Gavel & stack of hundred dollar bills

Husband Appeals Colorado Alimony Ruling

The Colorado Court of Appeals recently issued a maintenance decision that addresses several aspects of maintenance. and rejected every one of the husband’s grounds for appealing his Colorado alimony award. Most of the decision was fairly straightforward (at least to those who keep up with family law), which may explain why the decision was not selected for publication. But there was one surprising aspect of the ruling, where the court held that including even the earnings on assets awarded in a divorce would would violate the rule that a spouse need not deplete assets in order to qualify for maintenance.

In Coplin,1In re: Marriage of Coplin (Colo.App. 2020) (Unpublished Decision). the spouses were far apart on maintenance, with the wife seeking $11,000/mo and the husband proposing paying $3000-$5000/mo. The trial court sided mostly with the wife, awarding her $10,000/mo alimony.

Sworn Financial Statements Determine Need For Maintenance

The husband first argued that the trial judge erred by disregarding the wife’s sworn financial statement as an indication of her need for alimony, and instead used the husband’s SFS as an indication of what the wife’s reasonable needs would be.

Litigation, and expenses, are not solitaire, and it is not unusual for judges to compare financial statements to see if one of the spouses has inflated needs. Moreover, it’s hard to claim your spouse is being extravagant when your own expenses are 3x as much!

The wife’s SFS showed $6800 of monthly expenses, but the court agreed with her testimony that this was a “bare bones” budget that did not include income taxes, her anticipated higher costs upon divorce, and provided her with a lower standard of living then the spouses enjoyed during the marriage.

The husband’s financial affidavit, by contrast, claimed $19,000 of monthly expenses, which the court found more closely reflected the lifestyle of the parties during marriage. His budget included over $5000/mo of investing and retirement savings, plus another $10,000/mo for dining out, vehicles, emancipated children expenses, and vacations.

“By finding that husband’s SFS more accurately reflected the parties’ marital lifestyle than did wife’s SFS, the court impliedly concluded that wife’s ‘[r]easonable financial need as established during the marriage’ fell somewhere between her stated needs of $6800 per month and husband’s $19,000 monthly expenditures… Although we acknowledge that some of the expenses on husband’s SFS do not relate to the marital lifestyle or correlate with wife’s needs, because the record shows that the court equally considered wife’s SFS and all relevant testimony on the issue, the court did not exceed its discretion in relying on husband’s SFS.”

Coplin.2In re: Marriage of Coplin, ¶¶ 10-11 (Colo.App. 2020) (Unpublished Decision).

Investment Income For Maintenance

As property, the wife was awarded $765K in retirement and investment accounts, and another issue was how to count this investment income for purposes of determining alimony. The husband’s expert testified that the wife’s reasonable rate of return on her post-divorce investments would be up to $50K/yr, income which should reduce her need for maintenance.

Undistributed Investment Earnings Not Included As Income For Colorado Alimony

Treatment of investment gains for Colorado alimony.

Both the husband’s and wife’s experts agreed that, given her age, the wife could withdraw funds from her retirement account without tax penalty.

If a spouse is able to withdraw funds from a retirement account without tax penalty the court may, but is not required, to include the unwithdrawn funds as income for purposes of calculating maintenance in Colorado. Per C.R.S. 14-10-114(8)(c)(II)(E), for purposes of maintenance “gross income” does not include:

“Earnings or gains on retirement accounts, including individual retirement accounts; except that such earnings or gains shall not be included as income unless a party takes a distribution from the account. If a party may take a distribution from the account without being subject to a federal tax penalty for early distribution and the party chooses not to take a distribution, the court may consider the distribution that could have been taken in determining the party’s gross income.” (Emphasis added).

The Coplin3In re: Marriage of Coplin, ¶¶ 10-11 (Colo.App. 2020) (Unpublished Decision). court found that the trial judge had discretion whether to count as income for purposes of Colorado alimony withdrawals the wife could have taken, and therefore upheld the ruling which excluded from the wife’s income funds she could have withdrawn, but chose not to.

Not Required To Use Investment Earnings Before Qualifying For Alimony

Here’s where the ruling took a turn for the surprising. The trial court recognized that the wife would receive “significant returns” on her share of the marital property, but it concluded that she should not have to “tap into” those earnings to help meet her needs before qualifying for a maintenance award under Colorado law.

While it’s settled that a spouse does not have to deplete his/her share of the marital estate to qualify for maintenance, the Coplin court took an expansive view of the word “deplete.” Analogizing to an equalization payment, the court concluded that forcing the wife to spend the income on her investments, even while leaving the principal intact, would also be depletion – future investment income:

“[Future investment income] derives from an asset that the wife received during the property division. If wife must turn to the property division to access the income she requires to provide for her needs, she is depleting her property before being entitled to maintenance. This concept does not differentiate between a spouse’s invasion of the principal of an asset awarded and his or her reliance on income earned therefrom. It prohibits a spouse from having to use any part of the property awarded to meet his or her needs before receiving maintenance. Thus, even if wife uses only the income earned on the retirement accounts, that concept is disallowed.”

Coplin.4In re: Marriage of Coplin, ¶ 23 (Colo.App. 2020) (Unpublished Decision).

Colorado Alimony Award Cannot Impoverish Spouse

The husband made a last-ditch argument that the maintenance award would impoverish him (i.e. render him poor), and over a 30 year period, would leave him with a net worth of negative $620,000 while the wife accrued a positive $4m.

The court noted that the negative net worth was based upon the husband’s claimed expenses per the SFS, but once his expenses were “normalized” to the wife’s spending level, he would actually end up with a positive $6.8m to the wife’s $4m. The court therefore concluded:

“Because husband need not deplete his savings or property division to meet his maintenance obligation, we reject his final claim that the maintenance award is “an impermissible appropriation of the entirety of [his] estate.”

Coplin.5In re: Marriage of Coplin, ¶ 30 (Colo.App. 2020) (Unpublished Decision).

No Discussion Of Incomes Or Colorado Maintenance Formula

There was an interesting omission from the Coplin decision – any reference to the parties’ incomes. Normally in a Colorado alimony case, incomes are at least mentioned as a background fact, but apparently in this case the Court of Appeals did not consider that fact as relevant to its inquiry. That suggests that the real focus was the wife’s needs, and the husband’s ability to pay was not seriously at issue (notwithstanding his rejected impoverishment argument).

And along with no mention of the spouse’s incomes, there was also no reference whatsoever to the advisory Colorado alimony guidelines. This is unsurprising, as the guideline amount is not applicable when the spouses’ combined incomes exceed $240,000/yr. C.R.S. 14-10-114(3)(c), as we discussed in a blog post just last month.

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