What is Separate Property versus Marital Property?

When it comes to assets that may have grown during a marriage, how can you know what you have to divide and what you can set aside as your own separate property? Luckily, statute outlines how property is considered in the State of Colorado.

Marital property is considered any property owned by either spouse, except property acquired before the marriage, property that has been inherited, property that has been exchanged for other separate property, and property excluded from marital designation by a valid agreement between the spouses. Even if property may be considered separate, if the property has increased in value during the marriage, then that increase in the value would be considered marital. For example, if the wife owns a house when she marries her husband, the house is her separate property when they divorce. But if the house was worth $200,000 on the day of the marriage and is worth $300,000 when the parties are divorcing, then that difference, $100,000, is a marital asset that must be divided, even though the house is the wife’s separate property.

Divorce cases apply this rule frequently, as parties to a marriage may enter the marriage with assets that increase in value, or may inherit property during the marriage that they then commingle with marital property. For example, the husband could inherit $100,000 from his grandmother, which he deposits into a joint savings account that holds his and his wife’s cash savings. Because he has commingled the funds, he may have converted his separate inheritance asset to a marital asset that must now be divided between the parties.

With these definitions and examples, it becomes clear that separate property belongs to one party and does not need to be split in the divorce. In contrast, marital property belongs to both parties and must be accounted for in dividing up marital assets and debts.

In certain cases, it may not be clear whether a particular asset has any separate value to it, and if so, then how much can be set aside. In this circumstance, it is critical to engage the appropriate expert to conduct historical valuations or forensic accounting to produce an opinion of what the separate portion of an asset could be worth.

To avoid the messy division of assets that my occur with the presence of separate property, many couples elect to protect their assets with a pre- or post-marital agreement. A strong agreement such as this can protect even increases in value from being considered as marital property and can streamline the division, if and when it occurs.

We at Gunning LLC have seen arguments regarding separate versus marital property countless times and we are happy to guide you through the process of identifying your separate property and counting it out from the marital division. Give us a call and let us come up with a plan to protect your property.