Mountain Law: How is property divided in a divorce?
January 2, 2014
How is property divided when a marriage (or civil union) is dissolved in Colorado and the parties can't agree?
Preliminarily, Colorado distinguishes between separate property and marital property. Generally speaking, separate property is property that each party owns at the time of the marriage and marital property is property acquired during the marriage. There are exceptions to this general rule, including the following:
• Separate property includes property received by gift or inheritance during the marriage and property for which separate property was exchanged during the marriage;
• An increase in value of separate property during the marriage is considered marital property (e.g., the value of a retirement account owned at the time of the marriage may be separate property, but its increase in value may be marital property). A decrease in value of separate property is immaterial except as a factor for the court to consider;
• Property acquired while parties are legally separated is separate property;
• Social security benefits are separate property and cannot be divided in a dissolution even if the parties agree;
• The parties may agree to exclude certain property from the marital assets such as through a valid prenuptial agreement.
Unless the parties have agreed otherwise, separate property remains separate. So, a divorce judge will begin by identifying the property that is separate and set it aside to each party.
The divorce judge will then divide the marital property based on what the judge considers fair. There is no requirement that the division be equal. Colorado statutes identify a number of factors for the judge to consider in making the determination, which include, but are not limited to, the contributions of each spouse to the acquisition of the assets, including that as a homemaker; the value of the separate property set aside to each party; the economic circumstances of each spouse at the time of the property division; the desirability of awarding the family home or its use for a reasonable period of time to a party having the custody of minor children; any increases or decreases in the value of a party's separate property that occurred during the marriage; and the depletion of separate property (e.g., an inherited bank account) for marital purposes. In dividing the property, the court will assign both assets and debts to the parties.
Those are the basics, but, of course, the details can get more complicated. Let's illustrate with the issue of retirement benefits. First, if they are nonvested and unmatured at the time of the dissolution, are they property to be divided? The answer happens to be yes per court decisions, but the question of whether a given thing is actually property to be divided has been asked of nearly every kind of intangible asset with different outcomes.
Second, what is the value of the benefits for purposes of the divorce? The court may determine the present value of the benefits based on the opinions of experts hired by the parties, or the court may simply award each party a percentage of the benefits with the value to be determined at the time the benefits become vested and matured.
Third, if the court decides to split the benefits, how will the parties direct the employer what to do? This is often accomplished using a special document called a Qualified Domestic Relations Order (QDRO), which must meet certain requirements. Similar considerations as illustrated here play out for every type of marital asset.
In brief, property is divided in a divorce based on the nature of the property and the facts and circumstances of the case. Where matters cannot be resolved amicably and end up before the judge, it often proves the adage that love is grand and divorce is a hundred grand.
Noah Klug is the owner of The Klug Law Firm, LLC, in Summit County, Colorado. His practice focuses on business, real estate, and litigation. He may be reached at Noah@TheKlugLawFirm.com or (970) 468-4953.
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