There are some lessons to be learned in the estate planning context to help protect family assets from claims of a spouse of a child or other relative in a dissolution proceeding.
Property is characterized as either "marital" property or "separate" property. Generally separate property is allocated 100% to the party who owns it. Fortunately, from an estate planning perspective, separate property includes property which is received by gift or inheritance. The earnings on and appreciation in value of separate property is, however, characterized as marital property. In general, all property which is not separate property is characterized as marital property and is subject to division by the divorce court. Colorado is a so-called "equitable" division state which means that marital property does not have to be divided equally, but may be divided on a non-pro rata basis determined to be equitable by the court. One basis for an unequal division may be the disproportionate value of separate property owned by one of the parties.
One risk is that property which might otherwise be characterized as separate property may lose that status if it becomes commingled with marital property or otherwise cannot be traced to its separate property source.
For more information on this topic, including some general guidelines, see our December 2011 newsletter.
