Dividing Collectibles in a Colorado Divorce

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When it comes to divorce, many people dread the process of dividing up their assets and liabilities. The idea that something you bought for yourself could become marital property is a scary thought for many, especially when it is a sentimental item or collection that you have spent years acquiring. Just because a collection belongs to you does not mean that it will be safe during the divorce process.

To learn more about the process of dividing up collectibles in a divorce, continue reading. Our Denver divorce attorneys at Halligan LLC explain asset division in Colorado.

What is Equitable Distribution?

While some states automatically divide marital property 50-50 in a divorce, Colorado breaks that mold and uses an equitable distribution model. This means that instead of assuming property will be allocated equally, the focus is on allocating marital property fairly. To do this, a number of factors are considered in order to determine an equitable or fair distribution of marital property. This end result generally doesn’t move too far away from 50-50, however, depending on the circumstances of the case, a more drastic division of assets may certainly be appropriate. Factors such as the sacrifices and contributions that each spouse has made to the marriage, among others, are considered in an equitable distribution of marital property.

Determining Whether Assets Are Separate or Marital Property

The most important consideration when it comes to equitable distribution of marital property is whether an asset will be classified as separate or marital property. This is because only marital property can be divided between spouses. In a Colorado divorce, a spouse is not entitled to the other’s separate property divorce (except to the extent the property appreciated in value during the marriage), because the court only has jurisdiction over marital property. For this reason, the distinction between separate and marital property is highly important and determines whether you will get to keep your collectibles or risk having them subject to equitable distribution.

Common Collectibles

When you think of collections, you may think of baseball cards or tiny spoons, and sometimes that may be the case. However, in divorces, we also frequently see things like wine collections that have taken decades to accumulate and that are worth tens of thousands of dollars, historic weapons and war paraphernalia, meticulously assembled coin collections, and even collections of antique and sports cars.

These collections are expensive, personal, and can be rare. This can pose challenges in equitable distribution because whereas some couples may be willing to liquidate certain assets, such as their home or cars, to more easily divide the value of property during the division of assets and liabilities, a collector is likely unwilling to sell a collection that contains rare items that took decades to acquire. It may also be difficult to agree to a valuate, as most appraisers will use the fair market value, which may seem way too low for someone who has put blood, sweat, and tears into acquiring some of these items.

Are Collectibles Separate or Marital Property?

  • Collectibles acquired before marriage. Collectibles that are acquired by an individual spouse prior to entering the marriage will be considered separate property, and will not be subject to equitable distribution during a divorce; however, to the extent the items have appreciated in value during the marriage, that increase in value may be considered marital property subject to allocation in a divorce.
  • Collectibles purchased during the marriage. Collectibles purchased during the course of a marriage will be considered marital property. This is true even if one spouse bought them for themselves and without the knowledge of the other spouse. One exception to this may be if the spouse used inherited property to purchase the item(s).
  • Collectibles gifted between spouses. Collectibles that are gifted from one spouse to another, such as for a birthday present, may be considered marital property subject to allocation in a divorce, depending on the circumstances.
  • Collectibles gifted from third parties. On the other hand, collectibles that are gifted from a third-party, such as a friend or family member, to one spouse during the course of a marriage may be considered separate property and may not be subject to equitable distribution; however, to the extent the items have appreciated in value during the marriage, that increase in value may be considered marital property subject to allocation in a divorce.
  • Collectibles that are inherited. Collectibles that are inherited before or during a marriage may be considered separate property and may not be subject to equitable distribution; however, to the extent the items have appreciated in value during the marriage, that increase in value may be considered marital property subject to allocation in a divorce.
  • Collectibles covered by a prenuptial or postnuptial agreement. If you have a valid and enforceable prenuptial or postnuptial agreement that covers the treatment of collectibles in the event of a divorce, the terms of that agreement will dictate the disposition of such items. For this reason, if you have a collection that is highly sentimental or valuable to you, it is a good idea to hire an attorney to draft a prenuptial or postnuptial agreement to ensure that it remains your separate property. A postnuptial agreement can be executed at any time during a marriage, including after you have acquired a new collectible, so it is a good option for people who are currently married and want to protect their investment of time and money; however, it’s important you retain an attorney to help you with this or you risk the agreement being unenforceable.

How to Allocate Collectibles in a Divorce

If the collectibles are determined to be marital property, the first step in allocating collectibles in a divorce is to determine their value, which may require an appraisal. Determining the value of the collectibles will be important regardless of how they are divided. Collectibles are generally assigned their fair market value.

The parties always have the option of deciding independently how the collectibles and the rest of their assets and debts will be distributed, and it is recommended your attorneys assist in these negotiations. For example, if the collectibles are valued at $25,000, the spouse who wants to keep them may be able to retain ownership in exchange for granting the other spouse an asset of equivalent value and type, such as $25,000 in an investment account.

If the parties are unable to arrive at an agreement, the judge will decide how the collectibles will be allocated based upon the value of the collectibles and what the judge determines to be an equitable distribution.

Contact Halligan LLC to Schedule a Consultation

If you are a collector in Denver, Colorado, it’s important to protect your assets in the event of a divorce, and the experienced Denver family law attorneys at Halligan LLC are ready to help. Contact us today to schedule a confidential consultation.

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