Are Trusts Considered Marital Property In Divorce?

Parties going through a divorce often wonder how their property will be divided between themselves and their soon-to-be ex-spouse. Colorado is an equitable distribution state which means courts will attempt to divide marital property, including both assets and debts, fairly, but not necessarily equally. C.R.S. 14-10-113 provides guidance on the process and considerations courts use to determine what is a fair and equitable division of property in your case.

When determining what property is divisible in a divorce, a court must first decide whether an interest can be characterized as “property”, and then whether the property is separate or marital. Martial property will be divided amongst the parties equitably while separate property will remain separate and cannot be divided by the courts. “Separate property” is: (a) Property acquired prior to the marriage; (b) Property acquired as a gift or as an inheritance; (c) Property excluded by valid agreement of the parties; (d) Property acquired by a spouse after a decree of legal separation; and (e) Property acquired with separate property. “Marital property” is all non-separate property acquired by either spouse after the marriage.

For example, if Wife had $50,000 in her 401(k) account prior to her marriage, but the 401(k) is worth $100,000 on the day of the divorce, then the initial $50,000 would be Wife’s separate property and the court would not have the authority to divide the original $50,000 between Husband and Wife. The remaining $50,000, however, which represents the increase in value accrued during the marriage, would be considered marital property and would be divided “equitably” between the parties.

Before a court will attempt to characterize property as “marital” or “separate” it must first determine whether the interest in question is even “property” at all. In divorce proceedings, courts define “property” as items that have an exchangeable value which makes up a spouse’s wealth or estate. Courts consider a number of factors when determining whether an interest constitutes “property” including whether it can be sold or transferred and whether it terminates on the death of the owner. Enforceable contractual rights constitute “property” while interests that are speculative are considered expectancies and will not be classified as “property”.

One particularly complex issue of property division in a divorce is determining whether a spouse’s interest in an irrevocable trust amounts to a property interest that is eligible to be divided equitably. In determining whether a property interest exists or not, Colorado courts focus on whether the beneficiary spouse has a contractual right to enforce payment of trust funds.

In the case of discretionary trusts, where the trustee has absolute discretion as to how much, if any, of the trusts’ funds are distributed, and where the beneficiary spouse does not hold a remainder interest in the corpus (assets or property) of the trust, then the beneficiary spouse has no contractual or enforceable right to either the income or principal of the trust. Therefore, the beneficiary spouse’s interest in the trust will not likely be considered property subject to equitable division and will remain untouched by the court.

If you have any questions or concerns regarding a trust and divorce, please contact us here at Divorce Matters.

What Do I Get to Keep After My Divorce?

When couples get divorced, one of the first things on their mind is: What do I get? Divorce is a stressful situation, so knowing that you’ll get something softens the blow a little. But still, you want to make sure you get your fair share based on what you contributed to the marriage.

Marital property division is complex, especially when the couple has been married for decades and has accumulated numerous assets during that time. Ultimately, marital property is divided in an equitable manner as the court sees fit. However, there is no formula for determining who gets to keep what assets. To be clear, you and your spouse may agree on property division during mediation. If you can’t agree on your own, though, a judge will. You may or may not receive the assets you deserve, which is why it’s a good idea to have a lawyer on your side.

What is Considered Marital Property?

Just about everything acquired during the marriage is subject to split in a divorce. This includes not only cash but also homes, vehicles, boats, furniture, antiques, collections, businesses, stocks, retirement accounts and pensions. This is referred to as marital property.

It doesn’t matter if a certain asset””such as a home, vehicle or 401(k) account””is titled in one person’s name only. If one spouse has a sports car in their name only, the other spouse still has the rights to it in the divorce regardless of titling.

What is Considered Non-Marital Property?

There are some exceptions to the above, though. Not everything acquired during the marriage may be marital property. For example, gifts and inheritances given to one person from a third party are considered separate property. The same goes for pain and suffering payments from a personal injury award. Property that a person bought before the marriage is also considered non-marital property.

It’s important to understand, however, that separate property can easily become marital property if it’s not protected. For example, if you receive an inheritance and put it in your joint checking account, it can now be used by the other spouse. This process is known as commingling.

The same applies to property owned before marriage. If you bought a house before you were married, but your spouse has paid to maintain it, then it is now marital property and subject to split in a divorce.

Contact a Highlands Ranch Divorce Attorney Today for Help

Dividing property can be tricky during a divorce since not all assets are worth what they appear to be once you factor in taxes, fees and other things that can decrease an asset’s value. It’s important that you understand what you’re entitled to receive in a divorce while protecting non-marital assets.

If you are going through a divorce, make sure you get your fair share. The Highlands Ranch divorce attorneys at Divorce Matters can help. We can assess your assets and help you make the right decisions. Schedule a consultation today by contacting us at (720) 408-6595.

Stock Options During a Divorce

Stock options are a common form of compensation, the idea being to align the interests of the company and the employee. Therefore, the employee will have a vested interested in the company’s performance. But when spouses no longer have a vested interest in one another, the question arises over who has a vested interest in the stock options.

Stock options present one of the more complicated issues in the division of property during a divorce. First a court must determine if the options are “vested.” The term vested for family law may be very different than vested for IRS purposes. In family law the courts look to determine whether the employer can withdraw or retract the options.
To be martial property the options must also have matured. By matured, the focus is whether the option holder can exercise the options or turn them into cash. Then, the court must determine whether a vested and matured option is martial property which is often very specific to each individual case. An option to induce some future performance such as continued employment is usually not marital property. An option for some past performance usually is martial property. For example, an option granted to induce a move in work location or an option granted to change companies would be marital property.
Each option grant has to be evaluated separately to determine the nature and extent that option is marital or separate property.