‘Trading’ assets in the name of equitable property division

Property division is often the most complex financial aspect of divorce. Colorado calls for marital property to be distributed equitably – that is, fairly between both partners, not necessarily 50-50. It’s often best for spouses to negotiate this directly, rather than leave the final decision to the court.

This isn’t always straightforward, particularly for some big-ticket items.

Identifying problematic property

Property division involves splitting all marital property from a marriage. Generally, this includes most things not already owned prior to the legal union. Some of these are quite difficult to divide. Some common complex assets include:

• Real estate, such as a house
• Vehicles
• Valuable collections or art
• Retirement accounts
• Brokerage accounts
• A business or business interests

One frequently used solution is to, essentially, trade assets. You and your soon-to-be-ex consider the value of an asset, then agree to an exchange. In a simplified example, one of you might get the primary vehicle and retain all interest in certain invested stocks, and the other takes sole possession of a vacation home.

While this is a good approach, it does come with financial risks.

Consider the full financial implications

Many of the assets mentioned above – as well as others – will come with financial repercussions that are easy to overlook. What this means is, you shouldn’t just add up the value and aim for an even split. It’s important to consider not just the value of an asset on the surface, but its value with the proper tax obligations and recurring costs accounted for.

For example, a home is inherently valuable, so one spouse may be keen to keep it. However, this means they are also taking on its property taxes, monthly bills, the cost of future repairs or work, insurance and more. If the new sole homeowner does not possess the liquid assets to cover all of this, it can quickly become problematic.

In addition, things like alimony come with unbalanced tax obligations, retirement accounts are regulated by strict distribution rules and stock values will often carry the baggage of capital gains taxes.

There is a lot to review and consider. It’s important to get the right help and support as you navigate this challenging process. That way, you can help ensure this equitable division is actually fair.