William Ellison

Aug 259 min read

How is property divided in a Colorado divorce?

What is equitable distribution in Colorado divorce?

Colorado law requires an equitable distribution of marital property in divorce cases. Equitable does not mean exactly mathematically equal. However in court, equitable distribution often means a near 50/50 division of marital property—though “near” can mean a difference of thousands or even tens of thousands of dollars.

The judge is supposed to consider the following factors found in C.R.S. § 14-10-113(1):

(a) The contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker;

(b) The value of the property set apart to each spouse;

(c) The economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse with whom any children reside the majority of the time; and

(d) Any increases or decreases in the value of the separate property of the spouse during the marriage or the depletion of the separate property for marital purposes.

Unless one spouse has significant separate property that cannot be divided by the Court, most judges divide marital property nearly equally. There are exceptions for property acquired in varying ways and the property being divided is only that qualifying as marital property. Marital property is generally property acquired during the marriage and the increase in value of separate property during the marriage.

Determining what is marital property and separate property

All property and debt acquired after the date of marriage is generally considered marital property with a few exceptions. The application of these nuanced exceptions are where attorney advice is beneficial—as the answer may not be clear.

The statute (C.R.S. §14-10-113(2)) states that “marital property” 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;

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

The most clear cut separate property is property is that can be proven to have been owned by one spouse before the marriage (meaning it wasn’t acquired during the marriage). However, the increase in value of separate property after the date of marriage is marital property subject to an equitable division. For example, one spouse may own a home prior to the marriage worth $400,000 at the date of marriage. If the home increased in value to $500,000 at the date of divorce, then $100,000 of the equity is considered marital property and $400,000 is considered separate property.

Separate property exceptions to property acquired during marriage include inheritance not commingled with marital property or gifts to one spouse. However, like pre-marital separate property, the increase in value of inheritance or gifts is considered marital property subject to an equitable division. For example, if one spouse inherits an asset worth $100,000 from a family member during the marriage and at the time of divorce that asset increased in value to $120,000, then $20,000 would be considered marital property and $100,000 is considered separate property. Determining the value of assets may require an appraisal by an expert.

Marital agreements (prenups) often seek to change the standard law to protect more property as separate property. If you executed a marital agreement, this must be closely analyzed if a divorce is impending to determine how it affects property division. If you don’t have a marital agreement and are contemplating divorce, it is too late to prepare one as they are not valid if divorce is already on the horizon.

The determination of marital property versus separate property is highly nuanced and often requires case law research by an attorney and analysis of titling of the assets involved.

The appreciation of separate property is marital value subject to division

The two examples above highlight the concept that appreciation in value of separate property during the marriage is considered marital property. This can be a confusing concept. On one hand the law states that something owned before marriage isn’t marital property. This would lead one to believe that if you own a house before marriage that’s your separate property with no risk in divorce. This is not the case. If that house increased in value, then that increase in value is considered marital property.

This is found in the statutes at C.R.S. §14-10-113(4): an asset of a spouse acquired prior to the marriage or in accordance with subsection (2)(a) or (2)(b) of this section shall be considered as marital property, for purposes of this article only, 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.

So does that mean you have to sell or somehow split the value of the house with your spouse? Usually no, unless the increase is so substantial you cannot compensate your spouse for their half of the marital value some other way.

Here’s an example: If a house is owned by only one spouse and has $300,000 in equity (that’s the value beyond any mortgage owed on it) at the time of marriage, but then holds $400,000 in equity at the time of divorce there is $100,000 in marital value at issue. Assuming an equal split, each spouse should received $50,000 of value from this asset in the divorce property division. (If you have deeded that house into your spouse’s name, you may have created marital property of all of its value and that’s a more complicated issue to discuss with an attorney.)

However, if it is still held in only one spouse’s name, then instead of selling the house to pay out the other spouse’s $50,000 share, we find that amount to shift to the spouse somewhere else in property division. Retirement accounts are a good asset to use to shift an extra $50,000 to the other spouse.

If there are absolutely no other assets to shift to the spouse to cover that $50,000, you could seek a cash-out refinance of the house to get those funds or propose an incremental property payout of the amount over time.

Proving Separate Property

The burden to prove that property is separate is on the party seeking to keep it separate. This means there can be some efforts necessary to locate documents that show something was owned before marriage and its value at that time. Houses sometimes require a retroactive appraisal to the date of marriage performed by a qualified appraiser. Pre-marital retirement accounts also present challenges in obtaining paperwork from plan servicers that have been bought by other businesses or have gone out of business.

Dividing Marital Property

As mentioned in the house example above, the solution to resolving a case isn’t dividing each piece of marital property in half. Instead, we look at what property you wish to keep and then present proposals that create an equal marital split. For example, if you want to keep a house with $300,000 in marital value, then you could propose your spouse receive $300,000 from retirement accounts to equalize the assets.

Assets Requiring Expert Evaluations

A number of assets are best valued by an expert appraisal. These include real estate, businesses, unique vehicles or collectibles, pensions and annuities. Expert appraisal expense can range greatly from about $750 for a typical house appraisal to upwards of $5,000 for business appraisals. Expert appraisals are also subject to very specific court rules making experienced attorney assistance necessary.

Retirement Asset Division in Divorce

Retirement division is one of the more complex aspects of asset division. Retirement division not only faces the scrutiny of Colorado law, but also federal law and the terms of each specific retirement plan. There are also many instances where retirement division is time sensitive after a divorce.

There are many questions encountered with retirement:

How much is the retirement really worth?
Is this type of retirement even divisible by the Court?
What sort of division is permitted by the retirement plan?
How will a Qualified Domestic Relations Order divide it?
What portion of the retirement value is pre-marital?

This is a highly nuanced area where experienced divorce attorneys provide a great benefit in negotiating a proper, workable settlement.

Physical Personal Property Division

Physical personal property is usually divided by agreement or an alternating selection process conducted between the parties. Courts basically never take an active role in dividing physical personal property. It is unfeasible for a judge to consider all the contents of a house an select who gets each items. The low value of most personal property does not justify the time expense to argue about it in court.

If we must get to that detail, physical personal property is usually considered in categories like “electronics” and “outdoor furniture.” Some higher dollar items like jewelry and offroad vehicles might be considered individually. You can request to be awarded a particular piece of personal property and if you are awarded it, the judge counts its value towards your share of property division.

Pet Division in Divorce

Pets are actually considered physical personal property in divorce. Colorado law lacks direction on how pets should be allocated otherwise. If both parties want to share a pet after divorce, we have found a solution in creating a pet visitation plan similar to a parenting plan for children. If parties disagree on who should receive a pet, it will have to be argued in court and judges are likely to consider who paid for the animal (especially if bought pre-marriage), and who is the most appropriate and bonded caregiver—though again, there’s not a law that says this, it’s generally considered under equitable division.

Dividing Marital Debt

Just as assets are marital or separate, so too is debt. If acquired during the marriage, debt is marital. Again, we don’t shift debt around 50/50. For debts in both parties’ names, we seek to use liquid assets to pay these off. For debts in just one party’s name, they keep that debt and are compensated from other assets for the share owed by the other spouse.

Debt paid off during the marriage is water under the bridge. So if you paid on a spouse’s student loan debt during the marriage when you had none, that’s irrelevant for property division.

Property Division Spreadsheets

Attorneys use Excel spreadsheets to calculate and propose who should receive what assets and debts in proposed property division. We call these property division spreadsheets. Most judges require that before a Permanent Orders Hearing the parties/attorneys collaborate to state their positions on a single Excel spreadsheet. Each judge may have different requirements for what they wish to see for a property division spreadsheet with requirements that appear in their Case Management Order or Pre-Hearing Order. The state judicial branch does not currently provide a form for this. Attorneys create their own spreadsheets.

What if one party has spent or wasted assets before or during divorce?

The spending or waste of assets by one spouse might be considered dissipation of assets. This requires proving one spouse is in economic fault for their actions. This is generally an uphill battle that’s difficult to prove. Courts are not supposed to consider any sort of fault in a marriage except potentially economic fault. They are reluctant to do even that.

Economic fault must be egregious for a judge to be inclined to factor it in. This usually needs to be more than just spending on shopping, alcohol, drugs, bad investments, and bad business decisions. It needs to be something clearly out of the ordinary for the marriage and almost nefarious in intent to harm the spouse. There’s a better chance if it was done after divorce was filed and served and can be shown to be a violation of the automatic temporary injunction.

Courts view the economic aspects of marriages similar to businesses. If you have a bad partner, you don’t get compensated for the general failures they caused in the business. You both suffered the financial consequences. This makes it important to take action to initiate divorce promptly if you become aware of negative financial behavior by a spouse that you cannot stop.

Litigation versus Settlement

A great distinction in how property is divided is whether a hearing is required or whether a settlement is negotiated. The parties have much more control of how property is divided in a settlement versus in court. Attorneys can come up with more creative solutions than a judge has legal ability or time to construct. Read more about the practicalities of settling a divorce out of court here.

Conclusion

Property division is the most nuanced part of a divorce case. There are issues not discussed here that are assessed by attorneys and deeper issues involved in each of the topics discussed above.