Do losses offset gains for Marital Appreciation purposes?

On January 17, 2013 the Colorado Court of Appeals announced its decision In re Marriage of Krejci.  The court cited In re Marriage of Powell, a case this office handled, to discuss the grouping of assets under the umbrella of a larger asset to determine whether marital appreciation had occurred.  Would losses in some parts of the umbrella asset offset gains in another part? Ever since In re Marriage of Burford (1997), the Colorado Courts have held that losses in one separate asset cannot offset appreciation in another separate asset.  But when a party has an account, such as an IRA, which is composed of many smaller assets such as stocks that are regularly traded, should the court treat that account as one asset?  Or should the court only count the stock gains and disregard the stock losses in the account?

In Powell, the facts allowed us to argue for the court to treat the IRA as one asset and not a collection of smaller assets.  In Krejci, the wife was unsuccessful in trying to link various liquid accounts under an umbrella “inheritance asset”.  This resulted in a much larger marital estate to be divided by the court. As with everything else in family law, the facts and how they are presented, drives outcomes.  Using business entities to hold assets may offer increased protection.  Having a prenuptial agreement may offer the best protection.