Is Colorado a Community Property State?

Is Colorado a Community Property State?

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When a couple faces the inevitability of going their separate ways, one of the first things they wonder about is how to split their property in a divorce. Second only to child custody, separating assets is one of the most contentious aspects of divorce. While a handful of states are community property states in which the courts consider all assets collected during a marriage to belong jointly to both spouses and divide them 50/50, Colorado isn’t one of them.

Instead, Colorado doesn’t assume all property accumulated during the marriage as jointly owned but as remaining individual property. Colorado remains an equitable division and dual-property state.

Is Colorado a Community Property State?

Understanding Equitable Division

Under Colorado’s Revised Statute Section 14-10-113, the state must first find the total value of the property owned by both parties in the marriage and then follow a plan for the most equitable division possible, with a goal of fairness if not necessarily strictly even division.
Colorado uses a 3-step process of equitable division by:

  • Identifying all property and debts
  • Valuing all property
  • Dividing all property and debts

Both parties must make full written disclosures of their assets and debts. In the best-case scenario, a couple can form their own, mutually agreed-upon division with or without the help of a mediator. Professional mediation is highly recommended as a way to settle asset division fairly, civilly, and in a way that minimizes contention in a safe, controlled environment. If negotiations fail and a couple can’t reach a resolution even with mediation, the matter goes to court for a judge to decide.

What is an SFS in a Colorado Divorce?

When one spouse files for divorce in Colorado first, both spouses must fill out a sworn financial statement (SFS). This lengthy form requires lists of all assets and debts as well as all income and expenses for each spouse. Collectively, all the listed assets and debts are the spouses’ marital estate. In a true community property state, all property is divided down the middle with half going to each spouse. In Colorado’s equitable distribution state, property remains whole and is distributed between divorcing spouses as fairly as possible with some assets and debts going to one spouse and some to the other. The courts strive for fairness rather than a 50/50 division, so the distribution isn’t always perfectly balanced; for instance, a lower-earning spouse may receive greater assets or fewer debts during the division.

After both parties disclose their information on the SFS, it may be placed into a spreadsheet with some back-and-forth trading and negotiation between the spouses in the hopes of achieving an equitable distribution between the spouses outside of a courtroom in what’s known as a separation agreement. Only if both parties cannot come to a mutually accepted agreement does the matter go before a judge to decide.

Will a Judge Always Accept an Out-of-Court Separation Agreement?

In some situations, spouses may agree on a grossly unbalanced division of assets; for instance, if a spouse says, “I’ll give her everything because I cheated,” or “I’ll let him have it all because I just want to get this over with.” In cases of separation agreements that are far out of balance and grossly inequitable, a judge is likely to overturn the signed agreement. A judge may also decline to accept a signed agreement if the court senses that any of the following played a role in the agreement:

  • One spouse unduly pressured or intimidated the other into signing an unfair deal
  • One spouse has a far lesser understanding of economic matters and the financial situation of the marriage than the other
  • If the spouses were in greatly unequal emotional places at the time of the signing
  • If the agreement was made under fraudulent conditions such as with the concealment of assets

If a signed agreement dividing a couple’s assets and debts is obviously unfair to one party, a judge is unlikely to accept it.

How Judges Approach Equitable Division in Colorado Courts

Judges attempt to divide marital property in a way that’s the fairest for both parties in a divorce. While every case is unique, a judge might consider specific factors such as one party placing their career goals on hold in order to take care of the children and the home. In this case, fair distribution may not be the same as equal division and the spouse who earns less might get to keep a greater share of the marital assets.

Colorado judges consider the following during property division in divorce:

  • Each party’s financial situation
  • Increase or decrease in shared property during the time of the marriage
  • Whether or not the parent with primary custody wishes to remain in the family home
  • Determining separate vs. marital property

Understanding Separate and Marital Property

Colorado law recognizes two types of property, separate and marital. Separate property is that which a spouse owned before the marriage either through purchase or inheritance. It also pertains to debts incurred by each individual before the marriage.

The term marital property describes all assets acquired jointly during the marriage such as real estate, vehicles, businesses, art, jewelry, and collectibles as well as joint debts such as credit cards.

Dividing separate and marital property becomes complex when couples commingle property throughout the course of a marriage. Separate bank accounts commingle when a spouse makes deposits and separate real estate property may become joint when a spouse puts money and time into it. A property owned by one spouse before the marriage is separate property, but any equity built on the property during the marriage is considered marital property and subject to division.These types of commingled assets may be difficult to divide equitably and often leads to contentious negotiation during divorce.

What is the Dissipation of Marital Assets?

When mediating a divorce settlement in Colorado or when a judge decides the equitable division of marital assets, the question of dissipation of marital assets may arise. Under the state’s divorce law, neither spouse may dissipate marital property once one spouse has filed for divorce. Dissipation occurs when one spouse intentionally removes, spends, or hides marital assets so it isn’t subject to division. Some examples of purposeful dissipation of marital assets include:

  • Giving away or cheaply selling possessions to friends and family members with the express purpose of retrieving them after the divorce
  • Excessively spending money on personal items, drugs, alcohol, or gambling with the intent of depleting assets before a divorce and without the other spouse’s approval
  • Spending money on gifts, trips, etc. for an adulterous relationship

If one party in a divorce purposely dissipates marital assets, the other party can raise an argument of dissipation in court and ask for the court to “recapture” the value of the dissipated assets by assigning additional property to the spouse who was cheated.

How an Attorney Can Help

An experienced Denver property division attorney can help you understand your rights under Colorado’s equitable division laws and may have solutions to help facilitate a fair division while advocating aggressively for the best possible outcome for your unique case.