When facing a divorce, one of the most important and often contentious issues to resolve is the division of property. In Colorado, the legal principle courts use to decide property division in divorce is known as equitable distribution. But what does equitable distribution mean, and how does it impact how your property will be divided?

What is Equitable Distribution?

Equitable distribution refers to the legal process by which a court divides marital property during a divorce. Unlike community property states, where property is split equally, equitable distribution means property is divided in a way that is fair but not necessarily equal. This allows the court to consider various factors and circumstances to determine what is a just and reasonable division of property.

In Colorado, this principle applies to all marital property—assets and debts accumulated during the marriage. Importantly, equitable distribution does not necessarily mean a 50/50 split. The division could be unequal but still fair depending on the specific situation of both spouses.

What is Equitable Distribution in Divorce?

In a divorce, equitable distribution comes into play when spouses are unable to agree on how to divide their property. When the division is left to the court, the judge will consider various factors to determine how to distribute property in a manner that is fair to both parties. These factors can include:

• The financial circumstances of both spouses: The court evaluates each spouse’s income, earning potential, and financial needs.
• The standard of living during the marriage: The lifestyle both spouses enjoyed during their marriage can influence how property is divided.
• The length of the marriage: The longer the marriage, the more likely the court will award maintenance or more significant portions of marital property to one spouse.
• Contributions to the marriage: Both financial and non-financial contributions, such as homemaking and caregiving, are considered by the court.
• The desire to keep the marital home: In some cases, one spouse may want to remain in the family home, which could influence how the property is divided. The court must also consider the desirability of awarding the home to the primary caretaker of the children.

While these factors provide a framework for making decisions, couples can negotiate their property division prior to a Permanent Orders hearing. This allows them the opportunity to divide assets in a way that works best for them instead of being at the mercy of the Court, provided the division is still fair to both parties.

What Does Equitable Distribution Mean for You?

For many divorcing couples, the idea of equitable distribution can be confusing. It’s important to note equitable distribution does not require an equal division of assets, but instead focuses on a fair division. The goal is to create a division acknowledging the unique circumstances of each spouse, ensuring both parties are treated justly based on their contributions, needs, and financial situations.

Equitable distribution applies to both assets and debts. This means debts incurred during the marriage, such as credit card bills, mortgages, and car loans, will also be divided fairly. Each spouse’s responsibility for marital debt will be assessed alongside their share of the marital assets.

How Are Specific Assets Divided in Equitable Distribution?

Certain assets may require additional attention during the division process due to their complexity or value. Here’s how some common assets are handled:

• Real Estate: The marital home can be one of the most contested assets. If one spouse 
• wishes to retain the home, they may be required to buy out the other spouse’s share, or the home may be sold, with proceeds divided.  In order to value the home an appraisal may be needed.
• Retirement Accounts: Retirement funds accumulated during the marriage are considered marital property and are subject to division. In many cases, this is done through a Qualified Domestic Relations Order (QDRO), which allows for the division of retirement accounts like pensions and 401(k)s without incurring any tax penalties for early withdrawal of such funds.  Similar orders are available to divide military or federal pensions  .
• Business Interests: If one spouse owns a business, the business’s value may be considered marital property. The other spouse may be entitled to a portion of the business’s value, which could require an appraisal to determine its worth.

How Does Debt Factor Into Equitable Distribution?

In addition to dividing assets, marital debt must also be addressed in a divorce. This includes any debts accrued during the marriage, such as mortgages, car loans, or credit card balances. Just as with assets, the court will divide marital debt fairly based on factors like income, earning potential, and financial circumstances.

It’s important to keep in mind that even if the court assigns a debt to one spouse, creditors can still pursue either spouse for repayment if the debt is held jointly. If one spouse is burdened with significant debt, it’s important to request very specific and enforceable provisions for the debt to be refinanced in their name only or paid out of marital assets during the divorce process .

What Happens if You and Your Spouse Agree on Property Division?

While the court’s equitable distribution process is designed to ensure a fair division of property, couples who can agree on how to divide their assets and debts can avoid the frequently undesirable necessity for the Court to decide for them.  When couples can agree, these agreements will need to be memorialized in a writing called a Property and Financial Agreement, which the Court will review, and if approved, make an enforceable Order as part of the final divorce decree. 

Conclusion: Understanding Equitable Distribution

Equitable distribution is the method used by Colorado courts to divide marital property during divorce. It focuses on fairness rather than equality, meaning the division of property may not be split 50/50 but will be determined based on a variety of factors, including the financial situation of both spouses, their contributions during the marriage, and their future needs. Understanding how equitable distribution works is essential for anyone navigating divorce proceedings, whether negotiating an agreement outside of court or relying on a judge to make the final decision.

Equitable division can be a complicated process as there are statutes and various cases defining what this means exactly.  Having a full understanding of these statutes and cases is crucial prior to making final agreements.  You can count on  the experienced attorneys at Tanis McGonegal Family Law, P.C. to help.  We offer 20-minute consultation, at no charge, to discuss your case and provide the guidance you need. Contact us today to learn more about how we can help you through the divorce process.