Property & Debt Division in a Divorce

Colorado is a “dual property” equitable distribution state. This means that, in a divorce, the court may only divide and allocate the parties’ marital property and debt. The court may not divide or allocate a spouse’s separate property or debt.

What is Marital Property?

Marital property consists of all property acquired by either spouse during the marriage except the following, which are considered a spouse’s separate property: (a) property acquired by gift, bequest, devise, or descent; (b) property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent; (c) property acquired by a spouse after a decree of legal separation; and (d) property excluded by valid agreement of the parties.

It does not matter how title to property is held. Property acquired during the marriage that does not fall into one of the above four categories is presumed to be marital property which the court may divide and allocate. Even if property does fall into one of the above four categories, if the property has appreciated in value during the marriage, the increase in value is marital property which the court may divide and allocate in the divorce.

There are a multitude of assets that are considered “property” subject to division and allocation in a divorce. The list includes:

  • Personal property such as furniture, jewelry and art
  • Real estate
  • Motor vehicles
  • Financial accounts, including bank accounts and investment accounts
  • Retirement accounts (IRAs, 401ks, etc.)
  • Stocks
  • Bonds
  • Deferred employment benefits
  • Stock options
  • Profit sharing
  • Pensions
  • Tax benefits
  • Business interests, including interests in corporations, partnerships, LLCs, etc.
  • Certain military retirement benefits
  • Income from separate property
  • Contract rights, including royalties, etc.
  • Frequent flyer program awards
  • Legal claims such as personal injury and workers’ compensation claims.

Allocation of Marital Property

To identify, divide and allocate the parties’ marital property, the court must engage in a multi-step process:

  1. The court must determine whether a spouse’s interest in something constitutes “property” at all. The term “property” is interpreted broadly, and includes “everything that has an exchangeable value or which goes to make up wealth or estate.” However, interests that are merely speculative are mere expectancies and do not constitute “property.” For example, a spouse’s interest in a pension plan is “property” subject to division in a divorce, while the rights of a beneficiary in a discretionary trust is not.
  2. Once the court determines what does and does not constitute the parties’ “property,” the court must then determine whether the property is marital or separate under the four categories described above.
  3. The court sets apart to each spouse his or her “separate property.”
  4. The court determines the value of each item of marital property.
  5. The court divides the parties’ marital property in such proportions as the court deems just after considering all the relevant factors including those described above.

The court must also consider the desirability of awarding the marital home or the right to live there to the spouse with whom any children reside the majority of the time.

In dividing and allocating marital property and debt, the court must consider all relevant factors and come up with a division and allocation that the court deems “just.” In making this determination, the court will consider (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.

The court is not required to divide the assets 50/50. The court may not consider marital fault or misconduct when dividing and allocating property, but it may consider a spouse’s economic fault or misconduct.