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Property which is not the property of either spouse does not fall into the marital estate. Therefore it is important initially to determine whether an asset is property at all.

Assets forming part of a discretionary trust are not property and therefore appreciation or income received from that trust is not property. See In re Marriage of Jones 812 P.2d 1152 (Colo 1991) and In re Marriage of Rosenblum 602 P.2d 892 (Colo App 1979).

The trusts in the Jones and Rosenblum cases were considered economic circumstances to be taken into account in the property distribution.

The Supreme Court left open in the Jones case the questions as to whether future vested interests in trusts subject to divestment but whose value may be uncertain at the time of dissolution of the marriage, would be either marital or separate property, so there is no clear statement of the law on this issue at this time.

A college degree is not property, neither separate or marital. See In re Marriage of Graham, 574 P.2d 75, 76 (1978 Colo).

Husband’s insurance policy with no cash surrender value was not an asset subject to division as property. See Menor v Menor 391 P.2d 473, 477 (1964 Colo.).

In the bankruptcy case of In re Baum 22 F.3d 1014 (10^th Circuit 1994) the court held that assets in a discretionary trust were not subject to the claims of creditors.

Marital property for purposes of dissolution of marriage means all 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;

(c) Property acquired by a spouse after a decree of legal separation; and

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

All property acquired by either spouse subsequent to the marriage and prior to a decree of legal separation is presumed to be marital property, regardless of whether title is held individually or by the spouses in some form of coownership such as joint tenancy, tenancy in common, tenancy by the entirety, and community property.

The presumption of marital property is overcome by a showing that the property was acquired by a method listed above.

An asset of a spouse acquired prior to the marriage or in accordance with subsection (a) or (b) above is considered as marital property, to the extent that its present value exceeds its value at the time of the marriage or at the time of acquisition if acquired after the marriage.

Property is valued as of the date of the decree or as of the date of the hearing on disposition of property if such hearing precedes the date of the decree.

Military retirement pay is considered "property." This policy was set out in In re Marriage of Grubb, 745 P.2d 661 (Colo. 1987).

While one might invoke the law of future interests to support an argument that a vested but unmatured pension right is a mere "expectancy" until such time as a right actually matures, a more persuasive argument, in our view, is that the employee’s rights derives from his contract of employment. Such a right is not a mere expectancy but, rather, is an enforceable contractual right that traditionally has been recognized as a chose in action and thus a form of property.

In the case of In re the Marriage of Gallo, 752 P.2d 47 (Colo.1988) the court explicitly compared military retirement pay, which it had just determined to be marital property to private pensions and trusts:

Although Congress could end the system tomorrow, "(n)o sound reason justifies treating (military retirement pay) differently from any other type of property whose value could become worthless in the future, e.g. the corpus of a trust may dry up or a private pension plan could become bankrupt".

The statement in the Gallo case could lead weight to an argument that non-discretionary trusts be considered marital property.

Income received from a discretionary trust is considered to be a gift and is not marital or separate property. See In re Marriage of Jones. 812 P.2d 1152 (Colo 1991).

All income on separate property is considered to be marital property.

Where the parties agreed by stipulation that the Trust was separate property then the income from the Trust is properly characterized as marital property. See In re Marriage of Footit, 903 P.2d 1209 (Colo. App. 1995). Had the parties not stipulated to the Trust being separate property, it could have been argued that the income received was a gift and therefor not a marital asset.

The Trusts in the Jones and Rosenblum cases were discretionary and the Court held that appreciation on the trusts was not marital property. This legal principle seems clearly established in Colorado law.

These trusts provide future vested benefits not within the Trustee’s discretion to withhold, but whose value may be uncertain at the time of dissolution of the marriage. In the Jones case the Court did not address whether vested interests in trusts subject to divestment would be either marital or separate property for purposes of C.R.S. section 14-10-113.

The law in regard to non-discretionary trusts is not clear and there is no decided case in Colorado on this issue. The Jones case did cite some examples of decisions in other states regarding non-discretionary trusts.

As an example of such a vested or non-discretionary trust, the Supreme Court in the Jones decision cited Davidson v. Davidson, 19 Mass. App. 364, , 474 N.E.2d 1137, 1143-45 (1985) where a 33 year old husband’s vested right to take his remainder interest in a trust could only be exercised after he attained age 35 and his then-living mother had died. He was 33 and his mother was alive at the time of the divorce. The trustees had uncontrolled discretion to invade the principal for the benefit of his mother. The Court nevertheless found his interest sufficient to include it in the marital estate for division on divorce.

After the decision in Davidson, the Vermont Supreme Court, citing Davidson in the case of Lynch v. Lynch, 522 A. 2d 234 (VT. 1987) held that a right to revoke a trust made the trust "property" for purposes of a divorce.

See, e.g., Mey v. Mey, 79 N.J. 121, , 398 A.2d 88, 89-90 (1979) (The court did find husband’s trust interest divisible. Husband was entitled to receive his share of principal when he reached the age of twenty-five, which he did during the marriage and he also received his interest during the marriage);

Trowbridge v. Trowbridge, 16 Wis. 2d 176, , 114 N.W.2d 129, 134-36 (1962) In this case the Wisconsin Supreme Court also upheld a division of a trust interest where the husband had to survive his mother and the mother could deplete the principal. This case used a distribution method "if and when received" which is similar to the Colorado pension decisions.

Other jurisdictions vary significantly when determining what interests constitute property subject to division in divorce proceedings. For a discussion of different approaches, see also Powell v. Powell, 577 A.2d 576, 580-82 (1990) (holding that, despite earlier ruling that nonvested and vested pensions were marital property, increase in value of vested trusts subject to divestment was not marital property).

If one of the spouses forms a revocable trust the assets will be included as part of the marital assets on divorce. The grantor of the trust is treated as the owner of the Trust. Irrevocable trusts may be marital property in some circumstances but not others.

See In re Marriage of Jones and In re Marriage of Rosenblum.

An irrevocable discretionary trust was considered marital property in the case of Kaladic v Kaladic 589 P.2d 502 (Colo. App. 1978)because it was held to be a colorable transaction. In this case the principal issue raised was whether the court had jurisdiction to reach the trust assets and require a conveyance of a portion of them to the husband. The court held that it had such power and properly exercised it in this case. It also held that, under the circumstances present here, the court had jurisdiction to order the trustee to make payments from the trust to the husband.

Here, the conveyance of marital assets by the wife into an irrevocable, discretionary trust without her husband's knowledge was properly set aside by the trial court. The Court held that the conveyance was illusory and fraudulent as against Husband’s rights. The trust assets were subject to division as marital property under C.R.S. section 14-10-113(1), and the trustee held those assets as an equitable trustee. See Page v. Clark, 40 Colo. App. 24, 572 P.2d 1214 (1977).

The IRS defines the grantor as the person or corporation who actually provides the trust with its funds, even if he names a third party as grantor. The burden of proof is on the grantor to show that he did not supply the funds.

C.R.S. 15-2-102 (1997) defines a power of appointment in the following terms.

(1) A power of appointment is any power other than a power held in a

fiduciary capacity created or reserved by any person, institution, or

corporation having property subject to its disposal, enabling itself or another to designate, within such limits as it shall prescribe, the appointees of the property or of any right, interest, or estate therein or the shares in which it shall be received. A power of appointment shall include all powers which are in substance and effect powers of appointment regardless of the language used in creating them.

(2) A power to consume, invade, or appropriate property for the benefit of the donee of the power, which power is limited by an ascertainable standard related to the health, support, education, or maintenance of the donee, shall not be deemed a power of appointment.

(3) The donor of a power of appointment is the person, institution, or

corporation who or which creates or reserves the power of appointment.

(4) The donee of a power of appointment is the person, institution, or

corporation in whom or in which the power of appointment is created or

reserved.

(5) The objects of a power of appointment are those persons, institutions, or corporations among whom the donee is given the power to appoint.

(6) The appointees of a power of appointment are those persons,

institutions, or corporations to whom property or any right, interest, or

estate therein is appointed by the donee.

(7) The takers in default of appointment are those persons, institutions, or corporations who will receive property not effectively appointed.

C.R. S. section 15-2-103classifies powers of appointment as follows:

(1) A general power of appointment is a power of appointment which is exercisable in favor of the donee, his estate, his creditors, or the creditors of his estate.

(2) A special power of appointment is any power of appointment which is not a general power of appointment.

(3) A power of appointment by will is any power of appointment which, being created or reserved in an individual, may be exercised by the donee only by will or by other instrument which by its terms or by law takes effect only at death.

(4) A power of appointment by deed is any power of appointment which is not a power of appointment by will.

A person may be considered as holding a power of appointment if they have the power to revoke and revise the trust.

Under Internal Revenue Code section 2041, if the decedent is found to possess a lifetime general power of appointment the trust assets are included in the decedent’s taxable estate. Under CRS section 15-11-201(2)(b)(I)(A), a lifetime general power of appointment is included in a decedent’s augmented estate for purposes of calculating a spouse’s elective share rights.

The Colorado Courts have not specifically decided on the characterization of a trust as property or otherwise where a spouse has a lifetime power of appointment over a trust

A power of appointment is not considered property as can be seen from the Rhoadharmer case discussed below.

University National Bank, v. Rhoadarmer 827 P.2d 561; (1991 Colo. App.)

This case concerned the garnishment by the bank of property which was subject to a power of appointment. The court concluded that because a power of appointment is not property or a property right, such power is not a garnishable asset under C.R.S. section 13-54.5-103(2).

The Court considered whether the funds to which the beneficiary was entitled upon written request, but for which no such request had been made, were in fact her property, merely held by the trust.

The Court stated the following:

When a donor gives to another the power of appointment over property, the donee of the power does not thereby become the owner of the property. Shattuck v. Burrage, 229 Mass. 448, 118 N.E. 889 (1918). Rather, the appointed of the power, in its exercise, acts as a "mere conduit or agent for the donor." Holzbach v. United States Bank, 216 Va. 482, 219 S.E.2d 868 (1975). The appointee, having received from the owner of the property instruction as to how the power may be utilized, possesses nothing but the authority to do an act which the owner might lawfully perform.

Thus, title to property over which the appointee has power remains in the donor until altered by the exercise of the power within any limitations set out by the donor. Here, Virginia Harsh could have exercised her power of appointment, by written request, to alter title to the subject funds, thereby removing them from the Trust and vesting title in herself. She did not do so, and the power retains the character of an offer which has not been accepted. And, "until accepted, the person to whom the offer is made has not, nor can he have, the slightest interest in, or title to, the property." Gilman v. Bell, 99 Ill. 144 (1881).

In the case of In re Marriage of Rosenblum 602 P.2d 892 Colo App 1979, a divorce action, the court held that the husband's rights in trust assets were not property subject to division and that the appreciation in value was not marital property. However, the court stated that the husband's rights in the trust were to be considered by the trial court as an economic circumstance of the husband in determining a just division of the marital property and as a relevant factor in making an award of maintenance.

The irrevocable trust had been funded with $200,000 worth of stock and was worth approximately $ 3,500,000 at the time of the trial court hearing. It had been created by the husband's mother during the parties' marriage as a gift to the husband and such of his issue as might be living at the time of each distribution.

The trust provided that the husband and his sister were co-trustees; that the trustees were authorized to distribute all, none, or any part of the net income and principal to any of the beneficiaries; that so long as the husband was a trustee, income or principal could not be distributed to him in excess of that necessary for his health, education, support, or maintenance; that no beneficiary should have the power to enforce the payment of principal or income to himself or any other person; and that on the husband's death the trust assets were to be divided into separate trusts, one for each child living and one for the issue of a deceased child, with none of the assets going to the husband's estate.

Although the trial court had found that the husband had handled all the trust transactions, that the co-trustee had acceded to his decisions, and that he had borrowed money from the trust without interest and without the formality of promissory notes, the trial court had held that the trust was not marital property. However, the trial court had held that the husband's interest in the increase in the value of the trust assets was marital property and, finding that the wife was entitled to one-half of the husband's share of the increase, had directed the husband to pay the wife $ 500,000 in $ 100,000 annual installments.

The appellate court noted that the effect of the trial court order was to require an invasion of the trust assets for the benefit of the non-beneficiary wife.

In support of its conclusion that the husband's rights in the trust were not property subject to division, the court declared that where a trust permits the trustees to distribute to a beneficiary so much, if any, of the income and principal as they in their discretion see fit to distribute, a beneficiary has no property interest or rights in the undistributed funds.

The court added that although a beneficiary of such a discretionary trust does have rights therein, those rights are merely an expectancy and do not rise to the level of property.

The court emphasized that the husband's rights in the trust had no cash surrender, loan, redemption, or lump-sum value, and no value realizable after death and noted that neither the corpus nor the income of the trust could be reached by his creditors until a distribution occurred.

The court reversed the trial court judgment and remanded for a new trial on disposition of assets and liabilities and on maintenance.

Kaladic v Kaladic 589 P.2d 502 (Colo. App. 1978). The principal issue raised by this appeal was whether the court had jurisdiction to reach the trust assets and require a conveyance of a portion of them to the husband. The court held that it had such power and properly exercised it in this case. It also held that, under the circumstances present here, the court had jurisdiction to order the trustee to make payments from the trust to the husband.

Here, the conveyance of marital assets by the wife into an irrevocable, discretionary trust without her husband's knowledge was properly set aside by the trial court. The Court held that the conveyance was illusory and fraudulent as against Husband’s rights. The trust assets were subject to division as marital property under C.R.S. section 14-10-113(1), and the trustee held those assets as an equitable trustee. See Page v. Clark, 40 Colo. App. 24, 572 P.2d 1214 (1977).

In re Marriage of Jones 812 P.2d 1152 (Colo 1991).

In this case the Court held that the beneficiary in a discretionary trust has no contractual or enforceable right to income or principal from the trust and has no vested 'property' right to receive payment from the trust.

The Court found that a trust that grants a non-discretionary benefit is different, even if the benefit is uncertain. Therefore a discretionary trust corpus cannot be considered separate property of the beneficiary for purposes of division of property.

Income from the trust was not 'marital income' subject to division since it was neither from marital nor separate property because the trust was not the wife's property at all. Therefore income from the trust was a 'gift' and not divisible at all. Wife’s expectancy interest in the trust should be considered an economic circumstance in determining an equitable distribution of property. Judge Quinn in dissent would have found a property interest in the trust.

In discussing discretionary and non discretionary trusts the court stated:

In re Marriage of Footit 903 P.2d 1209 (Colo. App.1995)

In this case the parties actually stipulated that the Trust was separate property. The Court found that income on separate property is marital property.

University National Bank, v. Rhoadarmer 827 P.2d 561; (1991 Colo. App.)

This case concerned the garnishment by the bank of property which was subject to a power of appointment. The court concluded that because a power of appointment is not property or a property right, such power is not a garnishable asset under C.R.S. section 13-54.5-103(2).

The Court considered whether the funds to which the beneficiary was entitled upon written request, but for which no such request had been made, were in fact her property, merely held by the trust. The Court stated as follows:

When a donor gives to another the power of appointment over property, the donee of the power does not thereby become the owner of the property. Shattuck v. Burrage, 229 Mass. 448, 118 N.E. 889 (1918). Rather, the appointed of the power, in its exercise, acts as a "mere conduit or agent for the donor." Holzbach v. United States Bank, 216 Va. 482, 219 S.E.2d 868 (1975). The appointee, having received from the owner of the property instruction as to how the power may be utilized, possesses nothing but the authority to do an act which the owner might lawfully perform.

Thus, title to property over which the appointee has power remains in the donor until altered by the exercise of the power within any limitations set out by the donor. Here, Virginia Harsh could have exercised her power of appointment, by written request, to alter title to the subject funds, thereby removing them from the Trust and vesting title in herself. She did not do so, and the power retains the character of an offer which has not been accepted. And, "until accepted, the person to whom the offer is made has not, nor can he have, the slightest interest in, or title to, the property." Gilman v. Bell, 99 Ill. 144 (1881).

In re Baum 22F.3^rd 1014 (10^th Cir. 1994).

In re the Marriage of Smith 891 P.2d 522; 1995 Mont.

The wife was the beneficiary of two trusts, the court found that the Husband had failed to demonstrate that his actions in any way maintained or increased the value of the corpus of the trusts. The court also found that Husband never had any contact with the corporate trustees, regarding any aspect of the trusts, did not contribute anything to the trusts, and no marital monies were ever contributed to the trusts. The Court concluded that these findings demonstrated that Husband made no contribution to the trusts and he was awarded no part of them.

In Lynch v Lynch 522 A. 2^nd 234 (Vt.1987) the Court held that a right to revoke a trust caused the trust to be "property" for purposes of equitable division of property on dissolution of marriage.

(1979) 265 Ark 170, 578 SW2d 10

In this divorce action, the court rejected the wife's contention that she was entitled to one-third of the corpus of a testamentary trust of which the husband was the beneficiary. The trust was established by the will of the husband's great-aunt and provided that the trustee should pay the husband $ 200 per month until all funds had been dispersed and that if additional money was needed for an emergency, an additional amount could be paid on the approval of certain individuals.

Noting that a state statute provided that where a wife is granted a divorce she was entitled to one-third of the husband's personal property, the court said that the issue was whether the corpus of a testamentary trust was personal property of the beneficiary of the trust. The court pointed out that the husband was not entitled to the corpus during his lifetime unless it was exhausted by the monthly payments to him and that the husband could not dispose of the assets of the trust.

The court stated that it presumed that the payments to the husband had been used for family purposes during the marriage and noted that the husband's monthly income from the trust was apparently considered by the trial court in setting the amount of child support.

The court said that it had reviewed the cases cited by the wife and had not found any that treated a contingent interest in an estate as subject to division under the state statute.

In Loeb v Loeb (1973) 261 Ind 193, 301 NE2d 349, a divorce action, the court, affirming the trial court judgment, rejected the wife's argument that the husband's remainder interest in a trust should have been included in the trial court's property settlement award.

During the parties' marriage the husband's mother had created a trust that provided that the net income was payable to her during her lifetime; that on her death the principal and any undistributed income should be paid to the husband and his two sisters; that if any of the principal beneficiaries did not survive the mother, then his or her share should be paid to his or her issue; and that if a deceased principal beneficiary did not leave issue, his or her share should go to the remaining principal beneficiaries.

Although the court stressed that the central question was not whether the interest was vested or contingent, but whether the future interest was so remote that it should not have been included in the property settlement award, the court determined that the husband was granted a vested remainder subject to a condition subsequent. The court noted that his interest was subject to complete defeasance if he should predecease his mother.

In support of its conclusion that the remainder should not have been included in the property settlement award, the court pointed out that under the terms of the trust agreement the husband had no present interest of possessory value, stressing that if he should predecease his mother he would take nothing, that the beneficiaries reaped no income while their mother was living, and that the trustees had no authority to invade the corpus during the mother's lifetime.

In Sayer v Sayer (1985, Del Sup) 492 A2d 238, a divorce action in which the wife's interest to income from a testamentary trust established by her grandfather's will vested during the marriage, the court held that the trust income acquired subsequent to the divorce was nonmarital property and not subject to division between the parties.

Noting that a state statute provided that all property acquired by either party subsequent to the marriage was presumed to be marital property regardless of whether title was held individually or by the parties in some form of coownership, the court, relying on Frank G. W. v Carol M. W. (1983, Del Sup) 457 A2d 715 (this section), stated that the term "acquired" meant the actual receipt or the right to presently receive trust income.

The wife's grandfather had executed a will establishing four separate trusts for the benefit of his children. On the grandfather's death each child, including the wife's father, was to receive trust income for life. On the child's death, his or her share would be held for the benefit of that child's surviving issue, who would also be entitled to income for life. The wife's father had died during the marriage. The court noted that since the trust's continued existence depended on certain measuring lives specified in the grandfather's will, the wife had no right to receive any part of the corpus during the marriage and that this could be the case for the remainder of her life. The court reversed the trial court judgment on other grounds.

In Trowbridge v Trowbridge (1962) 16 Wis 2d 176, 114 NW2d 129, the court held erroneous a divorce judgment transferring to the wife 30 percent of the husband's interest in a trust administered in Illinois. However, the court directed the trial court to make provision in the judgment requiring the husband to transfer to the wife or her heirs, legatees, or assigns 30 percent of any funds received by him from the trust and such auxiliary provisions as deemed appropriate that would make the order effective.

In support of its holding that the trial court had erred making an involuntary transfer of a 30 percent interest in the trust to the wife, the court stated that a court should not attempt to transfer by decree a beneficiary's interest in a trust located in another state where the efficacy of the transfer under the laws of the other state were subject to as much doubt as in the present case.

The court noted that in the present case the trustees, a bank and the husband's mother, were not parties to the divorce action; that the corporate trustee was in Illinois and apparently had possession of the securities evidencing the trust assets; and that the judgment purported to make a present transfer of an interest in the trust res. The husband's father, apparently a Wisconsin resident when he executed his will and when he died, left virtually all of his property in trust. He apparently died while the parties were married.

The trust was administered by the trustees under the supervision of an Illinois probate court, where the will was admitted. Under the trust the husband's mother, age 80, was entitled to the net income as long as she lived; she was entitled to withdraw from the trust principal $ 5,000 a year on a certain contingency (which appeared to have occurred); the bank was authorized to pay her out of principal such additional amounts as it deemed necessary or advisable for certain purposes; if the husband survived his mother, he would be entitled to the balance remaining in the trust; and if the husband did not survive his mother, the trust was to continue for the benefit of his issue. The value of the trust at the time of trial was $ 62,351. The trust contained a spendthrift clause that the trust funds should not be liable for any claim for alimony or for the support of any spouse. The court reversed the trial court judgment and remanded the cause.

628 A.2d 608 (Conn. App.Ct. 1993.)

In this case the the trust instrument confered on the defendant a limited power to appoint, during his lifetime or by his will, all or any part of the trust principal for the benefit of the plaintiff or his three brothers or any of them during the initial period. The trust instrument expressly provided that no interest in the trust, while in the possession of the trustee, shall be subject to the debts, contracts, liabilities, engagements or torts of any beneficiary. The Paula Trust was still in its initial period.

The trial court refused to order that the plaintiff share in the appreciation of the Paula Trust. The court found that, under article eleventh of the trust instrument, the Wife ceased to be a beneficiary upon the filing of this dissolution action, and, therefore, the defendant's limited power to appoint to her had ceased. General Statutes gaves the trial court the power in a dissolution action to "assign to either the husband or wife all or any part of the estate of the other." A limited power of appointment was not a part of the marital estate that can be awarded in a dissolution action, however. The Court defined a power of appointment as follows:

"A power of appointment is a power of disposition given to a person over property not his own by some one who directs the mode in which that power shall be exercised by a particular instrument. . . . The donor does not vest in the donee of the power title to the property, but simply vests in the donee power to appoint the one to take the title. The appointee under the power takes title from the donor, and not from the donee of the power. . . . The ultimate beneficiary really takes from the person who created the power, the donee of the power acting as a mere conduit of the former's bounty." (Citations omitted; internal quotation marks omitted.) Linahan v. Linahan, 131 Conn. 307, 324, 39 A.2d 895 (1944).

Under the terms of the Paula Trust, the defendant was the donee of only a limited or nongeneral power of appointment. "(1) A power of appointment is general if it is exercisable in favor of any one or more of the following: the donee of the power, the donee's creditors, the donee's estate, or the creditors of the donee's estate. (2) Any other power of appointment is a nongeneral one." 2 Restatement (Second), Property @ 11.4 "Donative Transfers" (1986). "As a matter of both common law doctrine and the practicalities of the situation, the donee of a nongeneral power is not the owner of the appointive assets. The donee is in a fiduciary position with reference to the power and cannot derive personal benefit from its exercise. The donee's creditors have no more claim to the appointive assets than to property which the donee holds in trust. It is immaterial whether or not the donee exercises the power." Id., @ 13.1, comment (a).

The situation differs where the donee possesses a general power of appointment. "Where . . . a general power has been created, the donee is substantially in the position of an owner." Id. Because the defendant, having only a limited power of appointment, had no interest, beneficial or otherwise, in the appointive assets of the Paula Trust, no portion of those assets could be included in the marital estate.

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