Line maze going from one point to another

Typically, when spouses own joint property, such as by jointly titling an asset, that creates a presumption at divorce that the property is a marital asset, see, e.g., Finer.

A spouse who brings an asset into marriage (i.e., premarital assets) or was gifted property during the marriage can generally preserve the separate property nature of that property by keeping it separately titled rather than holding it as joint property. The flip side is that if the spouse titles what was separate property as joint property, it creates a presumption that the asset is now marital.

But as with so many things in the law, there are plenty of caveats, including:

  • The title alone does not control – through conduct or words, a spouse could evidence an intent to create a marital asset even though the title remains separate in that spouse’s name.
  • The increase in the net equity of separate property during marriage is marital. C.R.S. 14-10-113(4). For example, if, at marriage, one spouse owns a house with a gross value of $700K and a mortgage of $500K, that spouse has a net equity of $200K. If, at divorce, the property has a gross value of $1m and a mortgage of $200K, there is $800K of net equity. Assuming the residence remained separately titled and was found still to be that spouse’s separate property at divorce, that $600K increase in net equity is marital, and the other spouse could expect to receive about half of that or $300K for her half of the increase.
  • When marital funds are mixed with separate property funds into an account, which is one spouse’s separate property, that spouse has the burden of “tracing” the funds to prove which portions are marital vs. separate. Dale at 227.

Tracing is a term used to prove, through documents and testimony, the separate or marital components of an asset on a transaction-by-transaction basis. For more information on marital vs. separate property in a Colorado divorce, see our Division of the Marital Estate article in the Colorado Family Law Guide.

Tracing Not Preserve Separate Property in Joint Property

Note that “tracing” of marital vs. separate funds is required to prove the separate interest when an asset remains separate but has been commingled with marital property. In a recent case, a trial court expanded this tracing principle, accepting a wife’s assertion that her ability to trace her separate property contributions towards a jointly titled home was sufficient to establish a separate property interest in that residence.

In Capparelli, the couple purchased a jointly-titled residence during their 16-year marriage. At divorce, the wife traced the parties’ contributions to prove that she contributed almost $289K of her separate property funds towards the purchase price of that joint asset.

Couple holding hands together under a wooden house

The trial judge awarded the wife her $289,000 contribution as her separate property interest. The husband appealed, and the Colorado Court of Appeals reversed, finding no evidence to overcome the presumption that the house was marital.

Classification of Marital vs. Separate Property is an Issue of Law

The appellate court first noted that whether property is classified as marital or separate is a question of law, not of fact. Capparelli, ¶ 8. This distinction is essential in an appeal, where the higher court must defer to a trial court’s factual findings but not the trial court’s legal determinations.

The court thus summarized the process for dividing property (¶ 9) as follows:

  • Determine whether an asset is separate or marital,
  • Enter findings as to the asset’s approximate value,
  • Set aside the spouses any separate property and
  • Divide the marital property equitably (This means a “fair” division, not necessarily an “equal” one, though in Colorado, an equal division of marital property is typically the outcome).

Property Purchased During Marriage Presumptively Marital

“When dividing the marital estate, a statutory presumption exists that property purchased during the marriage is marital property. However, this marital property presumption may be overcome by evidence establishing that the property in question was (1) acquired by gift, bequest, devise, or descent; (2) acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent; (3) acquired after a decree of legal separation; or (4) excluded by valid agreement of the parties. The spouse claiming that property existing at dissolution is separate because it was owned prior to the marriage has the burden of proof to trace the property back to the original premarital asset. Thus, as long as assets received during the marriage are traceable to specific premarital property, the assets may remain separate property. But tracing alone isn’t sufficient to establish that jointly titled property maintains its separate character.”

Capparelli, ¶ 10 (Cleaned Up).

Tracing Not Defeat Presumption of Marital Property

Tracing does not overcome the presumption that joint property is marital, thereby creating a separate property interest:

“when a spouse places separate property in joint ownership during the marriage, it’s presumed both that the donor spouse intended the property to be a gift to the marriage and that the gifted property is marital property absent clear and convincing evidence to the contrary. Thus, while tracing is necessary to support a finding of separate property, it’s not sufficient, standing alone, to rebut the presumption that separate property placed in a jointly titled marital asset was a gift to the marriage. Instead, the fact of separate property must be proved by clear and convincing evidence.”

Capparelli, ¶ 11 (Cleaned Up).

In Capparelli, the wife’s evidence successfully traced her separate property contribution so she could prove the amount she contributed. But without more, this tracing does not overcome the presumption that she intended to gift her separate funds to the marriage by holding the asset as joint property:

“Although afforded the opportunity to do so, wife failed to present any evidence, let alone clear and convincing evidence, that she didn’t intend for the proceeds from the sale of her premarital home and the $100,000 gift from her mother to be gifts to the marriage when she used that money to purchase each of the three jointly titled marital homes. This lack of evidence is fatal to her claim that any portion of the proceeds of the Onyx Circle home sale is her separate property.

Simply put, the evidence presented at the permanent orders hearing — which focused exclusively on tracing funds but not the parties’ intent — was inadequate to overcome the strong presumption that the jointly titled homes, including the Onyx Circle home, were marital property.”

Capparelli, ¶ 16-17 (Cleaned Up).

Must Prove Intent to Defeat the Presumption that Joint Property is Marital

The takeaway? While tracing is necessary to prove the separate property portion of an asset that has both separate and marital funds, it is not sufficient, on its own, to overcome the presumption that joint property is part of the marital estate.

What could the wife have done? At a minimum, testify that she always intended to preserve her separate property interest in the funds and did not intend to gift them to the marital estate by jointly titling it. But that self-serving testimony, without more, is unlikely to carry the day – there are plenty of appellate cases where such testimony was held insufficient to overcome the presumption that joint property was marital.

The best additional evidence would be a signed agreement to preserve separate property (and who does that?) or some contemporaneous communications between the spouses regarding their intent when they purchased the property. And again, spouses talk, so this becomes a he-said, she-said.

Moreover, the wife is not entirely out of luck – the court of appeals overturned the determination that the residence had any separate property interest. The court did not order an equal equity division but remanded to the trial court “to equitably divide the marital estate.”

On remand, the trial judge may consider the wife’s contribution to that joint property. C.R.S. 14-10-113(1)(a). Although such contribution arguments are not common, they are enough in some cases for a judge to award a spouse greater than an equal share based upon contributing separate property.

Unusually, the appellate court has directed that no further evidence be admitted, which means the trial judge could not simply allow the wife to introduce more evidence that she intended her contributions to be separate:

“Both parties had a full and fair opportunity to present evidence regarding this issue. And because the relevant time of the parties’ intent regarding jointly titled property is at the time of the acquisition of such property, there is no basis for permitting either party to have a second bite at this apple.”

Capparelli, ¶ 26, n.1.

Award-Winning Southern Colorado Divorce Lawyers

Joint Property

U.S. News & World Report calls Graham.Law one of the Best Law Firms in America, and our managing partner is a Colorado Super Lawyer. Our family law attorneys have years of experience helping clients navigate the Colorado legal system. We know Colorado divorce & family law inside and out, from complex multi-million dollar property or child custody cases to basic child support modifications.

For more information about our top-rated El Paso County family law firm, contact us by filling out our contact form, calling us at (719) 630-1123 to set up a free consult, or click on:

Colorado Family Law. Period.