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INTERESTS IN TRUSTS AS PROPERTY IN DISSOLUTION OF MARRIAGE: IDENTIFICATION AND VALUATION

Real Property, Probate and Trust Journal, Spring 2005 by Chorney, Marc A

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(b) The value of the property set apart to each spouse;

(d) Any increases or decreases in the value of the separate property of the spouse during the marriage or the depletion of the separate property for marital purposes.11

C.R.S.A. defines marital property as:

[A]ll property acquired by either spouse subsequent to the marriage except:

(a) Property acquired by gift, bequest, devise, or descent;

(b) Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent;

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(d) Property excluded by valid agreement of the parties.12

As discussed infra, Part II.J, the Colorado statute also provides that:

"[P]roperty" and "an asset of a spouse" shall not include any interest a party may have as an heir at law of a living person or any interest under any donative third party instrument which is amendable or revocable, including but not limited to third-party wills, revocable trusts, life insurance, and retirement benefit instruments, nor shall any such interests be considered as an economic circumstance or other factor.13

When making a property division, a court must determine first whether an interest constitutes property, and if it does, a court then must determine if the property is separate or marital.14 Increases in the value of separate property and income from separate property constitute marital property.15 The Colorado statute creates a rebuttable presumption that all property acquired subsequent to the marriage, regardless of titling, is marital property.16 The presumption in favor of marital property is rebuttable even if an asset is titled jointly.17 After determining whether an interest constitutes marital property, and setting aside the separate property of the spouses, the enabling statute requires the court to divide the marital property in a manner the court determines to be just, which does not necessarily mean an equal division between the spouses.18

B. In re Marriage of Balanson

In re Marriage of Balanson19 ("Balanson II") concerned the determination of whether a wife's remainder interest in a trust constituted property for purposes of property division in a dissolution of marriage. Wife's parents created a joint revocable trust, which at the death of wife's mother divided into two irrevocable trusts.20 The settlors intended the "A" trust to be a combined trust consisting of the surviving father's assets and the deceased mother's assets, which would have qualified the trust for the federal estate tax marital deduction at the mother's death.21 The settlors intended the "B" trust to be a credit shelter trust, with the intent that it would not be subject to estate tax at the surviving father's death.22 Both trusts provided wife's father with a mandatory income interest and the power, as the trustee, to distribute principal to himself for his support, care, and maintenance. At father's death, the A trust would be distributed in accordance with father's general power of appointment exercisable by will and if not exercised, then in accordance with the B trust. The B trust was to be divided at father's death into as many equal shares as there were living children of the mother and father. Wife and her brother were the only living children of wife's parents. Wife's father was the trustee of both trusts and the trust instrument designated wife's brother as the successor trustee at the death of wife's father.

INTERESTS IN TRUSTS AS PROPERTY IN DISSOLUTION OF MARRIAGE: IDENTIFICATION AND VALUATION

Real Property, Probate and Trust Journal, Spring 2005 by Chorney, Marc A

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