Divorce is a deeply personal and often difficult process, with the division of assets being one of the most challenging aspects. When a couple decides to dissolve their marriage, they must also divide their assets and debts, which can be complex and contentious. Understanding what to expect during this process is crucial to ensure a fair and equitable division of assets. This article will provide more detailed information and useful insights for anyone navigating asset division during a divorce in Colorado.

Marital vs. Separate Assets

One of the first considerations in asset division is distinguishing between marital and separate assets. Marital assets are those acquired during the marriage, such as shared bank accounts, homes, vehicles, and retirement accounts. Separate assets, on the other hand, include assets owned before the marriage or acquired through inheritance or gift during the marriage. In Colorado, marital property is subject to equitable distribution, meaning it will be divided fairly but not necessarily equally (C.R.S. § 14-10-113).

While marital assets are generally divided between both parties, separate assets may be excluded from division. However, complications arise when separate and marital assets become commingled—such as using marital funds to improve a separately owned property. In such cases, the division process can become more complex, requiring a detailed analysis to determine the extent to which separate property has been transformed into marital property.

Identifying and Valuing Assets

The next step in the process is identifying and valuing all assets. This includes tangible assets like real estate, vehicles, and household items, as well as intangible assets such as stocks, retirement accounts, intellectual property, and business interests. Accurate valuation of assets is essential because it plays a significant role in the division process. Courts may consider factors such as the length of the marriage and each spouse’s contributions when determining asset values (C.R.S. § 14-10-113(1)).

Valuation may require the expertise of appraisers, accountants, and financial advisors. For example, real estate appraisers can provide market valuations for properties, while financial experts can assess the value of investments and retirement accounts. Business valuation experts may be necessary to determine the worth of any business interests.

Division of Assets

Once all assets have been identified and valued, the next step is determining how to divide them. Couples may reach an agreement independently, with the assistance of attorneys or mediators. Such agreements can be beneficial as they allow for more control over the outcome and can be tailored to the specific needs and circumstances of both parties. However, if no agreement is reached, the court will make the final decision based on various factors such as:

  • Duration of the Marriage: Longer marriages may result in a more equal division of assets.
  • Economic Circumstances: The court will consider each spouse’s financial situation, including their income, earning capacity, and financial needs.
  • Contributions to the Marriage: Contributions include not only financial input but also non-monetary contributions like homemaking and child-rearing.
  • Future Financial Needs: Consideration of each spouse’s future financial requirements, including education and career plans (C.R.S. § 14-10-113(3)).

In some cases, the court may order a division of assets that allows one spouse to retain certain high-value items (e.g., a family home) while compensating the other spouse with other assets or cash payments to achieve fairness.

Division of Debts

Debts incurred during the marriage, such as mortgages, credit card debt, and loans, must also be divided. Both spouses may be responsible for these debts, regardless of whose name is on the account. The court will consider several factors when dividing debts, including:

  • Who Benefited from the Debt: If one spouse primarily benefited from a particular debt, they may be assigned responsibility for it.
  • Each Spouse’s Ability to Pay: The court will evaluate which spouse is in a better financial position to pay off certain debts (C.R.S. § 14-10-113(5)).

It’s important to note that debt division can affect credit scores. If one spouse is assigned a debt but fails to pay it, creditors can pursue both spouses if the debt was jointly incurred, potentially impacting both parties’ credit ratings.

Tax Implications

Considering the tax implications of dividing assets is essential. Certain assets, like the sale of a home, may have tax consequences, such as capital gains taxes. Retirement account distributions may incur penalties and taxes if not handled correctly. Working with a financial advisor or tax professional can help you understand the potential tax impacts of asset division and structure the settlement to minimize tax liabilities.

For example, dividing retirement accounts may require a Qualified Domestic Relations Order (QDRO) to avoid early withdrawal penalties and taxes. Similarly, understanding the tax basis of assets is crucial to anticipate potential capital gains taxes on future sales.

Support System

Navigating the division of assets during a divorce can be long and complicated, making a strong support system vital. This includes a trusted attorney, financial advisor, and therapist. Each professional plays a specific role:

  • Attorney: Provides legal guidance and representation, ensuring your rights are protected and advocating for a fair division of assets.
  • Financial Advisor: Offers financial planning and valuation services, helping to assess the long-term financial impact of different asset division scenarios.
  • Therapist: Provides emotional support and coping strategies, helping to manage the stress and emotional toll of the divorce process.

Approaching the division of assets with a level head and focusing on reaching a fair resolution rather than letting emotions dictate decisions is crucial. With careful planning and the right support, navigating the division of assets during a divorce is achievable.

For assistance with asset division during your divorce, Brian B. Boal of the Boal Law Firm is ready to assist you. Call at 719-602-2262 or email to discuss your divorce case. Or visit Boal Law Firm to schedule your initial consultation with Brian B. Boal.

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