Protecting Your Dental Practice in a Colorado Divorce

By Matthew C. Clawson, Colorado Family Law Attorney

We have extensive experience representing dentists and spouses of dentists in divorce cases throughout Parker, Colorado Springs, and Pueblo. Divorce involving a dental practice is uniquely complex, as a practice often reflects years of education, dedication, and financial security. In Colorado, equitable distribution laws under C.R.S. § 14-10-113 govern how such professional assets are divided, focusing on fairness rather than strict equality.

This guide explains how Colorado courts handle the division of a dental practice in divorce and outlines key strategies to protect these valuable professional assets.

1. If You Owned the Dental Practice Before Marriage

If you established or purchased your dental practice before marriage, it is typically considered separate (non-marital) property. However, there are two important exceptions that can bring part of your practice’s value into the marital estate:

• Appreciation During Marriage:
  Any increase in the practice’s value during the marriage caused by reinvested profits, market growth, or your continued labor may be considered marital property.
• Commingling of Assets:
  If marital funds were used for business purposes (equipment purchases, debt payments, or payroll), those transactions may “blur the lines,” allowing your spouse to claim an interest in the appreciated value.

Keeping detailed records such as valuations, tax returns, and documentation showing the source of business funding is critical to protecting your separate property claim.

2. How Colorado Treats Professional Practices

Colorado courts recognize that a professional practice can contain both separate and marital components. The premarital value of your dental practice generally remains your separate property. However, any increase in value during the marriage, along with profits and retained earnings, may be divided equitably.

Courts will also evaluate whether the non-owner spouse contributed to the success of the practice either directly (by working in the business) or indirectly (by managing household responsibilities that supported the practice’s growth).

3. Valuing a Dental Practice

Valuation is one of the most critical and contentious steps. Dental practices have both:

• Tangible assets: equipment, accounts receivable, leasehold improvements, and office furnishings.
• Intangible assets: patient base, referral networks, and goodwill.

Colorado courts differentiate between:

• Enterprise goodwill – value attached to the business itself, which is typically marital.
• Personal goodwill – value based on the dentist’s personal reputation or skills, which is not marital and remains with the practitioner.

A qualified forensic CPA or dental-specific business appraiser should prepare a valuation report using accepted methods such as fair market value, capitalization of earnings, or the excess-earnings approach.

4. Discovery and Financial Disclosure

Under C.R.C.P. 16.2, both parties must provide complete financial disclosure. For a dental practice, this includes tax returns, production reports, and software-generated income summaries. Incomplete or inaccurate disclosures can lead to sanctions or unfavorable rulings by the court.

5. Options for Dividing or Offsetting the Practice

Because a dental practice cannot be divided without disrupting operations, Colorado courts and mediators use creative alternatives, such as:

• Buy-outs or Offsets: The dentist retains the practice and compensates the other spouse with other marital assets (e.g., home equity or retirement accounts).
• Structured Payouts: Equalization payments are made over time, often secured by a lien or promissory note.
• Sale of the Practice: Rare, but sometimes considered if both parties agree and the market allows for a fair sale.

Transfers between spouses that occur incident to divorce are non-taxable under IRC § 1041, though it is essential to account for income tax and liquidity when structuring a settlement.

6. Protecting the Future of Your Dental Practice

Proactive planning can greatly reduce future conflict. Steps to consider include:

• Maintaining separate business and personal financial accounts.
• Obtaining baseline valuations at the time of marriage.
• Drafting shareholder or partnership agreements that address divorce scenarios.
• Using prenuptial or postnuptial agreements to clarify ownership rights.
• Working with a family law attorney experienced in business valuation and tax integration.

7. Protecting the Original Value of a Premarital Dental Practice

In Colorado, the original value of a dental practice established before marriage is generally protected as separate property. That means your practice’s fair market value at the time of marriage is excluded from division provided it remains properly documented and uncommingled with marital assets.

However, any growth or appreciation during the marriage may still be considered marital property and divided equitably. The key is maintaining clear financial records and obtaining a contemporaneous valuation to establish the baseline value at the time of marriage.

Conclusion

Divorce involving a dental practice demands careful financial analysis, strategic planning, and experienced legal counsel. While the original value of a premarital dental practice can often be protected, appreciation during the marriage may still be divided.

For more information about high-net-worth divorce or to schedule a divorce case review in Colorado Springs or throughout Colorado, contact Clawson & Clawson, LLP.

Matthew C. Clawson will answer your questions, evaluate your case, and advise you on the best course of action based on your individual needs and priorities.

We can be reached at www.clawsonattorney.com, and Matthew can be contacted directly at Matthew@clawson.law. For more information about our top-rated legal services, fill out our online form or call 719-471-7050 or 303-805-9353 to schedule a free initial consultation.