When a loved one leaves you money or other property in their will, they do so with the expectation that it will go to you. But what happens to that inheritance if you end up getting divorced? Will your soon-to-be ex get all or part of your inheritance?

In Colorado, an inheritance is considered separate property. This means that it generally won’t be subject to equitable distribution in a divorce. However, there are situations where all or some of your inheritance could be considered marital property, such as if you use the money to buy a house with your spouse. Our Colorado Springs divorce lawyers can advise you of your rights and protect your financial interests during a divorce.

At Ascent Legal Group, we provide strategic legal advice and representation, including in divorce cases involving complex division of property issues. If you are contemplating divorce and are concerned about your property rights, we can help. Reach out to our law offices today to schedule a free consultation with a Colorado Springs family law attorney.

Marital vs. Separate Property in a Colorado Divorce

In Colorado divorces, property is divided into two categories: marital and separate property. Broadly speaking, marital property includes both assets and debts that a couple acquires during a marriage. Separate property includes any assets and debts that one spouse acquires prior to the marriage. It may also include certain assets acquired during the marriage, such as through a gift or inheritance.

The distinction between separate and marital property is important because, in a divorce, only marital property is subject to equitable distribution. When a couple decides to get a divorce, they must separately disclose all of their assets and liabilities. This is required for both contested and uncontested divorces.

These assets and debts are then categorized as either marital property or separate property. Marital property can include anything of value, such as:

• Stock options
• Frequent flyer miles
• Real estate
• Vehicles
• Personal property and household goods 
• Bank accounts
• Retirement accounts
• Investments
• Business interests

Because marital property is subject to equitable distribution, the question of whether a particular asset is marital or separate property can be hotly contested. There are many situations where the proper category for an asset or debt isn’t entirely clear. For example, if one spouse took out a car loan shortly before marriage, but the debt was paid off during marriage, there may be a question as to whether the vehicle is separate or marital property. A Colorado divorce attorney can advocate for your interests when it comes to the proper characterization of an asset as separate or marital property.

Generally, real estate that is acquired before the marriage and separately titled remains separate property. However, any increase in equity or value of that property is typically considered marital property. For example, one spouse comes into a marriage with a house valued at $250,000 and a mortgage of $100,000. Their separate property interest is $150,000, which is the net equity of the home. Over the course of the marriage, the house appreciates in value to $600,000, and the mortgage is paid off in full.  This makes the equity $600,000. The increase in equity of $450,000 is considered marital property, while the remaining $150,000 in equity is separate property. 

Separate property can also be converted to marital property if the assets are commingled or if the property is titled in joint names. For example, if one spouse receives a gift of $100,000 from a family member and puts it into a joint bank account, it would be considered marital property. In the house scenario above, if the owner spouse put his partner’s name on the title, then it would typically be considered a “gift to the marriage” and marital property.

Another complicating factor is determining whether an asset is marital or separate property occurs when the original property is invested or exchanged. If the spouse claiming it can trace it back to the original separate property, then it can remain a separate property. This can be tricky in situations where there have been many exchanges (such as in an investment fund). If the separate property is used to purchase something for both spouses (such as a marital home), then it is considered marital property.

Because there are many factors that come into play when deciding if a particular asset is marital or separate property, it is always a good idea to consult with a Colorado divorce lawyer to understand your legal rights. This is equally true whether you are planning an uncontested divorce or believe that your divorce will be contentious. Our law firm can analyze the facts of your case, help you draft a settlement agreement, and/or protect your rights at trial.

Will My Inheritance Be Considered Marital Property?

Under Colorado law, an inheritance is considered separate, not marital property. Any asset that is received through inheritance is separate property that is not subject to equitable distribution. However, as discussed above, it is possible for some or all of this inheritance to be considered marital property. 

When An Inheritance Could Be Considered Marital Property

Your Invested Inheritance Grows During Marriage

If you invest your inheritance or it otherwise grows in value over the course of your marriage, then this increase will be considered marital property.  

You Deposit The Money In A Joint Account

If you deposit any money received as an inheritance in a joint account, the funds may become commingled if the court cannot trace and separate them. When assets are mixed, they can essentially become joined and will be considered marital property.

You Use The Inheritance To Buy Marital Property

Similarly, if you use your inheritance to pay for marital property, then any funds you expended will likely be considered marital property. For example, if you used an inheritance to pay down the mortgage on your marital home, then you won’t get to separate out the amount that you spent as your own property. If you used the inheritance to renovate your marital home, the increase in value of your house will be considered marital property.

How To Protect An Inheritance During A Divorce

If you know that you will receive a significant inheritance, there are things that you can do to protect that money if you are concerned about divorce. This includes depositing any money in a separate bank account and not using it for any joint expenses. You also should not change the title on separate property to include your spouse if you want to maintain it as separate property.

Another option for anyone who may be receiving a larger inheritance is to sign a prenuptial agreement before marriage or a postnuptial agreement after marriage. A prenup or postnup agreement can be used to protect your property interests, including inheritances, in the event of a divorce. Our Colorado Springs divorce attorneys can advise you on a prenuptial or postnuptial agreement and draft a legally valid contract for you.

Reach Out for a Free Consultation with a Colorado Springs Divorce Lawyer

Many people in unhappy marriages hesitate to pull the trigger on a divorce for a variety of reasons, such as worry for their kids or how a divorce will affect them financially. While divorce can be stressful and filled with many uncertainties, our law firm works hard to help our clients understand their legal rights and likely outcomes in a case. This includes advising clients on how an inheritance will likely be characterized when dividing property.

Ascent Legal Group represents individuals and families in Colorado family law cases, including divorce.  We understand that our clients may be concerned about losing time with their kids, their financial stability, and more when getting divorced. Our goal is to help our clients achieve the best possible outcome based on the facts of their case and Colorado law. To learn more or to schedule a free 30-minute consultation with a Colorado Springs divorce lawyer, give us a call at 719-256-0067 or fill out our online contact form.