Division of the Marital Estate

Division of the Marital Estate

By Carl O. Graham

division of property, dividing house

Colorado is a marital property state, not “community property”. That means that the assets and debts acquired during marriage (i.e. the marital estate) should be divided equitably between the spouses upon dissolution of marriage, legal separation or annulment.

What is Marital Property?

Property acquired during marriage is generally marital property, regardless of how it is titled (with limited exceptions in cases of premarital or other separate property).

Marital property includes pretty much anything of value. Examples include:

  • Real estate equity
  • Bank accounts
  • Investments (stocks, mutual funds, etc)
  • Retirement accounts (IRA, 401(k), FERS, PERA, military retirement, etc)
  • Vehicles, RVs, etc
  • Personal property & household goods
  • Business interests
  • Pets
  • Stock options, frequent flyer miles, etc
  • Increase in value of separate property during marriage

Upon issuing a decree terminating a marriage, the court will divide marital property based upon the value at the time of dissolution, not separation.

A Colorado divorce court will divide the marital property equitably (almost always means equally), based upon the value on the day of dissolution unless the parties agree otherwise.

Factors for Equitable Division

The court’s division of marital property need not be exactly equal - just fair. In most cases, that will result in an equal division of the marital estate, but under C.R.S. 14-10-113(1) the Court will consider a variety of factors when determining a fair division, including:

  1. Each spouse's contribution to the acquisition of the property, including contributions as a homemaker
  2. Value of property set aside to each spouse
  3. Economic circumstances of each spouse at the time of the division, including the desirability of awarding the family home to the spouse caring for the parties' children
  4. Increases or decreases in the value of separate property during the marriage, or depletion of separate property for marital purposes.

Separate Property In General

Separate property is a surprisingly complicated concept. While one can point to a car, sofa, or painting, and say that one spouse owned it before marriage, so it is separate property, that's not the end of the analysis. How about a vehicle which was financed a day before marriage, and paid off completely during marriage? Or paid off partially?

While generally property which either spouse has brought into the marriage remains separate property as long as it is separately titled, it is more accurate to think of the net equity of an asset, not the asset itself, as this considers the paydown of any liens, and increase in value.

A spouse's separate property includes:

  • Property brought into the marriage by that spouse, and
  • Property one spouse receives during the marriage by gift or inheritance.

If the original property inherited has been invested or exchanged, the property thereby acquired remains separate property providing it can be traced, through a series of exchanges, to the original separate property. This can be extremely difficult if, e.g., one has an active stock portfolio which included constant reinvestments, splits, etc.

Titling separate property in joint names creates a presumption that the spouse who had the separate property intended to make a gift of it to the marital estate. This is one of the only instances where how property was titled matters for a divorce.

With respect to an increase in the value of separate property, consider this hypothetical

Pat owns a house at marriage worth $300,000, with a mortgage of $150,000. His separate property interest is the net equity, or $150,000.

Upon divorce, the house has appreciated to $500,000, and the mortgage has decreased to $100,000. The net equity is now $400,000.

The marital share is the increase in net equity, or $250,000 ($400,000 minus $150,000). So the spouse will receive the equivalent of half of that $250,000 marital interest, or $125,000, and the spouse whose house it is receives the other $275,000 of equity.

Dissipation of Marital Assets

Neither spouse may dissipate marital property once a party has filed for dissolution. Furthermore, if during the marriage one spouse improperly used marital property for non-marital purposes, a judge may "recapture" the value of that property into the marital estate. This means if one spouse improperly spent or wasted $100,000, the other spouse receives a $100,000 offset from the marital estate, before the remainder is divided.

It is rare to see dissipation cases, since the purchases made during the marriage, even if they only benefited one spouse, are presumptively marital. So generally, one spouse's trips to Vegas will still be considered marital. But if a spouse bought expensive presents for a mistress, those would obviously not be marital, and subject to recapture.

Appraisals

If the parties cannot agree on the value of a marital asset, they may get it appraised. This is done most often with real estate (either a comparative market analysis from a real estate agent, or a full-blown appraisal), antiques, and business interests. Sometimes even household goods have to be appraised! Attorneys will have names of appraisers they have used and trust, and hopefully both spouses can agree on the appointment of a joint appraiser.

The value of a business includes not only the "tangible" assets such as furniture and fixtures, but intangible assets such as accounts receivable, the value of work in progress, and "goodwill." Believe it or not, even a business with no assets has a value, as long as it generates a good revenue stream for its owner above what the owner could earn as an employee working for a third party.

Debts

Marital debts are those debts either spouse incurs during marriage, again without regard to whose name the debt is in. Debts are also allocated equitably in Colorado, which may result in an allocation which is equal, one where the higher income earner assumes a greater responsibility, or one where the party who incurred the debt incurs a greater responsibility.

More Information

Kelley Blue Book. Indispensable tool for calculating vehicle values.

Yahoo Finance. Find current and historical stock values.

Do You Need a Divorce Lawyer in Colorado Springs?

The family law attorneys at Graham.Law have years of experience helping clients through the Colorado legal system. We know Colorado family laws, inside and out, from divorce to legal separation, from annulments to military divorce issues. And we know how to divide marital assets & debts. For more information about our El Paso County family law firm, click on:

Colorado family law is all we do. Period.

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Assets & Debts