Property Division in a Colorado Divorce
Colorado Revised Statute 14-10-113 deals with how the Court has to review property when entering orders on a divorce or legal separation. Basically, the starting point in a divorce is that property that you or your spouse acquired during a marriage is marital. There are exceptions to this, for example inheritances that either party received during a marriage and kept separate or property that a spouse owned prior to a marriage and didn’t “gift” to that marriage or property that a spouse obtained by using other separate pre-marital property. “When a spouse places separate property in joint ownership during the marriage, a presumption that the donor spouse intended a gift to the marriage arises; the gifted property is presumed marital absent clear and convincing evidence to the contrary.” In re Marriage of Krejci, 297 P.3d 1035, 1037 (Colo.App. 2013), see also In re the Marriage of Stumpf, 932 P.2d 845 (Colo.App. 1996). What this means is that when a spouse does have separate property before the marriage or receives separate property during the marriage, if he or she puts the property in both names, the presumption is this is all now marital property during the divorce. So if a spouse wishes to keep an inheritance separate from the marital property, it’s important not to add the other spouse to the title, account, etc. The question isn’t is the property titled in someone’s name or is the account in someone’s name, the real question is when and how the property was obtained.
Even when property has been kept separate from the marital estate, if it has increased in value during the marriage, that increase in value is considered to be marital property, C.R.S. 14-10-113(4). Particularly with shorter term marriages, this may be crucially important in determining a fair distribution of property. Parties to a case who had assets prior to marriage need to request statements on the property to determine what the value was prior to the marriage as well as the current value to argue for exclusion of the premarital portion. If the property is real estate, look the property up on the county assessor’s website. While this isn’t a wholly accurate gauge of value, it at least provides a starting point to figure out how much the property may have increased in value during the marriage. An appraisal and request for an expert to determine the value prior to the marriage (or when the property was acquired if that occurred during marriage and it does fall within the exceptions as separate property) may also be helpful.
The often hidden and neglected property in a divorce are the retirement accounts of the parties. Thanks to early withdrawal penalties retirement accounts are often the only large assets left to divorcing spouses in today’s economy. Retirement accounts work on the same principals as other property and can get very complicated, particularly when 401(k)s are rolled over when a party leaves one job for another. It is important to chart the retirement accounts over the course of the marriage to determine how much of the account can be deemed separate property. As these records can often take a long time to obtain a divorcing spouse should request pre-marital statements, roll over statements, and current value statements as soon as possible.
The Court “shall set apart to each spouse his or her property and shall divide the marital property, without regard to marital misconduct, in such proportions as the court deems just after considering all relevant factors…” C.R.S. 14-10-113(1). This means that, unlike spousal support and child support, there is no starting guideline formula to consider as to how the Court may divide property. Most courts do tend to look at dividing property fairly equally, making up for differences in future earning capacity, etc. through spousal support, but that certainly is not required and is not how the Court will always divide property and debts.
Lastly, it is crucial not just to consider how much to divide, but how to divide it. Divorcing spouses should always consult with a tax specialist about potential tax consequences of settlement agreements or Court orders on property. Retirement accounts should generally be divided through means that avoid penalties or tax consequences such as the use of Domestic Relations Orders (DROs) or Qualified Domestic Relations Orders (QDROs). Making provisions for the “how” of the division is just as important as making provisions for the “how much” of the division.