Dividing property during a divorce is often one of the most challenging aspects of ending a marriage. Both spouses have likely contributed to building a life together, and determining how to fairly distribute assets can be an emotional and legal battle. Colorado follows an “equitable distribution” system, meaning that property is divided fairly based on multiple factors—but not necessarily in a 50/50 split.
If you are preparing for a divorce, understanding how courts divide assets can help you make informed decisions. Knowing what to expect can also prevent costly mistakes and ensure that you receive a fair share of the marital estate.
Marital vs. Separate Property: What’s the Difference?
One of the first steps in the property division process is distinguishing between marital and separate property. The classification of assets will determine what gets divided and what remains with its original owner.
Marital Property: This includes assets and debts acquired by either spouse during the marriage, regardless of whose name is on the title. Common examples include:
- The marital home
- Joint bank accounts
- Retirement savings and pensions
- Business assets
- Vehicles purchased during the marriage
- Debt accumulated jointly (such as mortgages, car loans, and credit card balances)
Separate Property: Assets that belong to only one spouse and typically are not subject to division. This includes:
- Property owned before the marriage
- Gifts given exclusively to one spouse
- Inheritances received individually
- Compensation from personal injury settlements (except for any portion that reimburses lost wages during the marriage)
While separate property is not usually divided, it can become marital property if it is mixed with shared assets. For example, if one spouse inherits money but deposits it into a joint account used for household expenses, the funds may lose their separate status.
How Courts Determine Equitable Distribution
Since Colorado does not automatically split property equally, the court considers several factors when determining a fair division. Judges review the circumstances of each case and aim to reach a fair outcome based on:
- The length of the marriage: Longer marriages often result in a more intertwined financial situation, increasing the likelihood of an equal split.
- Each spouse’s financial contributions: Even if one spouse was a stay-at-home parent, their non-monetary contributions—such as raising children and managing household duties—are considered.
- Each spouse’s earning potential: If one spouse is financially dependent on the other, the court may grant them a larger share of assets to provide financial stability.
- Whether one spouse sacrificed career opportunities: A spouse who put their career on hold to support the other’s education or job advancement may receive a larger share of the marital estate.
- Pre-existing agreements: If the couple signed a prenuptial or postnuptial agreement, the court will typically uphold the terms unless the agreement is deemed unfair or invalid.
It’s important to remember that equitable distribution does not necessarily mean an equal 50/50 split. Instead, the court focuses on a fair arrangement based on each spouse’s circumstances.
What Happens to Debts in a Divorce?
Dividing property isn’t just about assets—it also involves debts. Just like marital assets, debts accumulated during the marriage are usually considered joint obligations, even if only one spouse’s name is on the account.
Marital Debt: Includes mortgages, car loans, joint credit cards, medical bills, and personal loans acquired during the marriage. These are typically divided between both spouses.
Separate Debt: Includes debt accumulated before the marriage or after separation. Additionally, if one spouse takes on debt without the other’s knowledge—such as gambling debts or unauthorized credit card spending—the court may assign that debt solely to the responsible party.
Since both spouses can be held accountable for marital debt, it is wise to close joint accounts or refinance loans under one spouse’s name whenever possible. This can help prevent financial complications in the future.
Handling Retirement Accounts and Investments
Retirement accounts are often one of the most valuable assets in a marriage, and dividing them can be complex. In Colorado, retirement savings earned during the marriage are considered marital property, even if only one spouse’s name is on the account.
Common types of retirement accounts subject to division include:
- 401(k) plans
- Pensions
- IRAs
- Stock options and investment portfolios
To divide these accounts fairly, a court may issue a Qualified Domestic Relations Order (QDRO), which allows a retirement plan administrator to distribute funds to both spouses without early withdrawal penalties. However, it is essential to work with an attorney to ensure that these assets are handled properly to avoid unnecessary tax consequences.
Contact Littman Family Law to Protect Your Financial Interests
Taking proactive steps before and during your divorce can help protect your assets and ensure a fair outcome. Consider the following:
- Gather financial documents: Collect records of all assets, debts, tax returns, and property appraisals to ensure an accurate division of property.
- Establish separate accounts: Open individual bank accounts and begin separating finances to create a clear distinction between shared and personal funds.
- Work with professionals: Consulting with a divorce attorney and financial advisor can help you understand your rights and make informed financial decisions.
- Consider mediation: If you and your spouse can reach a settlement outside of court, mediation may be a cost-effective and less stressful alternative to litigation.
Understanding how property division works can help you avoid costly mistakes and ensure that your financial future remains secure. Our divorce attorneys are here to provide legal guidance and advocate for your best interests.
If you need assistance with your divorce and want to ensure a fair division of property, contact us today for expert legal advice.
