Marital or Separate Property: an Overview for Practitioners
| Publication year | 1995 |
| Pages | 571 |
1995, March, Pg. 571. Marital or Separate Property: An Overview for Practitioners
1) is this asset "property"?
2) then, is it "marital" property?
3) is there a "marital share" of this property that is otherwise nonmarital? and
4) does the method of acquisition support an argument for a disposition favorable to the client?
This article reviews the case law interpreting CRS § 14-10-113. It also presents arguments to support an unequal division of property based on the manner in which the property was acquired.
The first issue is whether a particular asset is "property." Assets that are not property are not divisible in a divorce. For example, a master's degree in business administration earned during the marriage is not property because it does "not have an exchange value and it could not be sold or pledged."(fn1) Moreover, beneficial interests in discretionary trusts are not property.(fn2) They have no cash surrender value, no loan value, no redemption or lump sum value, no value realizable at death and no value reachable by creditors. In addition, the beneficiary has no enforceable right to compel the trustee to make a distribution.
On the other hand, nonvested and unmatured military retirement pay is property.(fn3) Although such asset has no cash surrender value, no lump sum value and no value reachable by creditors, it is property because it is a form of deferred compensation and the retiree has an enforceable legal right to the benefits.
An asset does not need to be transferable or tangible to be property. Thus, the goodwill value of a "captive" insurance agency is property, even though the agency cannot be sold.(fn4) Similarly, a business may have a goodwill value to its owner above and beyond tangible assets, and the value of that goodwill is not necessarily dependent on what a willing buyer would pay for such goodwill.(fn5)
"Marital property" is defined by statute to be property acquired during the marriage that does not fall into one of the following exceptions:
1) property acquired by gift, bequest, devise or descent;
2) property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise or descent;
3) property acquired by a spouse after a decree of legal separation; and
4) property excluded by valid agreement of the parties.(fn6)
All assets acquired during a marriage are presumed to be marital property, regardless of how titled.(fn7) The burden of proof is on the party who asserts that a particular asset acquired during the marriage is nonmarital property. To overcome the presumption, a party must prove that the property was acquired by gift or inheritance, or that it was acquired in exchange for premarital, gifted or inherited property.(fn8)
The court must determine whether each asset is marital or nonmarital property.(fn9) Only marital property is subject to distribution.(fn10)
Marital property is often divided equally between divorcing spouses.(fn11) However, the Colorado appellate courts have reiterated time and time again that marital property need not be divided equally, but need only be divided equitably.(fn12) Wide discretion is granted to the trial court in dividing marital property to accomplish a just result,(fn13) often based on "economic realities."(fn14) The purpose of dividing marital property is to allocate to each spouse what equitably belongs to him or her.(fn15)
CRS § 14-10-113(1) requires that the court consider "all relevant factors" except "marital misconduct" in making its property division. Four specific factors are set forth:
1) the contribution of each spouse to the acquisition of marital property, including the contribution of a spouse as homemaker;
2) the value of the property set apart to each spouse;
3) the economic circumstances of each spouse at the time the division of property is to become effective, including
the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children; and
4) any increases or decreases in the value of separate property of the spouse during the marriage or the depletion of separate property for marital purposes.
"Separate property" is not defined in the statute. It is simply all property that is not marital. There are three categories of separate property: (1) property owned prior to the marriage; (2) property acquired during the marriage by gift or inheritance; and (3) property acquired during the marriage in exchange for gifted, inherited or premarital property. The statute requires that separate property be set aside to its owner.(fn16)
Rarely are assets "wholly separate," as usually there has been appreciation in value during the marriage. This appreciation in value is marital property.(fn17) Such assets, therefore, have both a separate share and a marital share.
Two distinct statutory provisions are available to the owner of...
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