Divorce can raise many questions about who owns certain assets. Inheritance is one issue that often causes confusion. If you received or may receive an inheritance in Colorado, knowing how the law treats these assets can help you understand how they may be handled during divorce.
Understanding marital versus separate property
Colorado divides property into two categories during divorce. Marital property includes assets and debts that either spouse acquired during the marriage. This usually includes income earned during the marriage, property bought with marital funds and retirement benefits earned during the marriage. Courts divide marital property fairly, although not always equally.
Separate property belongs to one spouse alone and is generally not divided during a divorce. Separate property usually includes assets owned before marriage, gifts received from someone other than your spouse and inheritances. In most cases, the spouse who owns separate property keeps it after the divorce if they have kept it separate.
How Colorado treats inherited assets
In Colorado, an inheritance is generally considered separate property. It belongs to the spouse who received it, even if the inheritance comes during the marriage. The law generally views an inheritance as a personal gift to one spouse, not a shared marital asset.
However, an inheritance does not always stay separate. The way you handle inherited property can affect whether it remains protected. Mixing inherited assets with marital property can create questions about ownership.
For example, the value of separate property that increases during the marriage may become part of the marital estate in some situations. Keeping records of inherited assets and changes in their value can help show how the property should be treated.
When inherited property becomes marital property
Inherited property may lose its separate status if you combine it with marital assets. This is known as commingling. Commingling happens when separate and marital funds become mixed together so much that they are difficult to separate. For example, placing inherited money into a joint bank account used for household expenses may make it harder to prove that the money remained separate.
Using inherited funds for shared property can also create issues. If you use inherited money to improve a home owned by both spouses, some of that money may become part of the marital estate. Adding your spouse’s name to inherited property or using inheritance funds to pay shared debts may also affect whether the property remains separate. Keeping detailed records can help show where the inheritance came from and how you used it.
What you can do to protect your inheritance during divorce
You can take steps to help keep inherited assets separate during marriage. Consider keeping inherited money in an account only in your name. Avoid mixing inherited funds with joint accounts or shared assets. You should also keep records of your inheritance. Save documents that show when you received it, where the money came from and how you managed it. These records may help explain whether the property remained separate.
If you use inherited funds for a large purchase, keep proof showing that the money came from your inheritance. Try to avoid using inherited assets for shared expenses or debts when possible. If you do use inherited funds for marital purposes, document those transactions.
You may also consider a postnuptial agreement. This type of agreement can explain how you and your spouse want to handle inherited assets and may help prevent future disagreements.
Careful planning safeguards your interests
Colorado law generally protects inheritances as separate property, but keeping that protection often depends on how you manage the inherited assets. By keeping inherited property separate from marital assets and maintaining clear records, you can help preserve your rights if divorce occurs.
One important exception is that any increase in the value of separate property during the marriage may become part of the marital estate, depending on the circumstances. This is one more reason to keep careful records and understand how inherited assets are handled over time.