How are Assets Divided in a Divorce in Colorado?

When you get divorced, you leave more than your former spouse behind. All the assets and property acquired over the duration of the marriage must be divided. Yes, assets must be divided fairly — or “equitably,” as Colorado law requires — but divided all the same. Below are some of the questions clients commonly ask when they want to know: How are marital assets divided in a Colorado divorce?

Colorado is an equitable division state. This means that once all marital property has been listed and valued, the court will attempt to distribute it more fairly based on each party’s contributions and liability.

In Colorado, acquiring certain assets before marriage automatically constitutes them as a spouse’s separate property. However, equitable distribution laws assert that individual property can sometimes become marital property when commingled with marital assets. If money inherited by one spouse is deposited into a joint bank account, these funds may later be declared marital property. 

Separate property can include:

• retirement contributions made before the marriage

• property owned prior to the marriage

• gifts and inheritances meant for only one spouse

• any property acquired after legal separation

The marital estate comprises assets and debts accumulated throughout the marriage. Typical examples of this include:

• real estate and mortgages

• rental income

• vehicles 

• furniture

• collectible items

• jewelry

• expensive clothing items

• sporting and exercise equipment

• business interests

• bank accounts and investments

• retirement assets

• pets 

• life insurance plan benefits

• student loans, if found to be beneficial to the marriage

• other types of loans

• tax and credit card debt

• other assets or debts acquired for marital purposes

Not all property in a marriage is divisible in a divorce. This would include non-marital assets, such as any separate property, investments, savings accounts, or valuable keepsakes that either spouse owned prior to the marriage. Non-marital assets also include gifts and inherited items meant specifically for one spouse and any assets left aside for one spouse in a mutual contract, such as a prenuptial agreement.

It is important to note that any assets considered separate property may be regarded as marital property if they increase in value during the marriage. Learn more about determining marital asset value and how to divide marital property during a divorce.

Colorado Revised Statute 14-10-113 details all factors courts may consider when dividing  property in a divorce:

• each spouse’s financial contributions made in acquiring the property, including the contributions of homemakers

• the value of the property to be divided

• the economic circumstances of the parties at the time property is divided

• current custody arrangements concerning any children

• Increases or decreases in the value of each spouse’s separate property or depletion of separate property for marital purposes

The most reasonable division of assets you can hope for in a divorce is one you can work out with your spouse and a mediator. If divorcing spouses can divide marital property equitably, it ensures each party receives a fair division and could save you time and money on court costs and lawyer fees.

Unfortunately, we don’t live in a perfect world, and many divorces are contentious.  If spouses cannot reach a consensus, dividing marital assets will defer to court intervention. 

It should be understood that spouses will leave the marriage with fewer assets since it’s being divided.

Marital debt includes all debts acquired by either spouse during the marriage, regardless of whose name the debt is under. However, your attorney may be able to successfully argue that some debts be allocated to your ex. For instance, debts incurred by your ex after the two of you separate or a debt that only benefits them may be assigned to them.

Like assets, marital debt is divided following the principle of equitable distribution. This translates to a fair division, which may or may not be equal depending on the circumstances of the case. 

When determining equitable distribution, courts will consider when the debts were acquired and other factors, such as:

• each spouse’s contribution in acquiring the debt

• each spouse’s income, earning potential, and financial needs

• the length of the marriage

• whether the debt was incurred for marital purposes or separate use

Some debts incurred during a marriage are automatically considered marital debt. Credit card debt, for instance, is generally regarded as marital debt, even if it is only open under one spouse’s name. Student loans taken out during the marriage may also be considered marital debt if the loan benefited the spousal unit. Loans and mortgages overall are typically classified as marital debt if acquired during the marriage. 

While it may be tempting to downplay the debt accrued during the marriage, disclosing all debts during the divorce process is crucial. It is also important to note that creditors have the legal authority to pursue debts from both spouses to the extent that they could before the divorce, regardless of which spouse is assigned the debt in the divorce.

Marital Tax Debt

Regarding tax debt, the IRS will determine liability based on how spouses filed the tax returns. 

Colorado does not divide a house during a divorce. The family house is considered marital property, of course, but since Colorado is not a ‘community property’ state, family courts will never advocate a solution that involves divorced spouses sharing a house 50/50 — unless both spouses mutually agree to such an arrangement.

Many times, divorcing spouses will decide to sell the house and split the profit, especially if neither spouse can afford to remain in the home and pay the mortgage on their own.

If both spouses have a desire to keep the house, the court can decide who that will be based on a variety of factors. If the couple has children, the court may award the house to the parent who has more parenting time in order to preserve stability for the kids.

If the couple doesn’t have children, the court will look to other factors to determine which spouse gets the house. Learn more about the division of property in a divorce. 

Retirement earnings or savings are divided much the same as other marital property. Any retirement, IRA, or 401K monies accrued before the marriage are left out of the community property pile and remain with the spouse who earned that money.

Retirement savings earned during the marriage are considered marital property and will likely be divided equitably between the spouses in a divorce.

Since dividing the retirement money means disturbing those accounts, it is important to obtain a Qualified Domestic Relations Order (QDRO) to avoid taxes and withdrawal penalties. A QRDO from the court tells the administrator of the retirement account how to allocate funds to each spouse per the court’s order.

If you and/or your spouse have several different retirement accounts, more than one QRDO might be required to achieve the court-ordered allocation.

Most of the time, no.

Under Colorado law, property inherited specifically by one spouse during the marriage is considered separate property. It is set aside. C.R.S § 14-10-113

Real-world scenario 1

Let’s say one of your parents passes away during the marriage and leaves a certificate of deposit (CD) account only in your name, your spouse cannot touch it, as it is not considered marital property.

However, there are situations where inheritance can be considered marital property. Let’s continue with the CD example:

Any interest that accrues on the CD during your marriage can be divided. So, if you inherited a lump sum of $450,000 in CDs and accrued $30,000 of interest during the marriage, the court could award each spouse $15,000 from the accrued interest. However, the original $450,000 is yours since you were the intended beneficiary.

Real-world scenario 2

Using the CD scenario, let’s consider when inheritance could be divided in your divorce:

Now let’s imagine you cashed out the $450,000 in CDs you inherited to purchase a home. Even though you purchased the house with your inherited money, you and your spouse lived in and contributed to the family home. The court aims to divide marital property equitably and may consider the home and its appreciated value as marital property.

Business division is one of the more complicated aspects of marital property distribution in a divorce. And it can also be the most costly.

If you already owned the business prior to getting married, and you were careful, then you worked out an arrangement for dividing business-related assets before tying the knot. Of course, couples go into business when they’re married. So what happens to a thriving business when the marriage crumbles?

Dividing marital property during a divorce tends to be a contentious process, but it’s one that lawyers and courts handle all the time. If an agreement between the divorcing spouses isn’t possible, it’s best to hire an experienced attorney because the value of the business can be considered for asset division, alimony, and child support purposes. 

Even if one spouse began the commercial business before getting married, the other will be entitled to a share of the profits and income generated during the marriage.

Courts will consider a variety of factors when dividing a business, including:

• when the business was started

• the business’ current value

• liabilities the business carries

• increases to the business’ value during the marriage

• each spouse’s contribution to the business

It does not matter if the contributing investment was financial or personal time and effort to maintain and grow the business. Learn more about business valuation in divorce.

Divorces involving high-value assets must factor in various considerations to ensure equitable distribution between the parties. 

Typical high-value assets include:

• real estate holdings,

• businesses, 

• investment portfolios, 

• and other assets such as jewelry, antiques, or art collections

All of these require professional appraisals for accurate valuation. 

Investment portfolios, for example, cannot be divided without factoring in potential tax implications and market changes.

Similarly, divvying up retirement accounts often requires a Qualified Domestic Relations Order (QDRO) to achieve a proper distribution. A QDRO is a court order that allows a portion of a spouse’s retirement account to be distributed to a former spouse as part of a divorce settlement.

If multiple real estate properties, including international holdings, are involved, you must also consider varying market conditions and valuations. 

Seeking guidance from a divorce attorney is the best way to navigate the complex asset valuation process. 

Types of Marital Agreements

Prenuptial and postnuptial agreements are legally binding marital agreements that dictate how assets, debts, and other financial obligations will be handled in the event of divorce or death. The agreements can provide invaluable protection for both parties.

Prenuptial agreements, drafted before a marriage, typically aim to preserve each spouse's separate property. A prenup may include specific provisions for the division of marital property acquired during the marriage. For example, a prenuptial agreement might specify that each party retains assets in their name. 

Postnuptial agreements work similarly, allowing spouses to address property division and financial arrangements during the marriage rather than before, when separation or divorce is not imminent. A postnuptial agreement may modify existing prenuptial agreements or address new circumstances, such as significant changes in financial status or inheritance. However, a postnuptial agreement cannot dictate provisions regarding child custody or support.

NOTE: A postnuptial agreement signed shortly before a party files for divorce is considered “divorce planning,” and the court will likely invalidate it.

Marital agreements can significantly influence asset division, and judges turn to them to guide their decisions. However, courts retain the authority to review and ensure their fairness and compliance with public policy. This means the court must divide marital property in proportions it deems just.

A marital agreement may not hold up in court if:

• It is not in writing

• It lacks signatures from both parties

• A party was coerced into signing it

• One party failed to disclose their full financial situation

• The terms are unconscionable —  a one-sided agreement that shocks the court’s conscience

• The agreement violates state laws regarding contracts or marital agreements C.R.S. 14–2-309

In many cases, the emotional toll of divorce proceedings can bring out the worst in people. Some spouses, in an attempt to preserve what they feel belongs to them, may not disclose certain assets. However, this is illegal and can lead to steep consequences. To protect yourself from a dishonest spouse, we have listed some preventive measures you can take to foster a fair outcome.

Organize important documents as soon as possible to ensure a fair and accurate division of assets in divorce. Having accurate financial records is crucial in determining alimony, identifying marital assets, dividing debts, and determining child support. At a minimum, we recommend gathering copies of these documents from the last three years:

• tax returns 

• pay stubs for both you and your spouse

• applicable W-2s and 1099s

• bank statements 

• investment account statements

• retirement account statements

• credit card statements

• loan documents

• property deeds and titles

• mortgage statements

• property appraisals

• insurance policies

• business records, if applicable

• prenuptial or postnuptial agreements, if applicable

Asset valuation and appraisals are imperative to divide marital property equitably. Divorcing couples may opt to jointly select appraisers and valuation experts. They may split the cost equally to obtain these services or negotiate which spouse covers the expense based on the asset type involved and which spouse is interested in acquiring it. 

If neither party can agree on an appraiser or valuation expert, the court can order the appraisals and allocate associated costs. Marital funds can sometimes be used to cover these costs and may be a practical solution. If concern over an appraisal arises, the opposing spouse may also hire a separate evaluation expert. 

 Keep a watchful eye on all financial accounts and credit reports before, during, and after divorce proceedings. 

Working with a Colorado divorce attorney is critical when dividing marital assets. Your attorney can help you determine which assets are considered shared assets and make sure you have a complete Sworn Financial Statement. Dividing marital assets is notoriously complex — seek legal advice to understand your options. 

Often referred to as an alternative dispute resolution (ADR), courts commonly require both parties in a lawsuit to participate in mediation. Facilitated by a neutral third party, this process can be a valuable substitute for court when parties are open-minded about negotiating a property settlement. 

We highly recommend each spouse have their attorneys review the settlement agreement before signing. Feel free to visit our site for answers to questions about mediation. 

Under the Colorado Rule of Civil Procedure 16.2, divorcing spouses are legally obligated to disclose all assets and debts. Unfortunately, divorce can bring out a darker side in people, especially when money is at stake. Some spouses may try to hide or sell assets. Not only is this unfair to the other spouse, it’s illegal. 

Planning for financial stability after a divorce is crucial in rebuilding your life. Managing a new budget with less income can be tricky. We recommend creating a realistic budget as early as possible. One way to start is to track your expenses for a few months to understand your spending habits. 

When creating a budget, you should consider the following:

• fixed expenses, such as rent and utilities

• variable expenses, such as groceries and entertainment

• debt obligations, including monthly credit card and loan payments

• building an emergency fund of three to six months worth of living expenses

• retirement account reflections

Revising Your Estate Plan and Beneficiaries

It may be comforting to know that divorced spouses cannot inherit benefit policies, but you still need to establish new recipients. Here are some of the policies that may require updated beneficiary designations:

• Life insurance policies

• Retirement accounts

• Trusts

• Will

State law allows for some exceptions. If the parties include an express provision to preserve the former spouse’s beneficiary designation then the automatic revocation does not apply. 

You may find it beneficial to work with an estate planning attorney to reorganize your estate, especially if you have children, plan to remarry, and/or have considerable assets. 

Dividing assets in divorce proceedings can be complicated at best and a contentious nightmare at worst. An experienced Colorado divorce attorney can help you understand the division process and avoid consequential mistakes.