Is Colorado a Marital Property State? Learn More from Divorce Matters®.

While Colorado law regarding gifts and inheritances for division of property can be relatively straightforward, it can be much more complex for determining a spouse’s income for purposes of child support. In fact, the court is not required to consider gifts for purposes of determining a spouse’s income for child support purposes, unless the gift is regularly received from a dependable source. In re Marriage of Nimmo, 891 P.2d 1002 (Colo. 1995). Future gifts, in order to be considered as income, cannot be speculative whatsoever.

If, however, you or your spouse is to receive a one-time gift in the future, such as an inheritance or winning the lottery, the court may include the gift in the calculation of income for the year in which the gift will be received. In re A.M.D. (Casteel v. Davidson), 78 P.3d 741 (Colo. 2003). The court also has a few options in deciding how to apply this type of gift, particularly regarding interest accrued from the gift, in years subsequent to the one-time payment. See In re Marriage of Bohn, 8 P.3d 539 (Colo. App. 2000) (holding that the imputation of investment income is not automatic and only applies if a spouse invests a portion of the funds, in which case income from interest could be used as the spouse’s income); In re Marriage of Laughlin, 932 P.2d 858 (Colo. App. 1997) (holding that gross income for child support purposes can include the amount of income an asset could “reasonably” be expected to generate, even if that asset had been consumed prior to the determination of child support); In re Marriage of Bregar, 952 P.2d 783 (Colo. App. 1997) (holding that if income is imputed as a result of a large, one-time payment, the net amount received, after payment of taxes, should be used).

While perhaps not the most common example (even though we all may wish it were), lottery winnings are helpful in explaining the complexity further. “Monetary gifts,” in general, are included within the definition of “gross income” for purposes of child support. There is a narrow exclusion for lottery winnings, but the vast majority of the lottery winnings will be considered in calculating a spouse’s income. Where lottery winnings are paid out in equal periodic installments (such as monthly), the appropriate manner for including them as income will typically be the same, i.e., monthly. In re Marriage of McCord, 910 P.2d 85 (Colo. App. 1995). But, when lottery winnings are to be paid in a lump sum, a Colorado court has indicated that child support may be calculated by including the entire winnings in the spouse’s income for the year in which the lump sum was received, without deduction for tax withholding. In re Marriage of Bohn, 8 P.3d 539 (Colo. App. 2000). A court then has the aforementioned variety of options in how to assess the spouse’s future income.

Dealing with inheritances can be a bit trickier. The definition of income in section 14-10-115(5)(a)(1), C.R.S., does not include “inheritance,” but the statute specifically includes “monetary gifts” as income, and the Colorado Supreme Court has concluded that monetary inheritances fall within this definition. In re A.M.D. (Casteel v. Davidson), 78 P.3d 741 (Colo. 2003). “Monetary” inheritances include cash or “[a]ssets that can be easily converted to cash,” such as money markets, mutual funds, stocks, and bonds. If an inheritance is “monetary,” then, before the court can include the inheritance as income, it must examine the recipient spouse’s use of the money. If the recipient spouse uses the principal as a source of income to meet existing living expenses or to increase their standard of living, the expended principal should be included as gross income. On the other hand, if the spouse saves or invests the monetary inheritance, such reserved principal is not included in gross income, but the interest generated by the principal is considered income.

While gifts can be relatively straightforward for purposes of division of property, it is not overly difficult to convert something from what was once nonmarital property to marital property. More importantly, gifts can be quite complicated when it comes to determining a spouse’s income.