In re Marriage of Smith.

2024 COA 95. No. 22CA2182. Dissolution of Marriage—Property Disposition—Irrevocable Family Trust—Revocable Interest—Donative Third Party Instruments—Separate Property Character.

August 22, 2024

Wife initiated a dissolution of marriage proceeding. Husband requested that she disclose information about an irrevocable family trust of which she was a beneficiary. Wife moved for determination of a question of law, arguing that any interest she had in the family trust did not constitute property and was not an economic circumstance relevant to the dissolution proceeding. The district court granted wife’s motion and did not further consider her trust interest. The district court later dissolved the marriage and entered permanent orders determining that husband had no separate property interest in (1) the parties’ marital home (2042 Alpine); (2) a lot adjacent to the marital home (2032 Alpine); and (3) a condominium in New York City (NY Condo). The court then divided the parties’ $49.5 million marital estate, allocating to husband net equity of about $25 million and to wife the remaining $24.5 million.

On appeal, husband contended that the district court erred by concluding that wife’s beneficiary interest in the family trust was not property or an economic circumstance. He maintained that the district court erred by determining that wife has only a discretionary interest in the family trust. Wife and her father and sisters are eligible beneficiaries of the family trust. Wife’s father is the primary beneficiary and has a power of appointment over the trust property, and as the trustee, has sole discretion over the distributions. At the time of the dissolution, wife had not received any distributions from the trust. Accordingly, distributions of income and principal from the trust are wholly within the trustee’s discretion, and wife’s interest is not property subject to the court’s allocation.

Husband also argued that the district court erred by determining that wife’s father’s power of appointment rendered wife’s trust interest revocable. He asserted that the district court interpreted “revocable” in CRS § 14-10-113(7)(b) too broadly in determining that a power of appointment within the irrevocable family trust triggered the statute’s application. When dividing a marital estate, the district court may consider a spouse’s interest in a discretionary trust as an economic circumstance, even if it is not property. But § 14-10-113(7)(b) provides that a spouse’s property does not include an interest under a donative third party instrument that is revocable, including a revocable trust, nor is such interest considered an economic circumstance. Here, under the family trust, wife’s father has a power of appointment over the trust property, so he may appoint the trust property outright or through a newly created trust. Applying the ordinary meaning of “revocable,” the court of appeals concluded that § 14-10-113(7)(b) precludes a court from considering any interest in a donative third party instrument as an economic circumstance or property if that interest could be canceled or withdrawn. Accordingly, the district court properly concluded that wife’s father’s power of appointment rendered wife’s trust interest revocable for purposes of § 14-10-113(7)(b) and thus precluded the court from considering that interest.

Husband further asserted that the district court reversibly erred by determining that he had no separate property interest in 2042 Alpine, 2032 Alpine, or the NY Condo proceeds. First, while husband contributed his separate assets to purchase 2042 Alpine and initially titled it only in his name, he later transferred the title to himself and wife as tenants in common. Given this transfer to joint ownership, the district court properly presumed that 2042 Alpine became marital property. Second, husband’s statements supported the court’s finding that he intended 2032 Alpine to be marital property and indicated that he believed he had effectuated a gift of this property to the marriage. Third, the record supports the district court’s determination that though the NY Condo was purchased with husband’s separate assets, any separate character those funds had was lost when husband commingled them with marital assets. Therefore, the district court did not err by declining to set aside any portion of 2042 Alpine, 2032 Alpine, or the NY Condo proceeds as husband’s separate property.

Husband also argued that the district court erred by making a relatively equal division of the marital estate because he contributed substantially more to the marital estate and the court’s ruling did not indicate that it considered all the statutory factors. A district court has wide latitude to equitably divide the marital estate based on the unique case circumstances and in accordance with the CRS § 14-10-113(1) factors. Here, the court considered all relevant statutory factors, determined that both parties made substantial contributions to the marriage, and concluded that a relatively equal allocation of the marital estate was equitable. Accordingly, the district court did not abuse its discretion by ordering a relatively equal allocation of the marital estate.

Husband further contended that the district court erred by determining that wife did not improperly dissipate the marital estate when she sold their Apple stock and by not accounting for the resulting lost assets when allocating the marital estate. The district court found that although wife violated the automatic temporary injunction imposed under CRS § 14-10-107(4)(b)(I)(A) when she disposed of the Apple stock without husband’s consent, this conduct did not rise to economic fault because she sold the stock as part of the parties’ agreement that husband could purchase a new home. Therefore, the court determined with record support that wife did not improperly dispose of the stock in contemplation of their dissolution of marriage. Accordingly, the court did not err in allocating the marital estate.

The judgment was affirmed.

The full opinion is available at https://www.coloradojudicial.gov/system/files/opinions-2024-08/22CA2182-PD.pdf.