For many, dividing marital assets and debts can often be the most important aspect of a divorce. It is what your new chapter in life is going to be built on. When dividing the marital assets and debts, the court must (1) determine what property (including both assets and debts) they have the authority to divide, (2) appoint it a value, and (3) divide the property equitably and fairly.
Under Colorado law, the court can only divide “marital” property and not “separate property.” Generally, marital property is defined as “any property which either spouse acquires during their marriage, except for property acquired by gift, inheritance or property excluded by a prenuptial agreement,” while separate property includes everything else, including property a spouse brought into the marriage. See § 14-10-113(2), C.R.S.
In Colorado, marital property is divided equitably or fairly between two spouses. However, an individual’s separate property remains their own. Additionally, property is valued at the time of divorce, not the time of separation.
Marital property also includes any increase in value of separate property during the marriage with the original property or value of the property remaining separate (provided the separate property component can be determined). This is most commonly seen in real estate and retirement accounts that were owned before the marriage and carried on during the marriage.
Here are a few examples:
- Prior Owned Property. You owned a 1969 Camaro before you married. At the time of marriage, it was worth $12,000. When you divorced, it was worth $15,000. Your spouse now wants the Camaro. Under Colorado law, the court cannot award your spouse the Camaro because it is separate property – you owned it before the marriage. However, because it appreciated in value during your marriage, the $3,000 in equity constitutes marital property and must be fairly (or equitably) divided. In sum, you get the Camaro and the first $12,000 in value and your spouse and you fairly divide the $3,000 equity.
- Gifts. When married, you received a Smith & Wesson pistol from your father and a big screen T.V. from your spouse for your birthday. You want both these items. Under Colorado law, gifts are considered separate property. But, gifts from a spouse are typically classified as marital property. Therefore, you will get the pistol your father gave you, no matter its value, and the t.v. and its value will be fairly divided with your spouse.
- Retirement. You started working for True Link Engineering in 2000. You married in December 2016. At the time you married, you had $180,000 in your employer sponsored 401(k). Your 401(k) is now worth $215,000 and you are divorcing. Under Colorado law, you have the burden of proving what part of the 401(k) is separate property so you contact your plan administrator and get a statement from December 2016 to show the value of your retirement plan when you got married. You then get a current statement to show the value now. The $180,000 in the account prior to your marriage is separate property and the $35,000 appreciation of that 401(k), whether by additional contributions or by way of market increases, is marital property subject to equitable or fair division.
- Marital Agreement. You and your spouse executed a pre-nuptial agreement that gave the increase in value of all separate property to the spouse who owned the separate property. You owned a business when you married that has increased in value $500,000 since you married. Without the pre-nuptial agreement, the $500,000 increase in value would be fairly divided with your spouse, but because of the pre-nuptial agreement, the $500,000 will be considered separate property and will be awarded solely to you.
This often frustrates and confuses most because couples do not view their property as marital or separate. For example, most couples might have their own credit card, bank account, retirement account, or vehicle. They are the only person titled on the account or vehicle title, the other spouse had nothing to do with the purchase or the earnings in the account, and they believe that asset or debt is their own. Property is not divided in this manner. As indicated above, if the property listed above was acquired during the marriage, it will be classified as marital property, regardless of how the account or vehicle is titled.
Separate property can also be turned into marital property and vice versa. This can be done by way of a written agreement or by changing the ownership title from individual to joint thereby making a gift to the marriage.
Additionally, if marital property is mixed or “commingled” with separate property, the court must determine whether all or a portion of the property is marital. Common instances of commingling are when a spouse deposits money they earned during the marriage into a bank account that was previously separate property or when a spouse uses money that was earned during the marriage to pay down the mortgage of a home that was separate property. Depending on the circumstances, commingled assets may be classified as a gift to the marriage and marital property to be divided between both spouses.
For example, you own your home before you marry; but during the marriage, you use your wages to pay down the mortgage thereby mixing the separate property of the house with the marital property of your income. Additionally, you refinance your home and in doing so you add your spouse to the title. Under Colorado law, you have comingled your separate property and the court could award your spouse the home and all of the equity in the home. This issue is complex and often requires the assistance of an attorney to trace the separate property so you do not lose the whole asset.
Another example, you inherited a large sum of money from your parent when they passed. You deposit your inheritance into your joint bank account thereby comingling or mixing the separate property of your inheritance with the marital property of your joint bank account. Unless you can trace the inheritance and show it was not a gift to the marriage, all the money in the joint account will be fairly divided with your spouse.
Classifying your property as marital and separate property can be daunting and complex. If you are unclear about the classification of property, you should consult an attorney.