During a divorce, a common fear that people have is losing or splitting their inheritance with their soon-to-be ex. In a contentious separation, disagreements may arise concerning a family’s generational wealth or precious heirlooms. Thankfully, Colorado law does provide some protection for inheritances. The bad news is that the protection is not as complete as some families might hope.
Marital property versus separate property
During a divorce, all items owned by the two parties are considered either marital property or separate property. Generally speaking, marital property is anything that was acquired after you were married. However, there are some exceptions to what is considered marital property. Colorado Revised Statute § 14-10-113, “Disposition of property,” states that any “property acquired by gift, bequest, devise, or descent” is considered separate property during a divorce.
At face value, the law seems clear-cut, but the devil is in the details and the fact that life goes on after a gift or inheritance is received often complicates matters.
If you inherited cash (or stock or other liquid assets) and then deposited the money into a joint account, it is no longer your separate property and WILL be considered marital property, even if you did not know that’s what would happen and even if you did not intend that result. If you deposited the cash into an account in only your name, the amount of that original inheritance will be your separate property. However, if the account goes up in value, whether from interest or dividends or because it was invested in stock that has appreciated in value, that increase in value will be marital. If additional funds are deposited into the account during the marriage, or if funds are taken out of the account during the marriage it may become difficult to identify or trace whether or how much of the inherited funds have been separately maintained.
Precious valuables, like jewelry and art collections
Compared to commingled cash, tangible items are typically easier to identify as separate property. That said, these assets might be less straightforward if they increased in value after they were inherited. The dollar amount of the increase in value will be considered marital property. For items that were inherited before the marriage, the value at the date of the marriage is used as the starting value.
Establishing the value of an item seems simple enough, but many divorcing couples will argue over the choice of an appraiser or the appraisal methods used. A family law attorney can provide valuable insight into the appraisal process, so you have the best chance at keeping wealth that is rightfully yours.
Homes, vehicles and land
If you inherited an item with a title of ownership, such as a vacation home or a collector car, the law might be in your favor so long as the title is only in your name. However, as with the non-titled property mentioned above, any increase in value will need to be assessed.
When both spouses are listed on the title for inherited property, the situation is more complex. A home, vehicle or other titled property passing to both spouses in joint names will belong to both of them, regardless of whose relative provided the inheritance.
The complications of divorce are always hard to navigate, but these complications can become increasingly difficult when there is inheritance at stake. Understanding how the law can protect your assets is a valuable tool to ensure your inheritance is not impacted.