What is Transmutation in Divorce?
When a couple divorces, the court must characterize property as community or separate. This divides marital property and confirms a party’s separate property to that party. In general, community or marital property are the assets and debts that are acquired during marriage by either property.
Separate property includes assets and debts acquired:
- before the marriage,
- after separation,
- by gift,
- inheritance and accumulations on such,
- appreciation, or
- traceable property derived from a separate asset.
The characterization of property in a divorce case is extremely important. Family courts don’t usually have the ability to divide separate property between the parties. It also does not have the power to give separate property from one spouse to another. The burden of proof is generally on the spouse claiming separate property to prove separate nature.
It becomes complicated when an asset or debt isn’t clearly separate or community.
An example of this could include when one uses community funds to pay an obligation associated with a separate asset.
What is the Difference Between Tracing Separate Property and Transmutation in Colorado?
Distributing assets during a divorce would be simple in a perfect world. This is, if neither party did anything to complicate the situation. However, the reality is that things are rarely perfect. And, commingling separate assets with community assets is one of the biggest issues. No one gets into a marriage expecting it to fail. So, why would they protect the identity of his or her assets to begin with?
The basic act of commingling separate and community assets, in itself, isn’t what complicates the dissolution process, however. In theory, it’s possible to track the contribution of both types of property in relation to an acquisition during a couple’s marriage. But, if you cannot trace those funds, we must presume that those funds are community property.
Tracing assets can be an extremely complex process, but the process can be made easier with the assistance of a seasoned divorce attorney with decades of experience. The attorneys at Litvak, Litvak, Mehrtens and Carlton have litigated several cases where the character of a specific piece of property is at issue. We can assist you in obtaining every dime you are entitled to in your divorce.
What are Transmuted Assets?
Transmutation is defined, simply, as “the action of changing or the state of being changed into another form”. In terms of marital property, this means that one or both spouses changed some form of property from marital property to separate property, or vice versa.
Transmuted assets can happen for a variety of reasons. This can include commingling, as well as legal actions, such as adding a spouse’s name to a vehicle title. Transmutation can also occur as a result of a gift or contract.
Why Does it Matter if Assets are Transmuted?
If your separate assets transmute into marital assets, this can and will have a significant effect on the outcome of your divorce, financially speaking. This happens, primarily because Colorado considers separate and marital assets are considered separate. As a matter of fact, only marital assets are subject to division, while separate assets may be kept separate.
How to Prevent Transmutation
If you wish to keep your property separate, thus ensuring that it won’t be subject to division during your divorce in Colorado, it’s important you understand the ways in which transmutation of assets occurs.
Some tips to prevent transmutation include:
- Keep documents of all gifts and inheritances received.
- If you purchased property or assets before your marriage, track down those details, including title information, purchase date, etc.
- Make your intentions clear when it comes to separate property. This is where having an estate plan in place can be useful.
- Don’t commingle your funds. Keep your bank accounts separate, and don’t use inheritance or “gift money” to purchase marital property.
- Don’t use marital funds to maintain a property that you want to keep separate.
- Do not treat separate property as if it were joint, or marital property.
When going through a divorce, you may have to prove that your assets are separate. Or further, that you never had any intention of transmuting them. A skilled lawyer with resources to trace your assets can prove to be extremely helpful during this phase in the divorce process.
Aspen and Denver Divorce Attorneys Skilled at Tracing Assets
Tracing separate property to its origin can be challenging. It typically requires obtaining and examining financial records and other documents that date back for years, in some cases. If separate property claims or transmutation are an issue in your case, the divorce attorneys at Litvak, Litvak, Mehrtens and Carlton can help you protect your property rights. Our attorneys have extensive experience in all aspects of equitable distribution. This includes cases that involve high net worth, tracing separate property and other complex legal issues.
For a free consultation, call us at 303-951-4506.
