People fighting over, or stretching a $100 bill.

First Comes Property, Then Comes Alimony

Which came first, the chicken or the egg? In the context of a Colorado divorce case, the question might be rephrased as “which comes first, property or maintenance?” And the answer, per statute, is maintenance.

Under Colorado’s maintenance statute, one of the factors a court is required to consider before making a maintenance determination is “The marital property apportioned to each party.” C.R.S. 14-10-114(3)(a)(I)(B). For a complete discussion of how courts determine maintenance, maintenance, see the Spousal Maintenance (Alimony) article in the Colorado Family Law Guide

And while Colorado’s statute governing the division of marital assets and debts includes a variety of factors for the court to consider, income of the parties is not one of them. C.R.S. 14-10-112. Instead, the court looks at the spouse’s contributions, depletion of separate property, their economic circumstances (which sort of does seem like it could include consideration of income), etc. See the Division of the Marital Estate article in the Colorado Family Law Guide.

What If Spouses Agree On Maintenance, But Not Property?

When spouses reach agreements at mediation, they typically have them incorporated into an agreement (often called a Memorandum of Understanding, or MOU), which is submitted to the court for approval.

If the spouses agree on maintenance, but not property, this presents problems. Courts will often accept the parties’ agreements before turning to the contested issues. That’s what happened in a recent unpublished decision from the Colorado Court of Appeals, Bergles.1In re: Marriage of Bergles (Colo.App. 2020) (Unpublished decision).

In Bergles, the husband was awarded his PERA, which the parties agreed had a net present value of $700,000. The wife was earning over $100,000/yr, and the husband would receive $6300/mo from the PERA, which resulted in the spouses agreeing to a mutual waiver of maintenance.

The trial court not only accepted the parties’ mediation agreement first, but it went a step further and found that it lacked jurisdiction to even consider maintenance in view of their agreement. But retirement plans already in pay status are both property, to be divided, and income, to be considered for purposes of maintenance. And the judge was understandably concerned about the equity of counting as property the very same PERA that the parties had just counted for purposes of the maintenance waiver.

Double-Counting Income As Property Is OK

To address redress the double-counting, the Bergles court got creative and as part of the property settlement, awarded the husband his PERA for a value of zero, despite the stipulation that it was worth $700,000. The Court of Appeals characterized what happened as follows:

“Section 14-10-114(8)(c)(I)(H), provides that ‘[p]ension payments and retirement benefits actually received that have not previously been divided as property’ in the dissolution action must be included in a party’s gross income when determining maintenance. The district court, relying on this section, concluded that the inverse is also true: once a court considers a party’s monthly pension payment in determining maintenance, the pension can’t also be awarded as property.”

Bergles.2In re: Marriage of Bergles (Colo.App. 2020), ¶ 11 (Unpublished decision).

And the Court of Appeals reversed the trial judge, finding this creativity to be error for two reasons: the court should have divided the marital estate before determining maintenance, and it could not exclude from the marital estate property just because that same property counted as income.

“Section 14-10- 113 simply does not remove from the marital property subject to division the marital portion of a retirement account in payout status merely because the retirement income has also been used in determining maintenance.”

Bergles.3In re: Marriage of Bergles (Colo.App. 2020), ¶ 14 (Unpublished decision).

On remand, the court was directed to first divide the marital estate before determining maintenance. However, this also meant that the judge would be free to revisit the maintenance waiver. I suspect the creative trial judge is probably thinking of awarding the husband maintenance, despite the waiver, about equivalent to what the wife’s share of the PERA was.

The takeaway? It’s OK to be equitable, but being creative contrary to statute risks reversal on appeal.

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