You and your spouse have made the decision to divorce. So what happens to your savings accounts, furnishings, and most importantly your home? In this blog post, we look at how property is divided in Colorado, what makes property subject to division and behaviors to avoid if your divorce mediation is underway. 

How is Property Divided in Colorado? 

Whether you are proceeding with an attorney assisted divorce or a divorce mediation, the ground rules for property division in Colorado are the same. Colorado follows the doctrine of equitable distribution when it comes to dividing marital property. Do not be fooled that because equitable and equal share the same first three letters, that the two words are interchangeable. It’s a bit more nuanced than that. 

What Does Equitable Mean? 

Equitable is not the same thing as equal but it doesn’t rule out that an equal division might sometimes be in order. An equitable solution is the solution based on what is just, fair, and right, in consideration of the facts and circumstances. 

For example, if both parties to the marriage bought a sofa together and each person contributed $500 and both parties make roughly the same amount of money, what would be a way to make an equitable distribution?  If they couldn’t come to an agreement about who gets to keep it, a judge or mediator may advise them to sell the couch and divide the proceeds equally. 

In this instance, equitable worked out to be equal because each party was in relatively the same situation and contributed the same amount of money. 

But, when you consider how rare it is that parties to a marriage will be on the same footing financially at that point, or into the future, it makes a lot more sense that Colorado uses a system of equitable distribution. Forty one states besides Colorado use equitable distribution while only Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. In community property states,  there is equal division among the spouses. 

What Does Equitable Distribution Really Mean for Colorado Couples? 

In Colorado, equitable distribution means property will be divided by the court or divorce mediator in a manner that is deemed fair to both parties. Note: spouses are free to come to a decision on their own. You do not have to make the determination for all items deemed marital property before they leave the house or are sold. Couples who can agree about what to do with any given item, marital or separate, can make those decisions and not wait for a mediator or judge to decide. 

To make a determination about what to do with marital property, a court or mediator looks at all the factors. 

Common factors include, but are not limited to: 

• The length of time that the couple was married
• The age of each party
• The health of each party
• The standard of living that was established during the course of the marriage
• The income and earning capacity of each party
• Economic circumstances of each spouse at the time of the division, including the desirability of awarding the family home to the spouse caring for the parties' children
• The need for additional education or training of either party
• The value of the property that is in the marital estate
• The contribution of either party to the marital property
• The tax consequences that either party may face
• The overall financial circumstances of either party

Remember, Only Marital Property is Subject to Equitable Distribution

The property of couples divorcing in Colorado is deemed to be either marital or separate property. Separate property is property brought into the marriage by that spouse, and or Property they received during the marriage by gift or inheritance. Compare this to marital property that covers anything acquired after the marriage. 

The main determining factor for marital property is, was the item bought, or the account opened before the marriage began? If yes, it’s deemed separate property. If not, it’s marital property. The date of marriage is what controls. 

Even if you opened up a savings account at the bank in your name only and only you made deposits into it, it is still marital property if you opened it after you were married. 

Where it gets a little tricky is when one party co-mingles their separate property with the marital property, which changes the nature of the separate property. 

Below are a few ways that co-mingling money changes separate property to marital property: 

• If you inherit money and deposit that money into a joint account with your spouse, the inheritance then becomes marital property.
• If you borrow a sum of money from family and use that money to benefit both spouses and the family in general that money becomes marital money. In a case like this, where money is owed, it would, at the time of the divorce become the responsibility of both spouse’s to repay the loan

Your Divorce Mediation is Underway, So What Can You Do About Property? 

It boils down to keeping meticulous records. If you want to make a purchase and make sure it remains separate property, then use funds out of an account with only your name on it and keep records about the funds used to make the purchase. Also, it is never a good idea to sell or give away any of your property while your divorce proceedings, including mediation, are underway. The way around this is to come to a mutual agreement, especially if one party, or both, desperately needs the money. However, it is best practices and will keep things running more smoothly if you don’t move money around and don’t buy any big ticket items during this time. Yes, we’ve heard the news that interest rates will begin to rise by the end of 2022 but that doesn’t exempt you to ignore the “no big purchases” rule of thumb. 

Divorce Mediation and Property Division

Our roadmap to resolution breaks down our 8-12 week mediation process. Property division is part of step 2 of our 6 step process and only comes after clarifying your future financial situation, your goals and guiding principles. We can guide you in making the kind of property decisions that best suit your unique circumstances without the tension usually experienced in an attorney led process. 

To find out more about our process, please schedule a complimentary 20 minute consultation’ with one of our experienced divorce mediators. 

Have you ever heard, “What’s mine is mine and what’s yours is mine?” or “What’s yours is mine and what’s mine is my own?” Although stated differently, the result is that one person prevails and the other is left holding the bag. Thankfully, Colorado law has a less juvenile way to determine separate and marital property. 

This blog examines marital and separate property in Colorado and what happens when separate property is commingled with marital property. We examine Social Security, retirement accounts and gifts acquired during marriage. 

What Is Marital Property in Colorado?

Marital property is legally defined as “any property which either spouse acquires during their marriage, except for property acquired by gift, inheritance or property excluded by a prenuptial agreement,” See § 14-10-113(2), C.R.S.

The practical application is that marital property is subject to division, either by the courts or as agreed to in mediation. In Colorado, marital property must be divided equitably. Note that equitable does not mean “equal” division – it means “fair” division. 

To do this, a mediator or a judge will take into account the separate property each spouse owns when determining how to equitably divide the marital property. If one spouse owned an apartment complex before the marriage and rents it out and the other spouse only has a 15 year old car as their separate property, this would be one factor when a judge or mediator weighs in on how to divvy up the marital property. 

Other factors are each spouse’s earning capacity, their health issues, and who will have primary parenting responsibilities. 

What is Separate Property in Colorado? 

Separate property is property that acquired before marriage and treated as separate during the marriage. Treating it separately means you opened an account or invested in an asset where you are the only owner, and it is not commingled with other money or assets that are jointly owned. The main question is whether you retained the separate character of the property or gift during the marriage? Did you make deposits into this account during your marriage? Were these deposits your paycheck only? Is the property deeded to you? Are you the accountholder of the bank account? 

If you can show that your actions kept it separate, the property will be deemed separate and not subject to division. However, any appreciation on the separate property from the date of acquisition to the date of divorce is considered marital and goes into the marital pot to be divided.

What if We Commingled Our Separate Property? 

Think about it like this. You have your own separate property. But if you use it to buy something that benefits your marriage – you’ve commingled the two and it is now subject to equitable division.

A few common examples of commingling property:

-You inherit money and deposit that money into a joint account with your spouse, the inheritance becomes marital property.

- If you have an investment account or start an investment account and both spouse’s incomes contribute to the account, the funds in that account become marital property.

- If a relative dies and leaves you $50,000, and you use that money to pay down the mortgage on the home you both live in, that “gift” transforms into marital property. You may try to argue that the $50,000 was meant to be a gift only to you, but unless your soon-to-be ex feels generous, they still get their half of it.  Bottom line, if you wanted to keep it characterized as a gift, you should have deposited it into a new separate bank account in your name only. There are many other waysto avoid commingling that you should look at before making any purchase. 

Are Retirement Accounts Separate Property? 

Contrary to popular belief, no. If the account was created, added to or increased in value during the marriage, it is considered marital property, either completely or in part, and subject to division.

Are Social Security Benefits Separate Property? 

Yes. Colorado law says Social Security benefits are not subject to division, nor can they be offset by providing your spouse with a greater portion of the marital property. But there’s an exception. If the marriage has lasted 10 years or more and the claimant spouse is 62 or older, the former spouse can receive benefits on the claimant spouse’s record.

This makes sense when you consider that you’ve been paying into Social Security since you began working and the Social Security Act, § 407 specifically, prohibits the assignment of Social Security benefits in any other legal process. In 1975, Congress amended the Act to include § 659, which incorporates a narrow exception to the anti-assignment provision to enforce legal obligations to provide child support or alimony. 

We have established marital and separate property and how each is treated depending on the circumstances. Whether your property division occurs inside the courtroom walls, an attorney’s office, or with a mediator, the same ground rules apply. 

The Certified Divorce Financial Analysts at the Divorce Resource Centre of Colorado are uniquely suited to assist divorcing couples. We are here to learn more about your unique situation during a 20 min exploratory call that you can schedule here.