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How Are Financial Investments Divided in a Divorce?
Posted in Divorce on November 18, 2020
Property division is one of the most complicated aspects of a divorce case in Colorado. A lot of couples have complex assets, such as financial investments, retirement accounts, and stocks and bonds. Finding out how the courts may divide financial investments in a divorce could encourage you to work together with your spouse on a settlement agreement. If a settlement is not possible, prepare for the trial process by understanding how the courts may divide your financial investments.
Colorado Is an Equitable Distribution State
Colorado’s property division rules are complex. It is an equitable distribution state, not a community property state. During a divorce case in Colorado, all marital property is divided in a manner that is fair, or equitable. This does not necessarily mean equally. While one couple may have a 50/50 split, another may not. The courts will only touch marital property during a divorce, however. Separate properties will remain with their respective owners.
Marital property is anything acquired during a marriage other than gifts and inheritance. It can also describe property that used to be separate but that the couple commingled after the marriage, such as a joint bank account. Marital property is subject to division in a divorce court in Colorado. Anything owned by a spouse prior to the marriage, however, is separate property and safe from division. The courts will divide all marital property based on what is fair for the couple.
Property Division and Financial Investments
Dividing financial investments is tricky. The first step will be to determine if the investment is separate or marital property. Contrary to popular belief, a retirement account is not separate property. A 401(k), pension plan, Roth IRA or another type of retirement account is marital property if it was created or added to during the marriage. Either part or all of the retirement account will be subject to division. Social Security benefits, however, are not subject to division.
For the most part, a judge in Colorado will divide financial investments much like other types of property in a divorce case. The judge will analyze each spouse’s financial contributions to the marriage, as well as each person’s current financial situation. Then, the judge will divide all marital property, including financial investments, in a way that is fair between the couple. This is often a half-and-half split. If one spouse had the financial investment prior to the marriage, however, only the portion acquired during the marriage may be subject to division. The spouse may be able to keep what he or she earned prior to the marriage.
A common complication when dividing financial investments is the appreciation of its value. In general, if an investment appreciated during the marriage, both parties will divide the profit. A common exception, however, is if one spouse acquired the asset prior to marriage but the appreciation occurred while married. In this case, it will be up to a judge on how to divide the earnings. If dividing an investment that will not have a return until much later, such as a retirement account, the couple can either wait until the benefits are paid and split them or discount one spouse’s share to its present value and have the other spouse pay it out.
Reach a Settlement With Help From an Attorney
It is important to work with an attorney on a complicated property division matter. It may be possible to avoid the court’s way of dividing financial investments during a divorce if you can achieve a settlement agreement with your spouse. In general, a judge will sign off on the paperwork if you and your spouse can agree on how to divide property, assets and debts. This can help you avoid a trial. Work with a divorce attorney in Fort Collins to improve your chances of settling. Your lawyer can facilitate communication and compromises with your spouse during mediation or arbitration. Speak to an attorney today about dividing your financial investments during a divorce.