Generally speaking, gifts or inheritances to one spouse are considered that spouse’s “separate property.” In other words, if you or your spouse receive an inheritance through the death of a family member or otherwise, those assets are not subject to equitable distribution at divorce.
This is pursuant to C.R.S. section 14-10-113(2), which provides that “’marital property’ means all property acquired by either spouse subsequent to the marriage except: (a) Property acquired by gift, bequest, devise, or descent…”
Nonetheless, inheritances can affect divorce proceedings in important ways. First of all, the Colorado Supreme Court has held that monetary inheritances MAY be included in an individual’s “gross income” for purposes of calculating maintenance and child support obligations. In re A.M.D., 78 P.3d 741 (Colo. 2003). Additionally, if an individual who receives a monetary inheritance uses the principal of said inheritance as a source of income, either to meet living expenses or to increase his/her standard of living, then the inheritance is included in that year’s gross income. And to the extent the inheritance is unspent, the actual interest income generated from its net value is likewise included in gross income for purposes of calculating maintenance/child support obligations. The Court may even impute a reasonable amount of interest if the principal of the inheritance is not adequately invested to earn a reasonable rate of return. Id.
Thus, if you or your spouse receive a “monetary” (i.e., cash or assets easily convertible thereto) inheritance during your marriage or thereafter, be aware that although the inheritance is technically the receiving spouse’s separate property, there are important implications with respect to that person’s gross income when it comes to calculating maintenance or child support under Colorado law.
Please contact the Domestic Team at Feldmann Nagel Cantafio & Song PLLC for all of your family law needs.