Articles Posted in Property Division

From time to time, in my limited spare time, I read. As the inner nerd in me still exists, that includes looking at odd topics related to divorce laws in other places. Colorado is one of fifty states. Though our laws have similarities to other states, they also differ. To Denver divorce attorneys, our statutes makes sense, though not always, largely based on familiarity and the fact that change often comes at a snails pace. Over the years I have read horror stories from other states, such as Massachusetts, which apparently does, or did, factor in new spouses’ incomes when recalculating alimony (properly termed maintenance in Colorado). I recall a story a few years ago from somewhere back east, in which a man was ordered to pay alimony at the time of his divorce, with his wife ultimately remarrying and his alimony stopping. Once the wife divorced her second husband, she was able to go back and get alimony again from her first husband. Upon reading that story, I concluded that payers of alimony in Colorado should thank their lucky stars that alimony terminates upon remarriage of the payee and cannot be revived. This was, perhaps, the oddest article I had seen until March of 2015.

While browsing the internet in my efforts to know more than I did the day before, I came across an article related to divorce and property that takes the proverbial cake. The specific article related to not another state, but another country, England. In this article regarding a British divorce, a husband and wife were married in the early 1980’s and divorced in the early 1990’s. Presumably all issues of property division and support were resolved at that time. As U.S. law is rooted in English law I could not help but presume that procedures and notions of fairness would be similar to ours. Those presumptions were wrong. In this case, during the next roughly 20 years, the ex-husband has started some sort of energy company and amassed a fortune in excess of $100 million pounds (pounds being worth significantly more than our dollars). In the article, the ex-wife, of far less means and perhaps down on her luck, was able to convince a British court that she should be able to come after her husband years later, essentially must because he had made out like a bandit and she had not. The British court, seeming to be at the appellate level, remanded the case back to the trial court, having ruled that she could make a claim against the fortune he had amassed subsequent to the divorce and division of assets.

Upon concluding the article, I sat bewildered and amazed, imagining the dramatic and chaotic state the Colorado family law community would be left in should our divorce laws regarding division of property take a turn towards the bizarre such as they have across the pond. In Colorado, pursuant to C.R.S. 14-10-113, property is divided at the time of the divorce decree, meaning when the initial divorce case is over. Beyond potentially filing an appeal, or perhaps in cases in which an asset is hidden or not disclosed, there is no going back to seek property amassed after the divorce from the former spouse. If our laws mirrored those in the English case, divorce would just be a new chapter in a life long saga of back and forth with the courts, as either spouse waited to pounce on the post-divorce good fortune of the other. A decision like that in the British case would turn divorce law in Colorado on its head. Fortunately, property divisions are final and our courts recognize that but for lingering issues of support which can arise, property divisions are final and people are given the latitude to move on with their lives.

As I look across the ocean, moving east to west, it seems that sanity mapped up with the law grows the father one moves towards the Rocky Mountains. To learn more about your property rights and representation in a Colorado divorce, contact an experienced attorney.

yellow-aspen-trees-9-1100273-m.jpgIn a Colorado divorce, when the court divides property, it must determine whether an asset is marital (subject to division) or separate (not subject to division). Generally, marital property doesn’t include property that spouses obtained before marrying or that they have agreed will remain separate. If a spouse places separate property into joint ownership with the other spouse, however, the court presumes he or she intended it to be marital property. This presumption can be rebutted by clear and convincing evidence. However, if separate property is commingled with marital property such that it can’t be traced back to separate property, it is transmuted into part of the marital estate.

In re the Marriage of Amy Corak and Nevan Corak considered a husband’s appeal of a Colorado trial court’s allocation of marital property. The case arose in 2010 when a couple entered into a prenuptial agreement. The agreement identified assets that would be separate property, which included a parcel of the husband’s property (“Shoshone”). All separate property was supposed to remain separate property if the marriage ended.

A month after the couple married, they purchased the Pinyon property. The husband pledged Shoshone as collateral for a home equity line of credit. This was to be used as a down payment for the new marital property. The couple decided they would use $16,000, drawn from the line of credit, to pay off the wife’s credit card debt from before the marriage.
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Whether a Douglas County divorce attorney, or one practicing just below the slopes of the Aspen ski hills, we all know the importance of financial disclosures in any divorce case. Colorado Rules of Civil Procedure rule 16.2 sets forth the procedural aspects, or rules, a court expects parties, with or without attorneys, to follow related to case management. This includes rules regarding disclosure of documents and information related to the financial issues of a divorce case, which can include property division, debt division, maintenance (alimony), and child support.

Sadly, from time to time, we see cases in which one party will attempt to hide assets from the other party. In most cases people are forthcoming, understanding that they are indicating to the divorce court, under penalty of perjury, that they have provided a complete listing of their assets and debts. However, every once in a while, you will get that one person who feels they might get away with not disclosing a bank account, stock account, or perhaps that tangible piece of property, such as artwork or a piece of expensive jewelry. Of course, there are limitations to what an attorney, or even a private investigator, might be able to find. In employing the tricks-of-the-trade, family law attorneys know how to go through the various financial disclosures to assess whether there are other items being concealed. Of course, this is not full proof. Likewise, people may come to an attorney after their divorce is done, indicating they believe the other side hid something from them. Fortunately, whatever the situation, statute affords parties to a Colorado divorce case a remedy, via a 5 year window, in which to seek relief should hidden or undisclosed assets become known.

Initially, C.R.C.P. Rule 16.2(e)(2) requires the parties to a divorce case to voluntarily disclose the following as can relate to assets:

A “Sworn Financial Statement”
The last three years of personal (and business if applicable)
Personal financial statements Business financial statements Real estate documentation Investment account statements Retirement account statements Employment benefit statements Bank statements Income documentation Insurance documentation Continue reading

When a marriage comes to an end, there must be a division of the assets that have been accumulated during the marriage. Generally speaking, states take one of two approaches when dealing with the division of marital assets. The more common of the approaches, and the approach taken by the state of Colorado, is “equitable distribution.”

tracks-in-field-1435694-m.jpgThe concept of equitable distribution is exactly what it sounds like. The property in a marriage is not divided equally between the parties but in a manner that is fair, given a number of different factors. Before a court gets to the division of marital assets, however, the court must first determine what constitutes a marital asset and what is the individual property of the parties.

Marital Assets in Colorado
In Colorado, the general rule is that property owned by either party before entering into the marriage remains the individual property of that party. All jointly held property is marital property. In addition, even an increase of value in individual property during the marriage can be considered marital property, depending on the circumstances.
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summer-beach-1270002-m.jpgThe Colorado Supreme Court recently decided an interesting issue for the first time. It looked at whether accrued vacation and sick leave is considered marital property during a divorce. In the case a husband and wife petitioned for divorce in 2007. The trial court divided the husband’s accrued unused vacation and sick leave, construing it as marital property.

The wife had submitted an exhibit during the divorce at the bottom of which she noted her estimate that the husband had accrued $23,000 worth of vacation and sick leave. The wife stated she would not ask for half of this sum if she could move to Florida with their kids. If she moved to Florida, she would leave the amount for the husband to use for visitation with the kids.

The court calculated that the husband had 452 hours of leave and sick time, which was worth $51.40 per hour or $23,232.80 in total. The husband’s pay stub did not indicate whether the accrued leave had a cash value. However, the husband was entitled to payment of the accrued leave if his job was terminated.
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oil-pumps-752980-m.jpgSometimes the division of property in a Colorado divorce is relatively straightforward, but it can become much more complex if one or both partners owns a business or is a partner in a business. Dividing a business or partnership interest during a divorce may be a difficult valuation that falls within a trial judge’s discretion. The price stated in a buy-sell agreement is not conclusive. Partnership agreements are not conclusive either.

A Colorado judge must do more than look at a balance sheet of assets and liabilities. Rather, the court must consider the context of the agreement. It should also factor in assets, both tangible and intangible. This includes the value of the work in progress, goodwill, and accounts receivable.

If a business share is in a company not traded on the stock market, the value of an ownership interest can be hard to measure fairly. However, a “marketability discount “can adjust the value of shares downward. A marketability discount is an amount that is deducted from an equity interest to reflect the lack of a ready trading market for shares. The propriety of using a marketability discount was decided in a 2010 Colorado Supreme Court case.
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white-house-1426634-m.jpgFrom the wedding and throughout the course of a marriage, a Colorado couple may receive many gifts, including gifts of real estate or significant amounts of money. If the couple gets divorced, one of the major controversies of the divorce may be who gets the property that was gifted. Is it separate property belonging to the partner who is friends or family with the gift giver? Or is it property to which both partners have a right? How does property division work in the case of gifts? Disposition of property in Colorado is covered by Colorado Revised Statute 14-10-113 and case law.

In a recent case, a husband appealed as to the property distribution ordered in connection with his divorce, among other things. One major piece of property that caused contention was the marital home. The couple had purchased the martial home together as joint property while they were married. Years later, the wife’s mother had paid off the mortgage by making a direct transfer to the lender. The couple was still married at the time. Soon after she paid the mortgage, the mother signed a trust instrument that described all her gifts to the wife as advances on her inheritance.

The mother’s trust instrument did not mention the husband. At trial, the wife testified the mother did not intend the mortgage payments as a gift to the marriage, but just to her. The husband testified both the wife and mother had told him it was a gift for them both. The trial court classified the home as the wife’s separate property because her mother had contributed to the mortgage. It found that the funds used to pay the mortgage were treated as part of the wife’s inheritance, which would be separate property.
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photo_6288_20080611.jpgIf you file for divorce in Colorado, within 40 days of serving your husband or wife you must also file a sworn financial statement with the court and make various mandatory disclosures to your spouse. Unlike some other states, Colorado is not a community property state; not all of your property is considered equally the property of your spouse. Therefore, the judicial system requires that spouses make each other aware of their financial information while coming to an agreement on marital property, debts, and maintenance.

When the parties are unable to come to an agreement, the court divides the marital property by weighing several factors. Among these factors are: each party’s contribution to acquiring the property, including the contribution of a homemaking spouse, the value of each party’s contribution, economic circumstances of both partners when they divorce, which partner is going to have custody of the children, and any changes in property values where only one party owns the property. Some items often considered “marital property” by the court are pensions, life insurance policies, tools, businesses, houses, vehicles and furniture.
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As divorce attorneys in Denver, we deal with various issues in any case. This can include issues related to children, property, financial support, and more. Not all cases are the same. One of the significant issues that can arise in a divorce is the division of property. In most cases, the property to be divided consists of a home, retirement and bank accounts, vehicles, investment accounts, or the furniture and pots and pans. However, there are families or parties to a divorce case who own businesses or business interests. As part of our divorce practice, experienced family law attorneys at Plog & Stein assist with the valuation and division of business assets as well.

Colorado business interests come in all shapes and sizes. A person may own a large business, such as a chain of restaurants or a car dealership. A person may own a small business, such as a one person accounting firm or a mom-and-pop laundry mat. A person might also own a fraction or portion of a business, without owning the whole entity outright. In a Colorado divorce setting, a business, or interest in a business, is generally considered property. As property, the same principles for dividing other assets apply. Property acquired during the marriage, absent a limited exception, is marital. Increases in value during the marriage to property acquired prior to marriage are considered marital in nature. Titling on property determined to be marital does not matter and said property can be divided by the court regardless of whose name it is in.

Prior to arriving at the actual division of a marital business asset, the parties must determine the value of a business. Contrary to popular belief, the value of any business is more that just looking at the assets/property and debt to arrive at a value from a balance sheet approach. Though this can be one facet of a business valuation, there is much more to the equation generally accepted by attorneys and courts in a Colorado divorce case. Beyond assessing assets and liabilities, a business valuation will entail an assessment of current and historical revenues and profits. This analysis also ties into the term “good will,” which can be quantified into an actual dollar figure. We have seen cases in which there may be a two person professional operation in which one party or the other will say, “There’s no value to the business; I am the business.” Of course, this will be a statement made by a husband or wife who actually runs or owns the business. Conversely, the other party may find it meritorious to look into whether even a small business has value for asset division purposes. As part of the process, business valuators can also determine historical values, such as the value at the time of marriage or acquisition, as well as the current fair market value.
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As indicated in prior blog postings, one of the major topics in a Colorado divorce case can be the division of marital property. Property can come in all shapes and sizes, and is not limited to cars, houses, and retirement accounts. Every so often, a divorce case will come along in which one, or both parties, owns a business. Just like any other piece of property, that business may have a marital component to it, and a cognizable value.

One of the first things that comes out of most people’s mouths when discussing a business with the Denver divorce attorneys at Plog & Stein is the notion that the value of a business is essentially calculated by looking at assets minus liabilities, and nothing more. The other thing that seemingly comes out of most people’s mouths is the idea that only a business with inventory or significant property, such as a car dealership or a store, has any real value. Both common notions are wrong when it comes to property division in a divorce.

There are many types of businesses one might have, or fight over. We have seen people with liquor stores, restaurants, car dealerships, medical practices, legal practices, and more. A business does not have to have inventory and property to have value. A business does not have to sell something. A single attorney or accountant sitting alone is an office can constitute a business with marital value. Service industry businesses are businesses, too.

Once your divorce attorney determines the existence of a business, you will need to have discussions regarding figuring out the marital components to the business. The business may have been owned prior to marriage. If so, as with other property, there must be a determination as to whether there has been an increase in value during the marriage, to be divided as part of the property division. There may also be partners or other shareholders, whom will also need to be factored in. Once it is determined that there is likely a marital componenet, the next step will be figuring out a value. The way this is normally done is through the hiring of a business valuator.
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