Inheritance & Divorce: Still Separate After Marital Spending

Doll of grandmother next to pile of money

Inheritance is Separate Property at Divorce

While property acquired during the marriage is presumptively marital, a spouse can overcome that presumption by showing the property was “acquired by gift, bequest, devise, or descent.” C.R.S. 14-10-113(2)(a). In other words, an inheritance received by one spouse is that spouse’s separate property, unless he/she does something to convert it to a marital asset during the marriage.

While jointly-titling an inheritance creates a presumption divorce that the inherited funds are marital, simply spending an inheritance on marital expenses will not convert the separate property inheritance into a marital asset. For more information, see our article about the division of the marital estate at divorce in the Colorado Family Law Guide.

Inheritance “Treated as Marital” Still Separate Property at Divorce

In a new decision, the Colorado Court of Appeals denied an appeal by a wife trying to argue that the husband had somehow converted his inherited separate property into marital funds, not by jointly titling them, but by using them for marital purposes. Consider her argument – the husband could have stashed away his entire inheritance, but because he chose to spend some of it on the marriage, thereby benefiting the wife, she wanted a share of the remaining balance!

Colorado Court of Appeals rules inheritance still separate property

In Crawford,1In re: Marriage of Crawford (Colo.App. 2020) (Unpublished decision). the husband funded a trust account during marriage with funds he had inherited. The trust account was managed by a separate financial adviser. The wife argued that the funds had become marital because:

  • The account was joint since correspondence from the financial adviser was sometimes addressed to both spouses, and
  • The spouses had treated the inheritance as marital, using it whenever needed to spend on marital purposes.

Inheritance Never Jointly-Titled

With respect to the joint title argument, the trial court accepted the testimony of the financial adviser who testified that the accounts had always been solely in the husband’s name. While he occasionally sent correspondence to the marital addressed to both spouses, it was as a courtesy. And such correspondence was only general letters, never actual account statements for the inheritance trust fund.

Spending From Separate Property Not Make Balance Marital

Moreover, the trial court found that merely spending separate property inherited funds on marital purposes was insufficient to convert the balance which remained in the account as marital. The wife appealed, and the Court of Appeals upheld the trial court determination:

“We are also unpersuaded by wife’s contention that husband and wife treated the trust accounts as marital accounts because husband withdrew trust funds to pay marital expenses. While we agree that the withdrawn funds became marital property, that fact doesn’t establish that the separate trust accounts themselves became marital property or that the spouses treated them as marital property.”

Crawford.2In re: Marriage of Crawford (Colo.App. 2020), ¶ 9 (Unpublished decision).

Giving Away Funds Not Necessarily Dissipation

The wife in Crawford also lost an unrelated issue pertaining to funds the husband had given away. She argued that he had dissipated the assets because two years previously he had given some money to a friend, and 10 years previously he gave money to someone she claimed was his girlfriend (the court used the term “purported girlfriend”, suggesting both (1) skepticism of the wife’s claim, and (2) an absence of evidence to support this contention beyond the wife’s suspicion).

The Court of Appeals upheld the trial court’s determination that such gifts were not improper:

“But giving money to someone alone is not improper. After all, a spouse has the right to use marital property during the marriage.”

Crawford.3In re: Marriage of Crawford (Colo.App. 2020), 22 (Unpublished decision).

All was not lost for the wife, however, as the appellate court did reverse the maintenance award, and remand it back to the trial court as the judge did not make sufficient findings to support the award. Readers of our blog will know that such reversals are becoming increasingly common when trial courts follow the maintenance guidelines without making specific findings.

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