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Dividing Property and Assets

A divorce severs the business ties a couple has by virtue of marrying and conducting the business of life as a partnership.  Assets acquired after the date parties marry is categorized as marital property.  Debts incurred after the date parties marry is viewed under Colorado law as marital debt.  Marital assets and marital debts are to be divided between divorcing parties in a manner that is fair and equitable to each of them.  If parties are unable to agree on what is fair, a judge will make the allocation s/he deems fair and equitable after a permanent orders hearing, essentially a trial.  Judges are accorded a great deal of discretion in deciding what is fair under all of the facts and circumstances presented as evidence in the course of the trial.

What is “fair” is a complicated question and may be very different depending on which party you ask.  For purposes of a divorce, whether an asset is marital property does not turn on whose name the property is titled in or in whose name an account is held.  Take the example of a retirement account, the value of funds contributed to the retirement account of an employed wife while she is married is marital property, regardless that only she is the employee entitled to contribute to her employer’s retirement program, and that her name and social security number are associated with the account.  The financial lives of people who are married to each other are presumed to be highly intertwined, and like a business partnership, the totality of assets and debts of a marital  partnership depend on the contributions made by both partners, regardless that each partner’s contribution has been different from the other’s.

Taking the example of a retirement account further, it may have both a separate as well as a marital property component.  What was in a party’s retirement account on the date of marriage is that party’s separate property.  However, all increases in the value of that account after the date of marriage are marital property.  If a divorce occurs 25 years after the date of marriage, it may be difficult for a party to prove the portion of the account that was separate if s/he has not retained financial records showing account values as of the date of their marriage.  Financial institutions cannot be counted on to maintain financial records more than a specified number of years or may no longer exist by the time parties divorce.  If a party cannot prove the value of the portion of an account that was their separate property, the default characterization of the entire account is as marital property, subject to division at the time of divorce.

Numerous factors affect what is fair in the context of each unique marriage.  Are there adequate resources to maintain a standard of living that parties enjoyed during their marriage?  If not, how is it fair to share lifestyle changes that may be inevitable.  Attention needs to be given to the tax ramifications of allocating marital property one way as opposed to another.  Is there property that will be income-producing, which, if allocated to a non-working spouse, will lessen his or her need to receive maintenance?  What is the tax basis in real property or stocks that are being divided?  Will there be capital gains taxes on that property when it is later sold by the party to whom it is allocated at the time of divorce?  What Orders may be required to divide retirement accounts so that no tax consequences are triggered by the division of a single account into two?  Are there limitations on the transferability of certain assets, even though they are marital property?  If one party is the owner of a business, how should it be valued?

Numerous questions must be answered before an allocation that is fair and equitable to both parties can be determined.  Proceeding without experienced legal help may result in mistakes that are difficult if not impossible to correct after a divorce decree is entered.