Back in 2019, we wrote about the Blaine1In re: Marriage of Blaine, 2019 COA 164. case, where the Colorado Court of Appeals held that one spouse conveying property to the other using an Interspousal Transfer Deed turned that property into the other spouses’ separate property
Today, the Colorado Supreme Court reversed the decision, holding that unless one of the four statutory criteria are satisfied, an interspousal transfer deed does not overcome the presumption that property is marital, meaning that the property is part of the marital estate, and not the other spouse’s separate property. Blaine.2In re: Marriage of Blaine, 2021 CO 13, ¶ 25.
C.R.S. 14-10-113(2) sets forth the 4 ways to overcome the presumption that property acquired by either spouse during marriage is marital property subject to division:
- Property acquired in exchange for premarital or gifted property.
- Property acquired after entry of a decree of legal separation.
- “Property excluded by valid agreement of the parties.”
The trial court and Court of Appeals both agreed that the interspousal transfer deed did not meet the requirements of the Uniform Premarital & Marital Agreements Act, as it was not a writing signed by both parties. Both lower courts nonetheless set aside the Dublin home as the wife’s separate property by carving out a 5th way to create separate property – a valid conveyance between spouses when accompanied by intent that the property be excluded from the marital estate.
The Colorado Supreme Court reversed, holding that there is no other way to exclude property from the marital estate upon divorce beyond those 4 statutory exceptions.
While our prior blog post set forth the facts highlighted in the Court of Appeals decision, here are the facts zeroed in by the Supreme Court concerning the interspousal transfer deed:
- During the parties’ 15 month marriage, the husband made eleven transfers of money to wife, totaling just under $300,000, which the trial court found were marital funds, not a loan or gift.
- The wife used most of the $300,000 transferred to purchase a home in Dublin, California.
- While trying to secure financing for the home, the wife told the husband that the mortgage company would not approve a loan without his signing an interspousal transfer deed to relinquish his interest.
- The Husband signed an interspousal transfer deed prepared by the mortgage company, indicating that he was transferring to the wife “as her sole and separate property” the Dublin home.
Court Cannot Create Separate Property Except by Statute
The Court held that C.R.S. 14-10-113 is the sole means by which property acquired during the marriage can become separate property, and courts cannot create a non-statutory exception to the marital property presumption: “We do not add words to a statute.” Blaine.3In re: Marriage of Blaine, 2021 CO 13, ¶ 21.
The Court of Appeals, in the words of the Supreme Court, had “misplaced” reliance upon two cases, because in each of them the court identified a statutory exception which applied to the marital property presumption, instead of creating a new exception outside the statute:
- Bartolo,4In re: Marriage of Bartolo, 971 P.2d 699 (Colo.App. 1998). where the court found, by the requisite “clear and convincing evidence that the husband had intended a gift to the wife of the property when he quitclaimed it to her. (By contrast, no gift was found or argued in the Blaine case).
- Vickers,5In re: Marriage of Vickers, 686 P.2d 1370 (Colo.App. 1984). where the court found that the parties had executed a valid agreement to include as separate property the increase in marital property, instead of such increase being marital property. (By contrast, in the present case the court explicitly found there was no valid agreement under the Marital Agreements Act).
Neither of those cases was on point:
“Here, by contrast, in concluding that Wife had overcome the presumption of marital property in the district court, the division didn’t identify a statutory exception that applied to Husband’s conveyance of his interest in the Dublin home. That Husband’s conveyance was through an ITD and was accompanied by his intent to exclude the Dublin home from the marital estate did not suffice to overcome the presumption. That’s because there is no ITD exception in section 14-10-113(2)—even if the ITD is accompanied by the conveying spouse’s intent to exclude the property in question from the marital estate.”Blaine.6In re: Marriage of Blaine, 2021 CO 13, ¶ 25.
Does Interspousal Transfer Deed Satisfy Different Exception?
The Court did not hold that the property was necessarily marital, but simply that courts cannot create exceptions beyond those set forth in the statute:
“We hold that a party may overcome the marital property presumption in the UDMA only through the four exceptions set forth in section 14-10-113(2)(a)–(d). Because the division improperly created a new exception to the presumption, we reverse its judgment and remand for further proceedings consistent with this opinion.”Blaine.7In re: Marriage of Blaine, 2021 CO 13, ¶ 28.
While the deed could not constitute a 5th way to create separate property, that does not mean the property has to be marital and subject to division. The Supreme Court remanded the case back to the trial court to determine “whether any statutory exception not previously addressed applies.” Blaine.8In re: Marriage of Blaine, 2021 CO 13, ¶ 26.
Clearly the property was not acquired after a decree of legal separation, the trial court already found that the $300K funding used to purchase the residence were marital, and both courts ruled this out as being a valid marital agreement. So practically speaking, this remand means the only exception remaining for potential litigation is whether the husband had intended to gift the property to the wife by signing the interspousal transfer deed.
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