Colorado is not a community property state; instead, Colorado divorces, dissolution of civil unions and legal separations are governed by equitable principles or principles of fairness. C.R.S. § 14-10-113. Of course, what’s fair depends entirely on the circumstances of a particular divorce or legal separation.
Where a “community property” state (for example, Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin) takes all assets acquired by both parties during the marriage and considers the assets to be the equal property of both parties (i.e. 50/50), Equitable Division states (including Colorado) divides property after consideration of several factors as set forth below.
So, before a party physically cuts any possessions in half (it happened!) and divvies up the equal parts, it’s crucial to understand how the laws of a particular state allocate property between spouses and partners.
The confusion between community property states (also known as equal division states) and equitable division states is understandable. After all, doesn’t equitable simply mean equal? It doesn’t. Equitable means what is just, based not on legal technicalities but on fairness. So, how does a court look at what is fair under the circumstances of a particular divorce case in Colorado?
Colorado courts are tasked with examining the following factors when dividing property between a couple that is divorcing or separating legally:
(a) The contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker;
(b) The value of the property set apart to each spouse;
(c) The economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse with whom any children reside the majority of the time; and
(d) Any increases or decreases in the value of the separate property of the spouse during the marriage or the depletion of the separate property for marital purposes
In many Colorado divorce and legal separation cases, the parties will exchange marital property spreadsheets or exhibits that attempt to account for the marital (and sometimes non marital) property allocated to each party. When a worksheet or exhibit shows that one spouse will receive more of the marital assets, the other party, spouse or partner will often reflect an “equalization payment” which aims to equalize the parties by ensuring that each party leaves the relationship with exactly half of the total value of the marital property. Equalization payments can be cash payments from a liquid asset or perhaps an unequal distribution of a retirement asset such as a 401(k) account or Individual Retirement Account (IRA). In military divorces, it is popular to divide a Thrift Savings Plan (TSP) or perhaps negotiate a differential in the division of a future military retirement. An equalization payment, if applied by a Colorado court, begs the (valid) question: If the court applies an equalization payment, isn’t it the same think as dividing property equally in a community property state?
The Colorado Legislature has refused to adopt the community property recognition and allocation of marital property. After all, circumstances exist where it simply may not be fair or equitable to divide property equally. Perhaps it makes more sense for a higher earning spouse or partner to be responsible for more of the consumer debt incurred during a marriage or civil union? Perhaps it makes more sense for the person who keeps the large screen television to keep the credit card balance associated with purchasing the television – despite the fact that the television is no longer anywhere close to the value of the maxed out credit card? Perhaps it makes more sense to have the younger spouse take on more of the marital debt because the younger spouse probably has an extended earning capacity and can better budget debt payments? What if a spouse is a business owner and his or her skills were the sole reason for the success of the business during the term of the marriage or civil union? What if the “stay-at-home” spouse was only taking care of the home and not the children, who were all in daycare or school? What if the parties made the joint decision for one spouse to contribute more towards a retirement plan with the other party agreeing to work less and take more free time during the marriage or civil union? Should income of the parties be considered at all in the allocation of assets?
Colorado law clearly provides that a court mush allocate joint property “without regard to marital misconduct.” However, does that mean that financial infidelity should be ignored or is somehow irrelevant to the division of marital or joint assets?
It’s important to recognize that Colorado is not a community property or equal division state and that the factors for the allocation of separate and marital property in a Colorado divorce, dissolution of a civil union or legal separation is more complex and requires not only factual but also legal arguments based on the various factors and circumstances presented in a particular case. An experienced and dedicated family law attorney is essential to analyzing your rights and risks with the division of marital property or joint property under Colorado law.
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