Allocating Marital Property in Lieu of Maintenance (alimony)

By: Stephen Plog

In any Denver area divorce case, there are many issues which need to be resolved, whether through settlement or ultimately a contested hearing in front of a judge. Those issues will generally either be related to finances or child custody. Two of the core issues that can arise in any case, depending on the facts and circumstances, are division of property and alimony, properly called “maintenance” under Colorado statute.

Pursuant to C.R.S. 14-10-113, a Colorado divorce court has the authority to divide marital property (property obtained during the marriage) “equitably.” In most instances, “equitable” translates to equal, meaning courts generally will divide marital property equally. However, they don’t have to. Pursuant to C.R.S. 14-10-114, a Colorado divorce court can also award one spouse maintenance, or alimony, so that he or she is able to meet his or her reasonable financial needs.

Divisions of property, but for perhaps a pension which is paid out over time, are generally a one-time event requiring transfer of an asset and nothing more. On the other hand, maintenance is a monetary award that lingers, depending on the length of marriage and the court’s order or parties’ agreement. For example, the parties to a divorce might agree that husband shall pay wife maintenance in the amount of $1000 per month for 72 months. With an award of maintenance comes continued financial entanglement. The payor has the duty to continue paying for that 72 months and had better make sure he pays the full amount and does so on time. For the recipient, there will always be that pensive moment where he or she wonders if the check is coming, or coming on time.

In some cases, when there are significant assets, there can be an opportunity to forego maintenance in exchange for more property. For example, in the scenario set forth above, the husband will pay wife $72,000 over the course of 6 years. Let’s say this couple has a house with $300,000 in equity. In theory, each party would receive $150,000 from the home. In lieu of maintenance, the parties could agree that husband will give wife $72,000 from his share of the equity in lieu of paying her maintenance. By doing so, he is alleviated of the monthly obligation to pay and she is assured that she is appropriately compensated for her waiver of alimony.

Creativity can be put into any divorce settlement. Creativity must also be tempered with some finer points to consider. In this scenario, by paying wife more equity in the home to forego maintenance, husband loses his ability to gain a tax benefit, as the maintenance he pays is deductible by him pursuant to IRS Code. Conversely, the wife, though being fully compensated, is divested of liquidity in that to meet her monthly financial needs she will potentially need to sell the home, or refinance, to get the $72,000 out. These are just some examples of things to consider when pondering the notion of trading property for alimony in your divorce.

An experienced Denver family law attorney from Plog & Stein, P.C. can help you understand the ins and outs of both property division and maintenance. Likewise, an attorney can help look at all angles, whether related to basic tax ramifications, the costs of liquidity, and other angles related to a proposed settlement you might not be considering.

To learn more about your particular situation, available options, and how our legal team can be of assistance, contact us today.