5 Common Colorado Financial Divorce Issues
A divorce impacts many areas of your life, including your finances. Throughout your case, you and your spouse will have to accept and make choices that will affect your financial situation now and in the future.
Before you embark on your divorce, here are five common financial issues in Colorado divorce to consider.
The Property Division
One of the first choices you will need to make is who will get what. Colorado is an equitable distribution state, meaning that the goal is to divide property in a just and fair way, and that is often not 50/50. The aim is to leave both spouses with enough to support themselves after the divorce, which depends on each spouse's financial state individually.
The best approach here is to consider what you want and whether you can manage the consequences of owning certain assets. If, for example, you really want the family home, do the math and make sure you can afford it on your income. If you can't, the smarter move is to let the house go to gain other assets without a price tag that will be too steep for you post-divorce. Otherwise, you could end up losing the home in a foreclosure later.
The Debt Division
Many couples have debt they incurred during the marriage. This can be shared or separate, and debt division can sometimes become even more complicated than property division. To start, you must create a full and accurate list of each debt owned, completed with amount and creditor.
Even if you have no reason not to trust your spouse, you should still get your credit report from all three major credit reporting bureaus, namely TransUnion, Experian, and Equifax. The reports will break down any debt you personally owe, including the joint accounts you have with your spouse. This will ensure all debts are considered in the division and nothing is overlooked.
Look through the reports to determine what debt is shared and what is in your spouse's name only. It's crucial to stop debts from growing larger while you're progressing through your divorce. Cancel all joint debts, with one card left in your name alone solely for emergencies. Never run up large debts during divorce just because you can. This can lead to penalizations by the court for wasting marital assets.
Once you know what all the debts are and have ensured they won't increase, you and your spouse can start deciding who will be responsible for what. There is more than one way in which you can do this, including the methods below:
Pay off all the debts now, if possible. If you have assets that can be sold or savings, this is the easiest way to handle these debts, leaving both you and your spouse starting your post-divorce lives debt-free.
Take responsibility for debts in exchange for more assets out of the property settlement.
Allow your spouse to take debt responsibility in exchange for them receiving more assets out of the property settlement.
Agree to share the debt responsibility equally. While this may sound to be fairer, it does leave you in the most vulnerable position. You are still responsible for those debts even if your spouse signs an agreement taking responsibility for them. If your spouse stops paying on a debt they took responsibility for, you may find yourself on the hook for it.
The Tax Impact
It's easy to get caught up in things like child custody and property division, but your divorce has tax implications, too. Who is going to take the exemption for your dependents? Who can claim the Head of Household filing status? Many tax questions may arise out of divorce, so it's wise to consult with a tax professional, so you know how things will work and what to expect.
The Retirement Plans
You may be entitled to some of your spouse's retirement account savings, and they may be entitled to yours. This area will largely depend on your case's circumstances, so work with an experienced attorney to ensure all the retirement accounts in your divorce are handled properly.
The Support Issue
Child support and spousal support may apply in your divorce. Whether you are paying or receiving support, it will impact your finances now and in the future. This is another area where the specifics of your life and situation impact the outcome, so be sure to discuss the possibility of support in your case with your attorney as soon as possible so you know what your obligations in this area may be.
Issues in divorces can be avoided or navigated when you hire a seasoned lawyer. Call Mitch Geller for help.