Mitch Tacy Family Law

Equitable Division of Property

Mitch Tacy Family Law Attorney Division of property

Mitch Tacy Family Law Attorney Division of Property

What is Colorado Marital Property?
What are Separate, Non-Marital, or Pre-Marital Assets?
How is Marital Property Divided (Equitable Division)?
Recommended Approaches to the Division of Marital Property

What is Marital Property?

As a divorce attorney, this is a question I get asked quite often by clients.  Here is a relatively simple description: In general, marital property includes any assets, benefits, property, debts or obligations that were acquired, earned, accrued, or incurred, by either party, during the marriage.  That means that marital debts are a part of the equation.  There are exceptions, and there is more detail, but that is the general definition.

Common Issues and Questions.

Question:  Last year, my husband purchased a vehicle that he titled in his name only.  Is that marital property?  Answer: Yes, it is marital property.

Question:  My wife has her own credit card.  The account is in her name only, and she is the only one who uses it. Is that a marital debt?  Answer:  Yes, it is marital, assuming the debt was incurred during the marriage.

Question:  My wife and I have separate IRAs (retirement accounts).  Are those marital property or are they separate?  Answer:  Yes, although they are separately titled, they are marital property (again, presuming that you acquired them after the date the marriage).

Question:  My husband and I have been separated for the last year.  Six months ago, he purchased a boat.  Is that marital property?  Answer:  If it was acquired during the marriage, it is marital property.

Question:  My engagement and wedding rings, are those considered marital property?  Answer:  Generally speaking, gifts between spouses are considered marital property.  However, there is an exclusion to this rule for non-business, tangible gifts.

What are Separate, Non-Marital, or Pre-Marital Assets?

With some caveats and exceptions, here is a list of what constitutes “separate” property and/or non-marital property.

 (a)   Property owned by one of the parties prior to the marriage.  This is commonly referred to as a “pre-marital asset.”  This does not mean the entire asset is pre-marital.  Under Colorado law, the value of the asset at the time of marriage is what qualifies as a separate, pre-marital asset.  Any appreciation in value is considered marital property.

 This issue comes up commonly with real estate (a home for example) owned by one party prior to the marriage.  Technically, the home qualifies as a pre-marital asset.  However, its increase in value since the date of marriage is marital property, and it (the appreciation) is subject to equitable division.

 (b)  Property acquired by gift or inheritance.  If your spouse inherited or was given property by someone else, as long as your spouse kept it “separate,” the inheritance or gift is considered separate, non-marital property, and it is not subject to equitable division.  Please note that such gifts and/or inheritances are subject to the appreciation in value rule described above – meaning that appreciation in value is subject to equitable division.

(c)   If your spouse held or possessed separate, non-marital property and he/she traded or exchange that asset(s) for other property, that trade does not change the underlying nature of the property of being separate, non-marital that is not subject to equitable division.

(d)  The biggest exception to all of the above is property excluded by a valid agreement, such as a pre marital or post marital agreement.  Even property which might normally qualify as “marital property” can be excluded from equitable division, if the parties have a valid, enforceable pre marital agreement that provides otherwise.

The qualification of marital and non-marital property is a very common issue.  One of the biggest challenges that lawyers come across is the issue of co-mingling of assets.  Please note that the co-mingling of separate, non-marital assets changes their status.  The reason is that co-mingling does in many cases constitute a “gift” to the marriage.

An example of this: Wife inherits a home from her parents, which is titled in her name only.  Five years later, she decides to refinance or take out an equity loan.  The husband’s income is needed to qualify for the loan, so he is added to the deed and his name goes on the loan.  Although the property was inherited by the Wife (qualifying the asset as separate property), the co-mingling changed the nature of the asset – making it into marital property, subject to equitable division.

For more questions and information on marital property, pre-marital assets, and separate property, please call my office for a free consultation at (970) 213-5405.

How is Marital Property Divided (Equitable Division)?

When it comes to the division of marital property, Colorado is an equitable division state.  That means that the division of property (and debt) should be fair and reasonable.  The terms that Colorado law uses is “just.” The statutes provide in relevant part (and this is my paraphrase):

 In separation or divorce proceeding, the Court shall divide the marital property, “without regard to marital misconduct, in such proportions as the court deems just after considering all relevant factors…”  Those factors include the following:

 1)    A Court shall not take into account marital misconduct.

2)    Contributions of each spouse to the acquisition of marital property.  Contribution of a spouse as a homemaker counts.

3)    The value of property set apart to each spouse.

4)    The economic circumstances of the parties at the time of division, including the desirability of awarding the family home (or the right to live in it) to a spouse with whom the child resides a majority of the time.

5)    Any increases or decreases in the value of “separate property” during the marriage, or the depletion of separate property for marital purposes.

 Again, this process is referred to as equitable division.  The natural and logical starting point for any division of marital property (or debt) is 50/50.  Parties can, do, and quite often should, deviate from this presumptive 50/50 approach.  Ultimately, the assessment of what is fair and just must encompass “fairness” to both parties.  I always ask clients to suggest a proposed division and then be able to articulate: (a) why the division is “fair” for him/her, and (b) why the division is fair to the other spouse.

 The statutory factors listed above are important considerations in dividing marital property.  I would like to discuss three of these because they come up quite frequently.

 Marital Misconduct.  This is probably one of the more difficult issues to deal with in the division of marital property.  When a divorce is occurring because one spouse cheated on the other or because domestic violence occurred in the marriage, it is difficult to remove this taint and stain from the negotiation table.  The reality, however, is that if parties can not reach an agreement on the equitable division of assets, the Court will decide the issue.  And, the Court will not include marital misconduct as a factor in the division.

 Contribution as a Homemaker.  The full time role of one spouse as mother, housekeeper, chauffeur, shuttle driver, dishwasher, cook, shopper, launderer, bookkeeper, babysitter, etc., is often an underestimated and undervalued role.  I commonly find that the person guilty of such undervaluation is the person who was the “Captain of Everything.”  Sadly, in the context of divorce, this often means that person is getting laid off, and he/she needs to find gainful employment doing something else (not a good position to be in).  The bottom line is that being a homemaker does constitute a very meaningful and important contribution to a marital partnership.  When one spouse takes the position – hey, I was the one working; I was the one paying 100% of the mortgage; why shouldn’t I get the majority of the equity?  – in my experience, this is not often a productive argument.

Economic Circumstances of the Parties.  As a divorce lawyer, I face this issue with almost every division of marital assets.  I believe that every case requires a common sense analysis.  Each spouse’s relative financial circumstances are very relevant.  Here is an example I’ve encountered frequently:

Wife is working professional.  She has a career and a job.  She’s worked at the same company and industry for the last 10 years.  She earns an annual salary in excess of $150,000.  During the marriage, husband was a full time dad.  He gave up his career when the parties’ children were born.  He has just recently started working part time while going back to school.  When the marriage ends, it will be very easy for the wife to make significant contributions to her retirement.  She will have no problem qualifying for a home loan and saving money to make a down payment.  The husband will be lucky if he can pay for health insurance.  He won’t qualify for a loan anytime soon.  He won’t be saving money for retirement for several years to come.  The “relative economic circumstances” of these two individuals are dramatically different.

Recommended Approaches to the Division of Marital Property

Even presuming a 50/50 “equitable division,” this does not mean that all assets need to be (literally) divided down the middle.  As a divorce attorney, I often recommend to my clients that they seek the counsel of other third party professionals in developing a plan for the division of marital property (a CPA to address longer term tax issues; a financial planner to address income and retirement planning issues; a vocational professional to address educational and career planning; and a mortgage professional).

There are lot of options in the way that assets can be divided.  One party may value retirement assets, while the other desire the marital home.  One party may want to hold investments or a life insurance policy, while the other spouse values cash.

Different types of assets have different qualities that may make them more or less attractive.  Many assets have a carry cost.  Older vehicles need to be maintained.  Houses come with mortgages, insurance, taxes, HOA fees, and maintenance.  Some assets are dramatically more liquid than others (home equity versus a 401k).  Some assets, such as a business or professional practice, are not capable of being partitioned or divided.  Some assets can not be duplicated… like a home ownership, particularly if post-decree loan qualification is going to be an issue.

What I recommend is putting all marital assets and debts on a spreadsheet and spending some time working through various options for division and considering the pros and cons.  It is also recommended that parties keep in mind the concept of mutual fairness.  Your soon-to-be ex-spouse is not going to appreciate a proposal for property division which is objectively and obviously unfair (nor will his/her attorney; nor will a Judge).

I also recommend to clients that they keep in mind that the division of marital property (and debt) is a financial decision.  It is not an emotional decision, and it should not be used as a means of hurting or disadvantaging the other party.

Mitch Tacy Family Law Attorney & Mediator
155 E. Boardwalk Drive, Suite 464, Fort Collins, CO  80525
1635 Foxtrail Drive, Suite 356, Loveland, CO  80538
970-213-5405
www.tacylaw.com

 

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    Yes!!!! Time to move on and do big things. Thank you so much Mitch. You have been a great attorney and I consider you a friend for helping me through the hardest thing I have ever been through. I have big plans and plan on living a more fulfilling life than I was previously. Thanks again. Regards, Daniel G.