how assets are divided in a divorce, check out our article "Dividing Assets: Determining Marital Asset Value During Divorce."