How is Property Divided in a Divorce in Colorado?

This is a very common question for those considering a divorce.  In short, there are many factors that may affect how property is divided in a divorce. Those include (but are certainly not limited to) whether the divorce will be amicable or contentious, whether an out-of-court settlement be arranged or be resolved in court, and whether there are children involved?

Regardless of the situation, an experienced divorce lawyer can assist you through the many complexities you will face.  My firm prides itself on making the complex easier to understand and will guide you through this process, starting with an initial free thirty-minute consultation and a transparent fee structure. I will represent you vigorously at the negotiating table or in court and will work hard in seeking for you a proper distribution of property under Colorado’s “equitable distribution” statute.

Understanding the Types of Property Involved in a Divorce

When people consider the term “property”, they generally think about their “stuff” – land, house, cars, furniture, and other items.  However, in addition to these “tangible” assets (assets that can be easily seen and used), there are other assets that constitute property that must be divided, including

  • Financial assets –money in savings, checking, and retirement accounts, as well as individual stocks, bonds,
  • Ownership of a business
  • Rights to intangible assets, such as future pension payments, rights to intellectual property (including copyrights and patents), rights to other specified future payments (including lottery winnings), and rights in lawsuits (such as the right to receive compensation in a lawsuit that may be in the process of litigation).

In dividing property in a lawsuit, all types of property must be considered, and the future ownership of such property must be determined.

What is the Difference Between Marital Property and Separate Property? How are the Two Types of Property Treated?

Under Colorado law, property is divided into two main categories:  marital property and separate property.   Separate property typically includes property acquired prior to the marriage and marital property includes property acquired during the course of the marriage. There are some exceptions.  For example, property acquired through gift or inheritance to only one spouse may be considered separate property, even if it was received during the marriage.

Will Assets Acquired Prior to Marriage be Considered “Marital Property” in Colorado?

Maybe.  Property acquired prior to marriage is generally considered separate property -.  For example, a home or vehicle acquired prior to the marriage might not be considered a marital asset if title has not been changed to include both spouses, and there are no other indications of a desire to make the property jointly owned.

However, the courts may find that an asset has been “converted” to a martial asset under certain circumstances.  In the case of a house, if the spouse who did not originally purchase the home contributes to mortgage and tax payments and other expenses required for upkeep, a court may find that the non-purchasing spouse acquired at least some rights in and to the property.  Additionally, if the home is refinanced and both spouses are now responsible for the mortgage, that too may lead the court to find the house has been converted to a martial asset.  As noted above, changing title to the home can likewise have an effect.

Is an Inheritance a Marital Asset in Colorado?

The original value of an inheritance is generally not considered a martial asset in Colorado – at least not initially.  However, if the inheritance is “commingled” (put in with) martial property (such as being placed in a joint bank account or used to purchase joint personal property, such as a car), the inheritance will likely become a marital asset and subject to equitable division between the spouses.

Are Gifts to Only One Spouse Considered a Marital Asset?

Property acquired as a gift to only one spouse during the marriage is likely separate property. As with assets acquired before the marriage and inheritances, gifts to one spouse can also become marital property; typically, as a result of the gift being sold and the resulting assets commingled (such as the sales proceeds being placed into a joint bank account).  Of course, a gift given to both spouses would be marital property.

Is Appreciation on an Inheritance or Gift Considered a Marital Asset?

Although the initial amount of the inheritance or gift will not likely become a marital asset if it remains segregated, gains on the inheritance or gift will be treated as a marital asset, even if such amounts are kept in a segregated account.  Thus, if the inheritance funds are placed into a separate stock investment account, and the account realizes gains over the years from stock appreciation, the amount of the appreciation is likely a marital asset, since the gains will have accrued during the marriage.

The determination of what constitutes a marital or separate asset can be complex and fact-specific.  Once I know more about your circumstances, I can advise you how the law is likely to apply to your circumstances.

How will the Marital Property be Divided?

Colorado courts must divide property in an equitable manner that is “equitable” (fair) to both parties. This means that the division may not necessarily be equal or a “50-50 split.”

In dividing the marital property, the courts are guided by several factors:

  • How much each spouse contributed to the acquisition of the marital property. It is important to note that the contribution of a spouse who acts as a homemaker or child-care provider while the other spouse works outside the house is taken into consideration as a contribution.
  • The value of the separate property assigned to each spouse.
  • The economic circumstances of the spouses at the time of the dissolution. If there is a home involved and if one spouse has custody of any children, the court may award the house to the custodial spouse. In that case, the other spouse may be compensated with other assets.
  • The martial and separate debt.

When, either through agreement or a court determination, the extent of the marital property has been determined (quantity), it is still necessary to determine the dollar values of the various properties (value). Sometimes this can be easy, but at other times a professional appraiser may be required. I can walk you through this sometimes complex process.

After the extent and value of the property is determined, the property must actually be divided. Some property can be physically divided (one for you, one for me); in other cases, the property can be sold and the proceeds then divided. In some cases, if they believe they can work together amicably, the parties may retain joint ownership of the property (though this can be very difficult in practice).

Finally, the couple or the court must determine how marital debts are divided. Where there is substantial debt, this can have an impact on the distribution of other assets.

My Spouse cheated on me. Will that Reduce His (or Her) Property Distribution?

No. Under Colorado law, misconduct by either spouse is not a factor the court uses in determining how marital property is divided. In addition, Colorado is a no-fault divorce state so any marital misconduct need not be proven.

Will Property Division Affect the Amount of Maintenance (or my Spouse) is Seeking?

Likely, yes. When the Court is asked to award maintenance, it will consider the results of its division of marital property and decisions regarding separate property in determining the amount of maintenance that is appropriate. Thus, any determination of property division must be a part of the overall divorce agreement or court determination.

As a practical matter, spousal maintenance is often negotiated in connection with property division.  For example, if one spouse is likely to be required by the court to pay maintenance to the other spouse, the paying spouse may agree to give up more property to the other spouse in lieu of having to make future payments.

See Colorado Spousal Support and Maintenance Considerations for more information.

We currently own a Business Together; will this Complicate our Property Division?

Likely, yes. The fact that a divorcing couple owns an ongoing business enterprise can dramatically complicate the overall property settlement.

Family businesses may have complicated ownership, valuation, and tax considerations when being divided.  For more information on these matters, please see Valuing a Business in a Colorado Divorce.

Can we Simply Work Out our Own Property Division Agreement?

As with all aspects of divorce, including maintenance agreements and child custody agreements, the parties – with the help of their respective lawyers – can reach an agreement without court intervention.

Reaching an out-of-court settlement has several advantages. First, an amicable settlement is always preferable, especially when children are involved. Second, even though the Judge will be guided by Colorado Law to divide the property in an equitable or fair manner, the Judge cannot know the parties’ situation as well as the parties themselves. Finally, the legal fees will be lower if your case does not have to be resolved by the court. That said, the court must nevertheless “sign-off” on the agreement to make sure it is not “unconscionable” (ridiculously unfair to one party).

Please Call Me to Learn More

The outcome of a divorce (particularly property division, spousal support and maintenance, parenting time rights, and child support) may have significant and long-lasting impacts.  For these reasons, anyone going through a divorce will be well-served by retaining an experienced divorce lawyer.

I would invite you to contact me to learn how I and my firm can best represent you and your interests.