Separate Vs. Marital Property
One of the most pressing issues which arises when couples divorce is what property each spouse will keep. Spouses are allowed to retain sole ownership of all separate property, and then receive an equitable share of the “marital property,” which is loosely defined as all property acquired during the marriage. Separate property is generally any property acquired prior to the marriage, and also property acquired during the marriage via gift or inheritance. In other words, if a spouse inherits a substantial sum of money from a relative during the marriage, this sum won’t be classified as marital property as a rule; the same would apply if the sum had been transferred as an inter vivos gift (a gift given between two people while they are alive) during the marriage.
Assets which are held as separate property typically don’t need to be titled a specific way to remain classified as such. One of the main keys to determining classification is “inception of title,” meaning that the origins of ownership (i.e. when and how the property was acquired) are controlling when it comes to classifying a given piece of property. However, a recent case – In re Marriage of Smith (22CA2182) – suggests that spouses may want to designate separate property specifically in either a prenuptial or postnuptial agreement to ensure that the property retains its classification during marriage.
Let’s take a closer look at this recent case.
Pertinent Facts
The husband in this case wished to retain multiple pieces of real estate as his separate property after the marriage ended. With one piece of real estate, the husband had simply kept the title of the property in its original form, and it was held as his sole property. A second piece of real property had been retitled and held as “tenants in common” (TIC) with his wife during the marriage; even though this property was held as a TIC, the husband intended to retain it as his separate property.
With both properties, the trial court held that the correct classification was actually “marital property.” With the first referenced property, the court reasoned that the husband had referred to the property as “our house,” which showed an intent to hold the property as marital; with the other property, the court reasoned that titling the property as a TIC was not a final statement on the property’s classification.
Analysis
As mentioned, the “inception of title” principle ordinarily controls, or at least heavily influences, how property will be classified in Colorado law. But what this case shows is that a spouse’s behavior during the marriage can also influence the final classification of certain property. We know that specific behaviors, such as “commingling,” have been known to possibly alter the status of property during marriage; this case demonstrates that there may be additional behaviors which can also have the same impact.
Primary Takeaway: Use Pre / Postnuptial Agreements to Retain Property
Perhaps the main takeaway from this recent case is that a prenuptial or postnuptial agreement may be the surest means to retain specific pieces of property. If a spouse enters a marriage and wants to ensure that a certain piece of real or personal property remains his or her sole and separate property, the best method to accomplish this is to develop and sign an agreement. A prenuptial or postnuptial agreement is usually difficult to overcome because generally, the agreement will be upheld in court, unless there is evidence of defective formation (i.e. fraud, coercion, duress, parties did not each have separate attorneys, etc.).
Contact the Drake Law Firm for More Information
If you would like to learn more about maintaining separate property, marital property, the property division process in general, or another related topic, contact one of the attorneys at the Drake Law Firm today by calling 720-679-8813.