What Happens To My Retirement Money In Divorce?

In Colorado, assets acquired during marriage are equitably divided between spouses in divorce. Retirement funds are often the largest liquid asset involved in divorce, and come with a lot of complex issues when it comes to division. The largest of these issues is taxes, and depending on the type of retirement fund you have, there could be financial ramifications of dividing retirement money that you should be aware of before a divorce is finalized.

Proper Division Of IRAs

When transferring assets from one spouse’s IRA to another’s, you must label the transfer as “incident to divorce.” This is necessary to avoid penalties for early withdrawal from the IRA. Both the sending and receiving IRA custodians must sign off on the transfer and it must be approved by a judge. This process must be completed within one year of a divorce settlement to avoid review by the Internal Revenue Service.

Proper Division Of Qualified Plans, Such As 401(k)s, Defined Benefit Plans & Pensions

To divide a qualified plan between two parties, you need a qualified domestic relations order (QDRO). A QDRO is a court order that recognizes a former spouse’s interest in their spouse’s qualified plan assets. Using a QDRO, the “participant” transfers assets into the “alternate payee’s” IRA or qualified plan. Much like transfers incident to divorce, these must be reported correctly to the courts and retirement custodians to avoid any unfortunate tax penalties.

If you have questions regarding the division of your retirement accounts in a Colorado divorce, our Denver divorce attorneys are well-equipped to assist you.

Should I Ask For Spousal Support In My Divorce?

In Colorado, spousal support (called maintenance, also known as alimony) is not an automatic right in divorce. It is a decision made by the courts, typically when one party does not have sufficient assets to meet their needs following divorce and is unable to support themselves through gainful employment or has childcare responsibilities they cannot ignore. So, should you ask for maintenance in your divorce?

The answer comes down to the particulars of each divorce case.

Health and Age

Spousal support may be granted to you if you have a medical condition that affects your ability to work or requires expensive treatment, especially if you have an ongoing condition. Additionally, if you are near retirement age, the courts will consider how your retirement will affect your finances and quality of life to determine if you should be eligible for maintenance.

Education and Employment

If your spouse has a significantly higher education than you and earns much more as a result, the courts will consider spousal support. This is especially true in cases with unemployed stay-at-home parents or spouses who will need time to increase their education and experience to find gainful employment.

How Long Have You Been Married?

Depending on the length of your marriage, you may be able to receive spousal support. The duration of spousal support will be determined by the length of marriage, with longer marriages receiving longer term spousal support.

Some people decide to trade potential spousal support for a greater share of the divorce settlement, while others prefer to receive monthly payments. The only way to know which is best for you is to discuss your case with your divorce attorney.

Our Denver divorce lawyers can assist you in determining is spousal support is right for you.

Dissipation Of Assets In Divorce & How To Fight It

In an ideal world, divorcing couples would be able to sit down with one another and separate amicably. Often, this is not the case. In particularly contentious divorces, greed, anger and spite can lead to vicious debates regarding assets. And sometimes, vindictive spouses will fight dirty to enact revenge on their exes. One such trick is known as dissipation of assets, and it can cause serious complications for one or both parties.

Dissipation of assets is a fancy legal way of saying that one spouse wasted marital assets to deprive the other party of those assets. For example, a husband decides to spend a significant amount of money on jewelry for a mistress. That money, in divorce, would be subject to equitable division between both parties, but because the husband dissipated those assets, the wife now faces financial struggles because of her husband’s malice.

Colorado offers some protection against this type of behavior in the form of the Automatic Temporary Restraining Order, or ATRO. This injunction helps prevent either party from disturbing the peace of another party, including prevention of dissipation of marital assets. While the ATRO is in effect, neither party can transfer, encumber, conceal or dispose of property without a court order or the other party’s consent.

Additionally, the services of an attorney can help you prove that dissipation occurred, which can help you fight for a fairer settlement. We can conduct interrogatories and request documents, financial releases and depositions to trace these dissipated assets.

Our Denver family law attorneys are ready to assist you in the process of asset division and protecting your assets from your spouse.

Who Gets The Tickets? What To Do About Time-Sensitive Property In Divorce

With all the hubbub about the rise of the Chicago Cubs, baseball fans have been kicked up into a frenzy, celebrating the momentous victory of the Cubs after 108 years without a World Series win. So, what happens when you’ve got tickets to the crucial game, but your spouse decides it’s time to get divorced?

One woman has taken her estranged husband to court over this very issue. Nancy Riddle of Chicago filed an “Emergency Petition for World Series Tickets” at her local county courthouse. Her husband John Riddle had two tickets that he planned to use to take the couple’s 12-year-old son to Game 4, where the Cubs lost to the Cleveland Indians. Nancy believed that she should have been able to take her son using the tickets, which were purchased by John as part of a season ticket package with some of his friends prior to the divorce filing.

The courts went middle field on their response. While John was allowed to keep his tickets, he was ordered to purchase his wife a comparable ticket as well.

Who Gets Sports Tickets In Colorado Divorces?

Colorado is an equitable division state. This means that property acquired during marriage will be divided equitably (if not equally) in divorce. Using a local team as an example, let’s say a Colorado couple has tickets to the Denver Broncos and both parties wanted to attend the blowout Super Bowl that we won this year (Go Broncos!). If the tickets were purchased during marriage, the courts would likely consider them marital property. As such, both parties would have a claim to the tickets, and through an emergency petition the parties may be able to settle the issue before kickoff.

Our Denver family law firm can help you take control of your family situation to prepare you financially, emotionally and logistically for your future.

How Much Alimony Will I Receive In Divorce?

Calculation of spousal maintenance (or alimony, as you may have heard it called) is based on a series of factors.

Maintenance will only be granted if the courts find that the spouse seeking it cannot provide for his or her reasonable needs and lacks sufficient property including property apportioned to him or her. Additionally, the spouse seeking maintenance must be unable to become self-supporting through employment or be the custodian of a child that prevents said spouse from seeking reasonable employment.

Once the court has decided that a spouse meets the above qualifications, they will make the following considerations in deciding the length and amount of spousal support to be granted:

  • The spouse’s financial situation, including any assets obtained through the divorce settlement as well as any child support the spouse is receiving
  • The spouse’s potential earning capacity, including time it would take for the spouse to receive the needed education and training to facilitate that earning capacity
  • The spouse’s standard of living during the marriage
  • How long the marriage lasted
  • The spouse’s age, as well as his or her physical and emotional condition
  • Whether the person paying for maintenance is able to afford the maintenance agreement

If you would like to see for yourself what your prospects are for spousal maintenance, you’re in luck ”“ there’s an app for that. You can find it by going to the App Store (if you’re on iOS) or on the Google Play store (if you’re on Android) and searching for Divorce Matters Colorado Spousal Maintenance and Child Support Calculator, or you can click the links on this page.

What Are My Options For Dividing The Marital Home In Divorce?

Following divorce, there are a lot of considerations to make with the family home. Who gets to keep it? What’s the easiest way to get one spouse’s name off of the mortgage so they won’t be held liable for the home in the future? Where will the departing spouse live afterward?

You have options, but some are easier than others. Here are three possible ways to deal with property division on the marital home:

  1. Often, the simplest way to split the home is for both parties to wash their hands of it entirely. Selling the home and splitting the money gives both parties equal (or at least, equitable) footing with which to begin their new lives. Additionally, this means that you will no longer have your name on a document with your ex-spouse. However, realize that there are some complications you might have to endure when selling the home. The economy can have a huge effect on whether selling the home is a worthwhile endeavor; if the housing market is down, it may make more sense to rent the property out instead. If the market is up, there are tax implications to consider for capital gains that are affected by your filing status (married couples get a bigger tax exclusion, so it might make sense to sell before the divorce).
  2. For couples that decide not to sell, it may be prudent for one party to buy out their half of the home. This is a good way to keep the home in the family (for the benefit of children, for example, or for sentimental purposes) but it may not always be financially feasible. Both parties in this situation should seek appraisals on the home ”“ it’s always best to have a second opinion before committing to something so important. If the departing party cannot afford at the time of divorce to buyout his or her half, then the couple can consider a delayed buyout, but there are some long-term headaches associated with this method (keeping both names on the mortgage post-divorce, namely) so it’s not usually recommended due to potential financial and credit ramifications.
  3. There’s always cohabitation if you and your ex-spouse split amicably. On one hand, it could be a good idea for both parents to be around for the kids; on the other hand, you just got divorced from the person who is now your housemate, with all the potential baggage this situation brings up.

How Can A Trust Protect My Adult Child’s Inheritance During Divorce?

On Monday we talked about the importance of discussing prenups with your adult children as they prepare for a wedding, especially for high-asset families. Prenups are not always the most comfortable thing to bring up with a fiancée, but they are very important tools for protecting one’s property in case of divorce. But parents with high-assets who wish to ensure that their estates transfers to the desired party (in this case, an adult child) without any hang-ups related to divorce or the lack of a prenup can rely on another tool to preserve their estates: creating a trust.

Benefits Of A Trust To Protect Inheritance In Divorce

A trust gives you much more control over your adult child’s inheritance. You decide the terms of the trust and can order the trustee to only pay out to your son or daughter in certain circumstances. Here are just a few terms you can throw into a trust to ensure that the assets go where you desire:

  • You can name a trustee other than your adult child. This makes it so that a future ex-spouse of your adult child has no claim whatsoever over the assets. You can then declare that the trustee only distribute funds to the beneficiary in a separate account that is strictly used for their inheritance and to monitor all transactions the account is used for; this helps prevent commingling of assets in joint accounts held by your adult child and their spouse (commingling can give the spouse a claim, as joint assets are generally considered marital property)
  • You can tell the trustee that assets are for specific uses in the future, such as your grandchildren’s educations or other expenses.
  • You can tell the trustee that assets are not to be distributed to your adult child without the existence of a comprehensive prenuptial agreement or postnuptial agreement that ensures that assets remain with your adult child and not their spouse.
  • You can even declare that certain assets are not to be distributed contingent upon expectations that you set forth.

If you do decide to create a trust, you must make sure that the terms of the trust leave no room for loopholes or leeway. An estate attorney can help you do just that.

Dealing With Intangible Assets In Divorce: Intellectual Property

Dealing with property division in divorce is a complicated process. Some parts can be relatively straightforward ”“ tangible assets like bank accounts and property, for example. But what about intangible assets, things that are difficult to value? For couples who own intellectual property, such as patents and trademarks, an equitable division can be incredibly complex. How do you figure out the value of an idea?

The vast majority of divorcing couples will probably not have to worry about intellectual property in divorce, but for authors, musicians, actors, artists, business owners and startup founders, etc., serious consideration must be given to the value of trademarks, patents and copyrights.

Who Owns A Patent, & How Is It Split In Divorce?

Generally, someone with an interest in an intellectual property has two choices in divorce. The first of those is to have the value of the assets appraised to determine if the assets are subject to valuation. While this can be expensive, it can help the IP holder fight for a final division of the property, eliminating any potential entanglements involving the ex-spouse in the future.

The second option is for the couple to come to an agreement on a proportional split of some type of the proceeds from the intellectual property holdings. For example, the property holder could offer a percentage of the royalties to the spouse on a continuing basis. Depending on the relationship between the two, however, these sorts of entanglements may be undesirable, or there may be problems determining exactly how much of the future royalties should go to the other spouse.

At any rate, intellectual property is very complex and you should discuss any reservations with your financial advisors, IP experts and your family law attorney to scope out the best path moving forward.

Can I Empty My 401(k) to Protect It During Divorce?

If you have a substantial amount of money in a retirement account, it is natural to want to protect it in the event of a divorce. You might consider draining your account in order to keep it for yourself, but this is a bad idea that will almost always backfire. Here’s why.

In Colorado, property is divided equitably upon divorce. This is to ensure that neither party is left out in the cold financially. And when divorce is filed for, or when you are served divorce papers, there is an automatic injunction put into place that prevents you from taking drastic actions such as draining your accounts to hide assets. Hidden assets are a big no-no in divorce, because there is almost always a paper trail, and your spouse’s attorney is going to find it. This could have a negative impact on your eventual outcome in your property settlement.

What if My Divorce Hasn’t Been Filed Yet?

Even then, you still should not pull out your retirement funds. If you are entertaining the idea of hiding assets, chances are your spouse would probably not consent to you pulling out your retirement assets. Without your spouse’s consent, the courts could still decide to award your spouse part of your 401(k). This is because of something called dissipation when one spouse wrongfully drains an asset in anticipation of an upcoming divorce. Dissipation is usually the result of intentional misconduct. Dissipation can also be done through what is called “marital waste,” where the value of an asset is reduced or destroyed in an attempt to keep it away from one spouse.

Contact a Divorce Attorney in Lakewood Today

The bottom line is that hidden assets are bad news, and can almost always be found by your spouse’s attorney or the court. If you have concerns about your retirement account and what will happen to it in divorce, instead of taking drastic action, you should speak to a divorce attorney.

How to Adjust Maintenance (Alimony) Obligations

If there is one constant in life, it is that life always changes. Layoffs, retirement, career changes, remarriage, changes with an aging parent, or illness””all of these can have an impact on how you live your life””and how you manage your financial obligations.  For divorced couples and parents, these changes are further complicated because of maintenance or spousal support obligations.

We work frequently with people who need to reduce their maintenance payments.  We also work with people who need to seek an increase in the maintenance they receive.  The need to change these payments stems from job loss, career change, remarriage, caring for an aging parent or the fact that the children from the marriage have gotten older.  Maintenance modifications are as much a fact of life as constant change.

Maintenance Defined

In Colorado, maintenance refers to spousal support which used to be called alimony.  Spousal support or maintenance is usually involved in a case that involves a long-term marriage or a case where one spouse has been able to make significantly more than the other, as in the case of a stay-at-home parent.

Whether or not one is entitled to maintenance initially is governed under §14-10-114 of the Colorado Revised Statutes.  An initial award of maintenance is not always required in a divorce, and a determination of entitlement (amount and duration) is case specific.  When maintenance is awarded or agreed upon as part of a divorce, all terms regarding the amount and duration are specified.

Substantial and Continuing Change

According to §14-10-122 of the Colorado Revised Statutes (C.R.S.), maintenance is modifiable only if there has been a substantial and continuing change.  However, you should be aware that if you and your spouse or former spouse entered into an agreement regarding the payment of maintenance, whether or maintenance is modifiable will be determined solely on the provisions of that agreement, regardless of whether or not there has been a substantial and continuing change.

So, for example, if your agreement specifically states that “maintenance is contractual and non-modifiable” the Court will not have jurisdiction to modify maintenance even if something has changed in your life.  Even if you are not bound by an agreement, the courts may not consider the change in your life to be a “continuing” change and may decline to modify maintenance. From the court’s perspective, some life obstacles are bumps in the road that are only temporary, such as lack of employment, as your finances will (hopefully) revert back to levels similar to when you negotiated you maintenance agreement.

For the court to approve a maintenance modification, you must be able to prove that the change to your financial situation is not only significant but ongoing. While temporary unemployment is not considered ongoing, income loss from a disability often is.

Taking the First Steps

The first step is to determine whether your maintenance can be modified.  In some divorces, the maintenance obligation cannot be modified.  If the maintenance obligation can be changed, you need to determine whether there has been a substantial change that would support a change.

So what should you do if your finances have changed substantially and you can no longer meet your maintenance responsibilities?

  • Collect the right information. When you apply for modification, you will need to complete a current Sworn Financial Statement, just as you did during the divorce process. Some information that will be helpful to you while completing this statement include:
    • Tax returns from the past three years
    • W-2 or 1099s from last year
    • Current paystub
  • Refer back to your original divorce agreements. As mentioned earlier, in some divorces, the couple agrees during the divorce process that all maintenance obligations are unchangeable. One of your very first steps should be to understand what you originally agreed to. You should speak to an attorney for legal advice.
  • If you have already missed payments, pay back as much as possible as soon as possible””even if it is not the full amount. Try to demonstrate to the courts that you are making an effort to catch up on your payments, even while seeking a better maintenance agreement. If you make no payments, you may be considered uncooperative, which may reflect poorly on you during the modification process.
  • Seek legal advice. Some maintenance agreements may not be modified, but in many cases if you can prove that your financial situation has drastically changed, it may be feasible. An attorney will be able to clarify your options. Also, because maintenance is not decided based on a formula, legal representation can help you maneuver the sticky, subjective areas in the law.  The most important thing you can do is to act immediately and not wait.  Modifications can only be applied back to the date that you file with the court requesting a modification of maintenance.  Courts may also look at the length of time that you waited to address the issue as part of determining whether or not the change is substantial.  The longer you wait, the less effective your argument becomes that your life change was substantial.

Conclusion

Changes are going to happen in life, and when those changes affect whether or not you can continue to make your maintenance support payments, it is vital to understand what your rights and responsibilities are and to clarify all options. You will only have an opportunity at being successfully in modifying maintenance if you can prove that your situation has changed drastically and that the change is ongoing””such as being laid off because of an injury or illness or retirement ””so you need to know exactly where you stand.