When going through a divorce, one of the most important issues you must address is property division. Generally, “marital property” consists of any property and debt either spouse accumulated during the marriage. It doesn’t matter who bought the item or whose name is on the lease. The law assumes that spouses share all assets, and both spouses own all marital property equally.
Therefore, the law must distribute all marital assets in a divorce, deciding who should be the single owner of each asset. This property division can have lasting financial implications for both spouses after the marriage ends.
Understanding "Equitable" Versus "Equal"
Equitable Property Division
Legally, “equitable” is a synonym for the word “fair.” When attempting to divide assets “equitably,” Colorado courts look at the circumstances of each case. Then, they decide how to “fairly” distribute property.
The process is nuanced, and it considers a variety of factors, such as:
- Each spouse’s contribution to the marital estate
- The value of the property each spouse will receive
- Who is the rightful, entitled owner of a particular asset
To sum up: The equitable approach is not a simple mathematical division. Instead, it looks at who deserves what and makes decisions accordingly.
Equal Property Division
States that use an “equal” model are often called “community property” states. Generally, this system is considered the older, outdated model, and only nine states operate this way.
In community property states, courts try to give each spouse 50% of the overall marital assets. This system is more dispassionate and mathematical, but it has its consequences. For example, if one spouse keeps the home, they owe the other spouse half of the home’s value. All this value is tied up into the home, and now the spouse who keeps the home has a problem. They have to find a way to give their spouse tens or hundreds of thousands of dollars to keep the house.
To keep division equal, spouses may have to sell assets and split the profits. They can also trade physical property until both spouses have 50%, or, if they have cash on hand, they can buy one another’s half of assets.
The Criteria for Equitable Distribution
Fair property division requires a careful and comprehensive evaluation of each divorce case. Ultimately, it wants to give each spouse what they deserve and what they need to remain financially healthy.
When making equitable division decisions, judges consider factors such as:
- The age and health of each spouse
- The liquidity of the marital property
- Whether a spouse is entitled to certain assets
- Whether a spouse is guilty of squandering marital assets
- Whether a spouse will have primary child custody (custody can affect who keeps the home.)
- Any marital misconduct that may have contributed to the breakup (courts can use property as a form of compensation for abused or mistreated spouses.)
Claiming Entitlement to Property
When negotiating property division, you can claim entitlement to a certain asset.
To make a strong argument for entitlement, you need evidence showing that you:
- Contributed to the property
Contribution could be economic, meaning you made most of the payments on the item. It could also mean that you maintained the item. - Were the primary user of the asset
Essentially, this means that you used the item most often, and you deserve to keep it after the divorce.
Examples:
- Contribution: Imagine a home where the wife is the primary breadwinner, and the husband is a stay-at-home father. She makes all the economic contributions to the home, but he does everything else. He keeps the place clean, and he is in charge of upkeep and maintenance. Even though he didn’t spend much money on the home, he may have a strong claim that he contributed more and deserves to keep it.
- Primary Use: Each spouse uses a separate car. The husband makes all the payments on both cars. However, the wife uses the Honda every day. She needs it for work, errands, driving the kids around, etc. Furthermore, she keeps it clean, takes care of oil changes, and so on. Everyone in the home understands that this is “mom’s” car, so she can argue for entitlement in the divorce.
Distinguishing Between Marital Property and Separate Property
Marital property generally includes all assets and debts either spouse acquires during the marriage, regardless of whose name is on the title.
Separate property refers to assets owned by only one spouse.
Rules vary, but separate property generally includes:
- Inheritances you receive
- Anything you own before the marriage
- Gifts from people outside of the marriage
- Any property protected by a prenuptial agreement
The lines between separate and marital property can blur. Separate property can commingle with marital property. For example, imagine inheriting a piece of land. That land is yours alone. However, you and your spouse build a house on that land. Now that land is commingled with the home, which is marital property.
Appreciation of Separate Property
If a separate property’s value increases during the marriage, that increase could be considered marital property. Generally, this happens when your spouse contributes to the property’s value.
For example, one spouse owns a business before getting married. During the marriage, both spouses contribute time, money, or effort to the business, and the business’s value grows.
Dividing Property Through Mediation or Arbitration
Mediation and arbitration are both ways to avoid settling divorce decisions in court. These methods offer a more private and less adversarial approach to resolving disputes.
Mediation involves a neutral third party. They help the spouses communicate and reach a mutually acceptable agreement.
Arbitration involves a private judge who makes binding decisions based on the evidence presented.
Both options can save time and money, but they also require a willingness to compromise. Either option could also limit your ability to appeal decisions.
Clawson & Clawson, LLP is here to help spouses fairly divide their assets in a divorce. For a free consultation, contact us online or call our office at (719) 602-5888.