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Is it Possible to Protect Assets Purchased During a Marriage From Your Spouse?

Sometimes, an individual may inherit property or decide to purchase property, while married. In most states, including Colorado, this property is considered “marital property” or joint property. In the event of a divorce, marital property must be split into equal shares between the couple. But what if that individual wants to keep that property for his or herself should the couple divorce?

The first option, is to create a post-nuptial agreement (similar to a pre-nuptial agreement, but entered into after the couple is married). Alternatively, a Domestic Asset Protection Trust (“DAPT”) may be created to secure property from a spouse. A DAPT is an irrevocable trust, meaning that once you create the trust and fund it, you can no longer terminate the trust and reclaim the assets. If an individual cannot retrieve the property because it is owned by the DAPT, the property cannot be taken out of the trust and be divided in a divorce. The property is also protected against other creditors. 

Property in a DAPT is kept safe for beneficiaries of the trust, which could include children, or other members of the family. Beneficiaries receive distributions from the trust according to the terms of the trust documents. Of course, the fact that an individual cannot remove the property from the trust has downsides, too—most notably the fact that if an individual needs money later, the property in the trust is off limits.

Before creating a DAPT, serious consideration should be given to the fact that the property placed in the trust cannot be retrieved, and if the individual can live without that property. Additionally, and more importantly, anyone considering a DAPT should consult with an attorney and a financial advisor. If you would like more information on creating a Domestic Asset Protection Trust, please contact Anne McMichael (mcmichael@ccrjlaw.com), or Jill Curry-Jahn (curry@ccrjlaw.com), or call 303-572-4200.

Source: https://www.wealthmanagement.com/estate-planning/domestic-asset-protection-trusts-explained

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