What Happens to Your Debt When You Get Divorced?

Whether it’s a mortgage, car payment, student loans, or credit cards, almost everyone has some kind of financial debt. When a couple gets divorced, their marital debt, just like their assets, must be divided between the two parties.

What is marital debt?

When it comes to married couples, there are two categories of debt: marital debt and personal debt.

Personal debt is debt one party incurred prior to the marriage. In the case of divorce, personal debt goes back to the original owner.

Marital debt is debt incurred by a couple during the course of their marriage. Generally, debt acquired during marriage is considered marital property even if it was obtained in the name of only one spouse. There are many reasons a couple might decide to take out debt in only one of their names ”“ for instance, one party may have better credit than the other. Therefore, this debt is considered marital debt because it is presumed to benefit the whole couple or family unit.

How is debt divided upon divorce?

A court will try to divide a couple’s marital debt equitably, which does not necessarily mean equally. Courts will look at the surrounding financial circumstances to allocate debt (and assets) between the two parties. The circumstances considered may include (among other things):

Ӣ Why the debt was incurred,
Ӣ When in the marriage the debt was incurred,
Ӣ The length of the marriage,
”¢ Each party’s ability (or inability) to pay the debt, and/or
Ӣ The contributions of the parties during the marriage.

If one party is granted an asset in divorce (for example, a car or house), that party is generally responsible for the debt associated with that asset (the car payment or mortgage).

Courts can divide all debt accrued up to the date a divorce is final. But what about debt accrued between the time a couple separates and when their divorce is finalized? What if one party has been recklessly or secretly spending ”“ for instance, spending money on an affair or racking up debt to harm or get back at the other party? In those cases, there is likely an argument to the court that the debt accrued by one party after separation or in anticipation of divorce should belong solely to the party that accrued it. The court should consider those circumstances in equitably dividing the debt.

Once the debt is divided, you should take steps to ensure that only the responsible party’s name remains on the debt. If the debt remains in both names and your former spouse fails to pay, you may be see negative consequences like a hit to your credit score or calls to creditors. Retitling the debt in the name of each individual will help protect you if your former spouse fails to pay the debt he or she has been assigned.

What about student loans?

One particularly tricky category of debt is student loans. By their nature, student loans belong to one party ”“ the party receiving the education. However, the benefit of receiving the education (like a higher salary) likely benefitted the whole couple or family.

Generally, student loans incurred during marriage are considered marital property, but arguments can be made that student loan debt should be carried solely by the student-borrower. In particular, courts may look at the length of the marriage, when the education was undertaken, and the contributions of each party.

Divorce Financial Considerations for Stay-at-Home Moms

Stay-at-home moms who have spent many of their married years as mothers who maintain the household and head child-rearing while relying on the income of their spouses may be intimidated by the prospect of divorce. Indeed, not only is divorce an emotional process for anyone, but for a stay-at-home mom who has always been dependent on her partner, divorce can create many financial anxieties, too. While your financial situation should not prevent you from seeking a divorce if that is what you want and need, there are some important financial considerations for stay-at-home moms to think about before filing divorce paperwork. Here are some things that you should know–

You’ll Likely Receive Spousal Maintenance

One thing that can help to ease your financial woes is the fact that it is more likely than not that you will be eligible for an award of spousal maintenance (alimony). Spousal maintenance is designed to help a dependent partner in a marriage/divorce support themselves with funding from the financially independent party. In making a determination about spousal maintenance, a court will consider each party’s gross income, marital property, the financial resources of each party, tax consequences of an award, and whether or not an award is fair and equitable (CRS 14-10-114).

If You Get Custody, Your Spouse Will Have to Pay Child Support

If you still have minor children in the home, you may be worried about how you will support these children (and yourself) if you are to divorce from your spouse, especially if you’ve been out of the workforce for years. One thing that you should know is that if you are awarded primary custody of your children–which is more likely than not if you have been the primary caregiver up until this point–then your spouse will be required to pay child support. Both parents have a duty to support their children financially.

You’re Entitled to Equitable Distribution of Marital Property

Even if you didn’t actually earn the money that filled up bank accounts and bought the many assets in your marriage, such as vehicles, your family home, furniture, and the like, you’re still entitled to equitable distribution of any marital assets. This means that it is very unlikely that you will be left with nothing after the divorce, even if your spouse was the only breadwinner.

Other Things to Think About

Just because spousal maintenance, child support, and equitable distribution laws are in place, all of which help a stay-at-home parent support themselves after a divorce, this does not mean that there aren’t some things to plan for, financially speaking. These include:

  • Finding a place to live. Even if you are receiving spousal support and get a fair property division settlement, finding a place to live could still push your budget to the limit. Try to plan for a place to live before filing for divorce.
  • Getting a job. You’ll probably want to return to the workforce after your divorce, which might require acquiring new skills or education first.
  • Setting a budget. Your costs of living may be different post-divorce, and you may have less money to support those costs. Set a budget early on to know exactly how much you’ll need to get by comfortably.

Our Colorado Divorce Lawyers Can Help

One of the best ways to mitigate the negative impacts of a divorce is to consult with an experienced Colorado divorce lawyer as soon as you start thinking about leaving your spouse. At Divorce Matters, we have helped stay-at-home moms like you secure the best divorce settlements possible. Call us today to learn more.

Transmuted Assets and Colorado Divorces

One of the most complicated elements of getting a divorce in Colorado is that of deciding how assets and debts will be divided amongst the parties to the marriage/divorce. While Colorado law holds that property and debts must be divided in a manner that is equitable, understanding the difference between marital vs. separate assets, how “equitable” is determined, and numerous other considerations can be difficult. Something that can complicate the process even more is that of transmutation. Here’s a look into what you need to know about transmuted assets and Colorado divorce.

Transmuted Assets – What Are Those?

Transmutation is defined as “the action of changing or the state of being changed into another form.” As it applies to property and assets in a marriage, transmutation means that the property has been changed from marital property to separate property, or from separate property to marital property. This can happen for various reasons, including co-mingling, as well as legal actions, like adding a party’s name to a vehicle title. Transmutation can also happen as a result of contract or gift.

Why Does it Matter If Assets Are Transmuted?

If separate assets are transmuted into marital assets, this can have a significant effect on the outcome of your divorce, primarily because separate and marital assets are considered distinct and separate in a Colorado property division settlement. In fact, only marital assets are subject to division; separate assets may be kept separate.

One of the most common ways in which assets are transmuted is via commingling, which happens when marital and separate property become mixed together to such a degree that identifying and separating each becomes impossible. For example, if an inheritance (separate property) is used to purchase the family home (marital property), assets have become commingled.

How to Prevent Transmutation

If you want to keep your property separate and ensure that it is not subject to division during your divorce, it’s important to understand the ways in which transmutation of assets occurs and how to prevent transmutation. Some tips to prevent transmutation include:

  • Keep thorough documentation of all gifts and inheritance received;
  • If you purchased property or assets prior to marriage, track down the details of those purchases, including title information, purchase date, etc.;
  • Make your intentions about your separate property clear – creating an estate plan can be useful for this purpose;
  • Don’t commingle funds – maintain separate bank accounts, don’t use a gift to pay for marital assets or property, etc.;
  • Don’t use any marital funds to maintain property that is separate; and
  • Do not treat any separate property that you have as joint, marital property.

When it comes time to settle your divorce, you may have to prove that your assets are separate and that you had no intent to transmute them. A skilled lawyer with the resources to hire relevant experts can prove extremely helpful at this phase in the process.

Call Divorce Matters Today

Understanding the laws regarding property division can be confusing, especially as they pertain to the transmutation of assets. To schedule your consultation with a knowledgeable divorce lawyer near you, call the offices of Divorce Matters today.

Selling Possessions Before a Divorce

Before a divorce can be finalized in Colorado, the separating couple must come to an agreement about the division of property, alimony, and spousal support. These can be some of the most contentious issues in a divorce, especially if the divorce is acrimonious.

As you navigate the divorce process, it’s important that you understand the laws regarding the above, as well as best practices when separating. It’s also important that you understand what can happen if you attempt to skirt the law. Here’s what you should know about selling possessions before a divorce–

Selling Spouse’s Stuff Before a Divorce in Colorado

Consider a situation in which you are thinking about filing for a divorce, but haven’t yet filed your divorce papers. In this case, do you maintain the right to sell some of your possessions prior to the divorce?

The answer is that it depends. If you are selling your possessions in an attempt to reduce your assets for the sake of mitigating child support or alimony payments, or to reduce the value of your estate for equitable distribution purposes, the court will likely see through this, and not only will you be held responsible for such payments regardless, but you could even be penalized. If you are selling your personal possessions to provide you with extra cash to help you pay for the divorce (or for another justifiable reason), on the other hand, doing so is likely within your rights.

Whether or not you can sell possession before a divorce also depends on whether or not the possessions are marital or separate property; you may be free to do what you want with your own property, but if you sell marital property and this has a negative financial effect on your partner, this may be considered by a court when making a decision about division of property in a divorce.

Another important element to consider is that of when; once divorce papers have been filed and served, an automatic injunction goes into effect. This injunction prohibits either spouse from hiding, destroying, disposing, or transferring any marital property (CRS 14-10-107).

Purposefully Selling Possessions Below Market Value

Another issue to consider is not just that of selling property before the divorce, but that of selling property below market value intentionally. A party in a divorce does not have the right to intentionally sell shared property for less than fair market value in an attempt to reduce the amount the other spouse will get out of it, reduce the amount of property that is considered for equitable distribution purposes, or reduce one’s child support or alimony obligations. If one party does this, the court may assign a professional appraiser to determine what the fair market value of the property was prior to being sold. Then, it may be this number that is considered for equitable distribution purposes, not the amount that the property was sold for.

Consult with a Lawyer

If you’re thinking about filing for a divorce and have questions about property division laws and how assets are considered during the divorce process, it’s best to consult with an attorney. At the offices of Divorce Matters, our Colorado divorce lawyers are here to answer your questions and provide you with knowledgeable, accurate advice. Reach out us today for a consultation to get started.

Navigating Divorce when You Co-own a Business

Navigating Divorce when You Co-own a Business

In a divorce, a judge unwinds a couple’s financial entanglements. But what happens if you own a business together with your spouse? In addition to being co-owners, you probably both contribute to the business, and it will suffer if either one of you disappears altogether. For this reason, unwinding a couple’s finances when they own a business together presents unique challenges.

Decide What to Do with the Business

Divorcing couples have options for what happens to the business. For example, you can:

  • Sell the business to a new owner.
  • Buy out your spouse’s share of the business.
  • Continue owning and running the business jointly.
  • Close the business down entirely.

If the business is profitable, closing it down is probably not the best option. However, you should take a close look at how much money the business makes. Also assess your own desire to continue working in the business. A divorce might be the right time to cut the cord to your business””along with your spouse.

How to Sell a Business

If you want to sell to a new owner, you need to value how much the business is worth. This might be tricky. Many business owners hire a valuation company, but both spouses should agree on the company hired. Valuation companies charge high fees, and you want each spouse to trust the valuation report issued. What you should avoid is each spouse obtaining their own valuation, which simply creates another disagreement.

After valuing the business, you can advertise it for sale. You might also want to jointly hire a lawyer or broker to manage the sale. Again, both spouses should agree on who to hire. Disagreements about whether to sell can actually cause buyers to flee.

Buying Out Your Spouse’s Share

You will also need to value the business so that you know how much your spouse’s share is worth. If you cannot obtain a loan to buy your spouse’s share, you should discuss giving them marital assets of equivalent value. For example, you might take the business while your spouse receives the home and other assets.

Running the Business Jointly

This option, though not ideal, is also possible if you can separate your personal issues from business ones. According to Michelle Crosby, CEO of Wevorce, you should clearly define your business roles so that there is no confusion. You should also protect yourself by drafting a buy-sell agreement in the event one ex wants out of the business at some point in the future.

Speak with a Fort Collins Divorce Lawyer Today

At Divorce Matters, we help divorcing couples divide property, including family businesses, in a way that works for everybody. Contact us today, 720-580-6745, to schedule your free consultation with one of our Lakewood divorce attorneys.

 

Are Trusts Considered Marital Property In Divorce?

Parties going through a divorce often wonder how their property will be divided between themselves and their soon-to-be ex-spouse. Colorado is an equitable distribution state which means courts will attempt to divide marital property, including both assets and debts, fairly, but not necessarily equally. C.R.S. 14-10-113 provides guidance on the process and considerations courts use to determine what is a fair and equitable division of property in your case.

When determining what property is divisible in a divorce, a court must first decide whether an interest can be characterized as “property”, and then whether the property is separate or marital. Martial property will be divided amongst the parties equitably while separate property will remain separate and cannot be divided by the courts. “Separate property” is: (a) Property acquired prior to the marriage; (b) Property acquired as a gift or as an inheritance; (c) Property excluded by valid agreement of the parties; (d) Property acquired by a spouse after a decree of legal separation; and (e) Property acquired with separate property. “Marital property” is all non-separate property acquired by either spouse after the marriage.

For example, if Wife had $50,000 in her 401(k) account prior to her marriage, but the 401(k) is worth $100,000 on the day of the divorce, then the initial $50,000 would be Wife’s separate property and the court would not have the authority to divide the original $50,000 between Husband and Wife. The remaining $50,000, however, which represents the increase in value accrued during the marriage, would be considered marital property and would be divided “equitably” between the parties.

Before a court will attempt to characterize property as “marital” or “separate” it must first determine whether the interest in question is even “property” at all. In divorce proceedings, courts define “property” as items that have an exchangeable value which makes up a spouse’s wealth or estate. Courts consider a number of factors when determining whether an interest constitutes “property” including whether it can be sold or transferred and whether it terminates on the death of the owner. Enforceable contractual rights constitute “property” while interests that are speculative are considered expectancies and will not be classified as “property”.

One particularly complex issue of property division in a divorce is determining whether a spouse’s interest in an irrevocable trust amounts to a property interest that is eligible to be divided equitably. In determining whether a property interest exists or not, Colorado courts focus on whether the beneficiary spouse has a contractual right to enforce payment of trust funds.

In the case of discretionary trusts, where the trustee has absolute discretion as to how much, if any, of the trusts’ funds are distributed, and where the beneficiary spouse does not hold a remainder interest in the corpus (assets or property) of the trust, then the beneficiary spouse has no contractual or enforceable right to either the income or principal of the trust. Therefore, the beneficiary spouse’s interest in the trust will not likely be considered property subject to equitable division and will remain untouched by the court.

If you have any questions or concerns regarding a trust and divorce, please contact us here at Divorce Matters.

What is a QDRO?

QDRO stands for (Qualified Domestic Relations Order). This is an Order that can be issued by the Court in a domestic case to transfer funds from one ERISA qualified retirement account to another without any of the normal penalties. The most common accounts that are divided pursuant to a QDRO are 401(k), 403(b), and pensions. IRAs do not need to be divided with a QDRO.

Important facts:

  • A QDRO needs to be drafted and filed with the Court so that a judge can sign it before any accounts can be divided.
  • While not many attorneys in Colorado draft QDROs, this is a service that I provide. I work with the Plan Administrator to get a QDRO drafted and pre-approved before sending it to the Court to streamline the process.
  • There are no penalties involved when funds are transferred through a QDRO as they normally would be for any other type of withdrawal or transfer.
  • There are no tax implications when funds are transferred from one retirement account to another through a QDRO. However, if a lump sum cash payout is taken then the party receiving same generally has to pay income taxes on it.
  • Any Permanent Order or Separation Agreement needs to specify whether any accounts are to be divided pursuant to a QDRO and have specific language regarding how such accounts are to be divided.
  • A QDRO can also sometime be used to obtain past due child support.

If you have questions about QDROs, please feel free to contact me here.

What Do I Get to Keep After My Divorce?

When couples get divorced, one of the first things on their mind is: What do I get? Divorce is a stressful situation, so knowing that you’ll get something softens the blow a little. But still, you want to make sure you get your fair share based on what you contributed to the marriage.

Marital property division is complex, especially when the couple has been married for decades and has accumulated numerous assets during that time. Ultimately, marital property is divided in an equitable manner as the court sees fit. However, there is no formula for determining who gets to keep what assets. To be clear, you and your spouse may agree on property division during mediation. If you can’t agree on your own, though, a judge will. You may or may not receive the assets you deserve, which is why it’s a good idea to have a lawyer on your side.

What is Considered Marital Property?

Just about everything acquired during the marriage is subject to split in a divorce. This includes not only cash but also homes, vehicles, boats, furniture, antiques, collections, businesses, stocks, retirement accounts and pensions. This is referred to as marital property.

It doesn’t matter if a certain asset””such as a home, vehicle or 401(k) account””is titled in one person’s name only. If one spouse has a sports car in their name only, the other spouse still has the rights to it in the divorce regardless of titling.

What is Considered Non-Marital Property?

There are some exceptions to the above, though. Not everything acquired during the marriage may be marital property. For example, gifts and inheritances given to one person from a third party are considered separate property. The same goes for pain and suffering payments from a personal injury award. Property that a person bought before the marriage is also considered non-marital property.

It’s important to understand, however, that separate property can easily become marital property if it’s not protected. For example, if you receive an inheritance and put it in your joint checking account, it can now be used by the other spouse. This process is known as commingling.

The same applies to property owned before marriage. If you bought a house before you were married, but your spouse has paid to maintain it, then it is now marital property and subject to split in a divorce.

Contact a Highlands Ranch Divorce Attorney Today for Help

Dividing property can be tricky during a divorce since not all assets are worth what they appear to be once you factor in taxes, fees and other things that can decrease an asset’s value. It’s important that you understand what you’re entitled to receive in a divorce while protecting non-marital assets.

If you are going through a divorce, make sure you get your fair share. The Highlands Ranch divorce attorneys at Divorce Matters can help. We can assess your assets and help you make the right decisions. Schedule a consultation today by contacting us at (720) 408-6595.

Stock Options During a Divorce

Stock options are a common form of compensation, the idea being to align the interests of the company and the employee. Therefore, the employee will have a vested interested in the company’s performance. But when spouses no longer have a vested interest in one another, the question arises over who has a vested interest in the stock options.

Stock options present one of the more complicated issues in the division of property during a divorce. First a court must determine if the options are “vested.” The term vested for family law may be very different than vested for IRS purposes. In family law the courts look to determine whether the employer can withdraw or retract the options.
To be martial property the options must also have matured. By matured, the focus is whether the option holder can exercise the options or turn them into cash. Then, the court must determine whether a vested and matured option is martial property which is often very specific to each individual case. An option to induce some future performance such as continued employment is usually not marital property. An option for some past performance usually is martial property. For example, an option granted to induce a move in work location or an option granted to change companies would be marital property.
Each option grant has to be evaluated separately to determine the nature and extent that option is marital or separate property.

How Do I Get My Name Off The House Deed During My Divorce?

Does Colorado Recognize Common Law Marriage?

Unless you’re planning a birdnesting-type situation to raise the kids after divorce, most people don’t want to live in the same home as their ex-spouse. If both of your names are on the house deed, one of you will need to take your name off the deed.

One way to do this is by having whichever ex-spouse is remaining in the home refinance the property, a common option for divorcees. However, this depends on that party’s ability to refinance. You could get a court order to have your ex refinance the home, but without the means to actually do so, it is difficult to force a hand.

If your ex does, on the other hand, have the ability to refinance but has not done so, you may be able to get a judge’s order to spur the action. This could lead to legal fees, especially if your original divorce judge no longer has jurisdiction over your case (if you have waited several years to pull your name from the deed, for example).

What Happens If I Don’t Remove My Name from the Deed?

As long as your name remains on the deed, you are considered a legal owner of that home. This means that if your ex-spouse still living in the house fails to make mortgage payments, your credit can suffer. If your ex does not have liability insurance and someone is hurt at that home, you can still be sued for damages for that person’s injuries. It’s always best to settle these types of issues while negotiating a divorce settlement, not after.

Denver family law attorneys dedicated to helping divorce clients through this intensely difficult and emotional time in their lives.