Finding a compromise with a soon-to-be-ex-spouse is not always easy - even more so when financial assets are involved. When uncontested divorce is not an option for either party, it is the court that will decide on the division of marital assets.
Whether you are negotiating an amicable settlement or gearing up for a more complex negotiation, this guide provides all the information you need to know about asset division in Colorado.
How Are Assets Divided in Colorado Divorces? Laws and Implications
In Colorado Divorce Law, the operative term is "fair and equitable" when it comes to asset division. However, the above term does not mean a 50/50 split of assets and debt in every case. In a legal sense, "fair and equitable" takes into account the unique circumstances of each spouse, as well as how the marital assets and debts were accumulated.
The above rule pertains to:
- Marital property — all assets, jointly acquired, during the duration of the marriage.
- Marital debt — debt accrued by either spouse in the course of the marriage.
Additionally, local courts also take into consideration any specific arrangements, documented in a prenuptial agreement. For example, your prenup can specifically state how private assets (such as real estate, purchased outside of the marriage) will be treated or if you are entitled to some assets after being married for a certain number of years.
The above provisions of Colorado divorce law on division of assets are codified in the Colorado Revised Statutes Sections 14-10-113: Disposition of (Marital) Property in Dissolution or Legal Separation.
The Three Common Scenarios of Divorce Asset Division in Colorado
In a perfect world, divorce proceedings would be quick, tension-free, easily negotiable, and fair to both spouses. Fortunately, it is possible to come to a settlement that both parties feel is fair. However, getting there may take time and may be fueled by emotions that could make it harder to have an amicable parting of ways.
For many Colorado couples, one of the greatest areas of contention while working through divorce proceedings is the asset division phase. Conditionally, the asset division process goes through three stages.
1. In-Person Negotiations
First, both parties can sit down and divide up all the assets and debts. The reached agreement is signed by both spouses and becomes a part of the divorce decree. This is the best-case scenario as it avoids litigation.
It also makes sense to engage a divorce attorney in this stage that would act as a neutral party to explain the implications of your decisions. For example, they can help with navigating complex matters such as what to do if both spouses are listed on the mortgage. Lenders have little interest in the details of one's divorce decree. Unless the spouse who stays in the home is willing and able to refinance on their own, the other party could be effectively "stuck" on the mortgage. This can make future home purchases difficult.
If the parties cannot agree on fair asset division, the next step will be to use a divorce mediator who will facilitate the negotiation process. In terms of costs and emotional toll, mediation is the next best solution you can pursue.
For example, a mediator can help you agree on who stays at home and what compensation the other party is entitled to for their share of the equity held within the property. They can help find a professional appraisal to assist with the evaluation and then create a legal agreement for the follow-up steps.
Read more about what you should expect during divorce mediation.
3. Court Appearances
Finally, if the parties still cannot agree, they must go through litigation. In this case, the court will make the division determination, and the resolution will involve attorneys’ fees and court costs. Understandably, this asset division scenario in Colorado is the most contentious, costly, and emotionally draining.
What Happens When the Court Steps in for The Division of Assets
Remember, the "fair and equitable" approach used in Colorado does not mean equal. The court will consider the following circumstances when making the decision:
- The individual financial status of each spouse. For example, during the marriage, one spouse may have been the primary provider of income, while the other stayed at home or earned a much lower income. This will figure into any division.
- Increases (or decreases) in shared assets and debt during the marriage. Such cases can get very tricky. For example, suppose one spouse inherited a sum of money and placed it in a separate account. The other spouse, however, also made deposits into that account. Or the investment from an inheritance resulted in an increase in that asset during the marriage. In such instances, seeking a qualified legal assistant will be highly valuable to help detangle comingled finances.
- When one parent gets custody of the children, that parent may wish to retain the family home. The court will then require to determine what portion of that home’s equity should belong to the non-custodial spouse.
- Was there a dissolution of separate property during the marriage for the sake of that marriage? For example, suppose one spouse cashed in a separate premarital retirement asset for the couple to meet other financial obligations? What is fair for that spouse now? That ruling will be made by the courts as well.
In general, the court will have to decide to separate marital assets and debt and make decisions accordingly. In the course of litigation, a judge will assign a value to all assets and liabilities before deciding on fair and equitable division.
Sample Asset Division Calculation in Colorado Divorce
The previous section's high-level explanation may sound a bit confusing, especially when you are trying to work out an amicable marital asset division scenario. So the easiest way to approach matters is to create a simple divorce asset division worksheet and work with it.
Outlining Your Assets
First, create five separate categories of jointly-owned assets. These include:
- Real estate — your home (primary residence), vacation or rental properties, land, business properties, etc.
- Personal property — any personal items of value such as cars), artwork, furniture, and other items you deem of value.
- Financial assets — checking, savings, and investment accounts, retirement and pension funds, mutual funds, bonds, stocks, trusts, etc.
- Debt — mortgage, student loans, credit card, and consumer debt.
- Business assets and liability — property, cash, interest, and liabilities on your business balance.
For each category, create an estimated total asset value. Separately, spell out your contribution. For example, if you made a bigger house downpayment from your personal funds, note how much. Also, provide details if you’ve both contributed to the mortgage in equal amounts.
LegalZoom provides a free printable asset and debt vision worksheet you can copy and fill in before meeting with an attorney.
Calculating the Division of Assets
Next, let’s take a look at how to calculate the division of assets in a divorce. Once you have an inventory and some numbers, let’s do the math. As an example, let’s use a simple scenario where a couple owns the following assets:
- Husband (J.): Family home.
- Wife (K.): Car. Vested company stocks.
1. Do an Asset Valuation
The first step is to determine which of the assets are marital. In this case, K. received company stocks while being married, and other purchases were made jointly too. So all three qualify as marital property:
- Home: $250,000
- Family car: $25,000
- Company stocks: $100,000
2. Calculate the Net Values
The next step is to determine the net value of the property:
- Home: $250,000 - $50,000 left on mortgage = $200,000
- Car: $25,000 - $5,000 left in credit = $20,000
- Vested stocks: $100,000
The total net value of marital assets: $320,000
|Asset Value||Subtractions||Net Value|
|Home: $250,0000||- $50,000 (the amount left on the mortgage)||$200,000|
|Car: $25,000||- $5,000 (amount left on the loan)||$20,000|
|Vested stocks: $100,000||$100,000|
|TOTAL NET VALUE OF MARITAL ASSETS||$320,000|
3. Factor in Individual Contributions
The family home was purchased with the money J. inherited from the family. He put a downpayment of $80,000. Afterward, they equally contributed to the mortgage.
So in this case, applying a deduction will be fair.
- $200,000 - $80,000 = $120,000 in value that is up for division.
The family car, however, was purchased with joint savings. The loan is in K.'s name, but monthly payments come from a joint account. So the value for division remains the same. K. also has vested stocks to her name, valued at $100,000. Since she acquired them during the marriage, these are considered marital property. The couple agrees to share stock holdings on a 40/60 basis.
4. Make a Total Tally
Now let’s calculate how much each spouse should get after the divorce.
- Value to divide for the house: $120,000. The wife is entitled to half of this amount: $60,000.
- Value to divide for the car: $20,000. The husband is entitled to half of this amount: $10,000.
- Value to divide for vested stocks: $100,000. The husband agreed to 40% of this amount.
Respectively, the husband owes the wife $60,000. The wife owes him $10K+$40K =$50K total. So it follows that the husband can pay the wife back $10,000. The wife will then not owe him anything. Based on the above figure, the couple can further decide if K. can keep the car and her stocks, while J. gets the house and pays her $10,000 in cash. Or choose an alternative arrangement.
The above is a simple example. If you’d like to run more advanced scenarios that also include debt division, you can try this division of assets in this divorce calculator by Avvo.
The Best Way to Approach Asset Division
Even if you and your spouse are amicably dividing up assets and debts, you still risk an agreement that is not fair and equitable. You need to have an attorney on board to review any arrangements you have so that you can be confident that your best interests are being protected.