After a divorce in Colorado, one spouse may be ordered to pay the other periodic payments – with child support or spousal maintenance (i.e. alimony). And when there is a disparity in assets awarded to the spouses, the court will typically order a property equalization payment from the spouse with the greater share of the marital estate. This may be a lump sum, or it may be in periodic payments.
What is an Equalization Payment?
Assume that after everything is divided upon dissolution of marriage, the husband has $850K in assets, and the wife has $800K in assets, a disparity of $50K. In order to equalize the division of assets, the husband would need to pay the wife a property equalization payment of half of that disparity, or $25,000 total – which brings his net share of the marital estate down to $825K ($850K minus $25K), and brings the wife’s share up to $825K ($800K plus $25K).
Rather than a lump sum, the spouses may agree, or the court may order, that the property equalization payment be made in equal monthly payments, say of $1000/mo for 25 months.
In Bervaldi,1In re: Marriage of Bervaldi (Colo.App. No. 21CA0245, Jan. 13, 2022) (Unpublished Decision). the trial court ordered the husband to make an equalization payment to the wife of $497,000, in equal monthly installments over 5 years, with an interest rate of 8.5% (which is above the normal judgment interest rate in Colorado), resulting in a monthly equalization payment of $12,670.
Notably, the court characterized these property equalization payments as spousal maintenance, subject to modification in accordance with Colorado law, and even addressed the statutory alimony factors, finding the wife needed the funds to “get on her feet financially and restart.”
The husband appealed, and the court of appeals reversed.
Must Divide Property Before Awarding Maintenance
As we wrote in a prior blog, “First Comes Property, Then Comes Alimony“. Under Colorado’s maintenance statute, one of the factors the trial court must consider when determining maintenance is “The marital property apportioned to each party.” C.R.S. 14-10-114(3)(a)(I)(B). For a more detailed discussion of maintenance in a Colorado dissolution, see our Spousal Maintenance article in the Colorado Family Law Guide.
By contrast, the property division statute does not include the amount of maintenance as a consideration for division of the marital estate.
It is impossible to determine the marital property each spouse has without actually dividing the marital estate, so necessarily the couple’s assets and debts must be divided, including determining the equalization payment, prior to the court considering maintenance. The problem is that in this case, the court did not do property first, then maintenance, but instead considered them together:
“This combined order has attributes of a property division and a maintenance award. See Sinn v. Sinn, 696 P.2d 333, 336 (Colo. 1985) (periodic payments should be based on the purpose of the payments — if they are meant to accomplish a just apportionment of marital property over time, they are in the nature of property division, but if they are for spousal support, they constitute maintenance). Such an order is improper under the UDMA, which contemplates separate property and maintenance orders based on separate considerations.”Bervaldi.2In re: Marriage of Bervaldi, ¶ 7 (Colo.App. No. 21CA0245, Jan. 13, 2022) (Unpublished Decision).
The takeaway? Property equalization payments may look like monthly support, but they are not. They are a debt one spouse owes to the other due to a disparate division of the marital estate, and should not be used as a substitute for maintenance, nor mixed together with it.
Note that this is not to say that there is no connection whatsoever between the two – indeed, a spouse paying a property equalization payment may have less resources available to pay maintenance, so in such cases it may be appropriate to (1) determine what is owed as an equalization payment, (2) determine maintenance, and then (3) request that the property equalization payments commence only after maintenance is no longer payable.
Judicial Notice & Value of Business
There were several other issues on appeal, the other one of note being the way the Court had valued the family business, a foundation repair company. The parties had stipulated to a business appraiser who had valued the business at $646,000, based upon an erroneous 2019 tax return. Once that return had been corrected, the appraiser lowered the valuation to $602,000.
Despite the only evidence of value being the $602K business valuation, the trial judge awarded the husband the business for a value of $646,000, justifying the increase by taking “judicial notice” that: “(1) ‘affluent people’ who are moving into the Roaring Fork Valley want to remodel their homes, and (2) the Aspen area has “a lot of expansive soils” and ‘foundation issues.'” Bervaldi.3In re: Marriage of Bervaldi, ¶ 12 (Colo.App. No. 21CA0245, Jan. 13, 2022) (Unpublished Decision).
In essence, judicial notice means no evidence is needed to prove what everyone already knows. The Court of Appeals noted when it is appropriate for a trial judge to take judicial notice:
“A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.”Colo. R. Evid. 201(b)
While “Courts may take judicial notice of matters of common knowledge in the community where they sit, and of general economic trends” Bervaldi,4In re: Marriage of Bervaldi, ¶ 13 (Colo.App. No. 21CA0245, Jan. 13, 2022) (Unpublished Decision) (Cleaned Up)., the trial judge went too far:
It may be common knowledge in Aspen that there has been an influx of new homeowners and the construction industry is thriving. But whether “affluent people” moving into the area are remodeling their homes and whether the soil conditions under those homes require foundation repairs are not matters of common knowledge subject to judicial notice. Those observations are speculative and not based on evidence presented at the hearing.
Moreover, these issues were not subject to judicial notice in this proceeding merely because the court had “preside[d] over many construction cases” involving other parties.”Bervaldi.5In re: Marriage of Bervaldi, ¶¶ 14-15 (Colo.App. No. 21CA0245, Jan. 13, 2022) (Unpublished Decision) (Cleaned Up).
Award-Winning Colorado Springs Divorce Lawyers
U.S. News & World Report calls Graham.Law one of the Best Law Firms in America, and our managing partner is a Colorado Super Lawyer. Our family law attorneys have years of experience helping clients navigate the Colorado legal system. We know Colorado divorce & family law inside and out, from complex multi-million dollar property or child custody cases to basic child support modifications.
For more information about our top-rated El Paso County family law firm, contact us by filling out our contact form, calling us at (719) 630-1123 to set up a free consult, or click on:
- Why Graham.Law for your Colorado Family Law Case. Learn about the benefits of hiring divorce specialists to help you.
- Our Colorado Springs Family Law Team. The great attorneys & paralegals at Graham.Law.
- Colorado Family Law Guide. The internet’s most comprehensive resource for attorneys and clients alike.
- Military Divorce Guide. Addresses specialized family law issues that arise when one spouse is in the military.
Colorado Family Law. Period.