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If you are facing a divorce, an important concern should be the division of your marital property, also referred to as property distribution. This amounts to the division of the assets and debts that you and your divorcing spouse acquired together during the course of your marriage. This distribution will likely play a significant financial role in your future, and it’s important to give the matter the careful attention it deserves. Issues related to property distribution can become very complicated very quickly, so working closely with a knowledgeable Aurora divorce attorney with considerable experience in complex property distribution is in your best interest.
Under Colorado family law, the courts seek to divide marital property in a manner that is considered equitable. In essence, equitable distribution refers to a manner that is fair, given the circumstances involved. In other words, each of you will not necessarily receive exactly one-half of your marital property.
Generally, any assets or debts that you acquired as a married couple qualify as marital property. This is opposed to that property that either of you brought into the marriage with you, which usually remains separate property. If you acquired property during the course of your marriage that is in one of your names only, it does not alter the fact that it is still marital property (based on the fact that you acquired it while you were married).
There are some exceptions to the rule related to acquisitions made during the course of your marriage. These include:
If one of you received either inheritance or gift in your name only during the course of your marriage, it remains the separate property of the recipient.
The line between marital property and separate property can be exceedingly fine. For example, if you owned a small business when you entered into your marriage, that business is your separate property, and if you kept it separate during the course of your marriage, it remains your separate property. Maintaining that separateness, however, can be tricky – many families naturally commingle their funds. Even if you did carefully keep your business separate, though, you likely still have an issue. If your business is worth considerably more now than it was at the time of your marriage, that increase in value is marital property. Things can get far more complicated from here.
Many people are confused to learn that their retirement accounts are marital property and not private property. If, for example, your retirement account was created during the course of your marriage, the entirety of funds accrued is marital property. If, on the other hand, you came into the marriage with the account but added to its value while you were married, the increase in value qualifies as marital property. Clearly, the issue can be exceedingly complicated – especially when multiple accounts and retirement-related financial tools are involved.
While your Social Security benefits are not universally subject to division in divorce and the amount cannot be offset in divorce, that isn’t the end of the issue. If your marriage lasted at least ten years and the spouse claiming benefits is at least 62 years old, the claimant can receive Social Security benefits on his or her ex’s record.
The division of property in a divorce is not a taxable event, but there can be complicating factors. If your finances are complicated by an issue such as the division of a retirement account or your divorce involves high assets generally, you could get into a tax jam in the divorce process. Working closely with an experienced divorce attorney with considerable skill in marital property division is the best way to guarantee that your rights are well protected and that you receive the distribution of marital property to which you are entitled.
The distribution of your marital property is far too important to you and your children’s financial future to leave to anything other than the professional legal counsel of our experienced Aurora property division attorneys at CNL Law Firm, PLLC. We have extensive experience protecting the financial rights of clients like you throughout the divorce process, so please don’t hesitate to contact us online or call us at (720) 370-2171 for more information today.
Property distribution, or equitable distribution, in the context of a divorce, refers to the judicial process of dividing the marital estate – the property acquired by both spouses during the marriage. This includes all marital assets and obligations. It does not include non-marital property, which typically refers to assets owned by one spouse before marriage or acquired as a gift or an inheritance. Some states follow a community property rule, where all property acquired during the marriage is equally owned by both spouses. This process aims to ensure a fair division of assets and obligations between the divorcing parties.
In Colorado, dividing marital property during a divorce or legal separation is influenced by an equitable division approach. This implies the court will distribute assets based on a fair evaluation, not necessarily a 50-50 split. The court’s decision regarding the division pivots on several factors:
As mentioned Colorado is not a community property state where all property acquired during the marriage is considered marital property. However, retirement accounts such as 401(k)s are counted when determining the division of assets in a divorce. Retirement benefits earned during the course of the marriage are subject to equitable distribution. The court will review and divide each account’s value on a case-by-case basis so that each spouse can receive their fair share of the assets. They may order one spouse to transfer a portion of their retirement fund to the other spouse, as part of the division of marital property.
Tax consequences play a significant role when dividing property in a divorce. Thanks to §1041 of the Internal Revenue Code, property division, including non-marital assets, isn’t a taxable event. However, one must remember the potentially significant impact of the tax basis, the value used to calculate capital gains tax when the property is sold. Often, this is the purchase price of the asset. Therefore, while the division itself might not attract tax, the subsequent sale of any property could potentially result in substantial tax liabilities, making it crucial to consider tax basis when dividing property in a divorce scenario.
In divorce proceedings, Colorado, an equitable distribution state, emphasizes fairness based on each party’s respective economic circumstances. Under the Marriage Act, the court considers various factors, including each spouse’s financial needs and contributions. However, if the parties can’t agree on the division of assets, litigation becomes inevitable. This process involves attorneys’ fees and court costs. The final determination of the division will be made by the court, based on the relevant economic circumstances of both parties.
The court indeed considers longer marriages, typically those spanning 25 years or more, when equitably dividing marital assets. The principle behind this consideration is that the lower-earning spouse may have made significant non-financial contributions, such as child-rearing or homemaking, which allowed the higher-earning spouse to focus on career advancement. Therefore, in long-term marriages, the court is more likely to award a larger share of the marital property to the lower-earning spouse, reflecting their contributions to the marital partnership. However, this varies case-by-case based on several factors like financial circumstances, the value of individual properties, and each spouse’s financial needs.
CNL Law Firm, PLLC focuses on helping families regain peace of mind during legal circumstances.
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