In a recent opinion, the Colorado Court of Appeals reviewed two questions relating to the treatment of separate real property in a divorce.  They also made one new determination in the treatment of accrued vacation and sick time as property to be divided.

How the Divorce Court Treats the Re-Invested Proceeds of a Home Purchased Prior to Marriage
In the Case of Marriage of Cardona and Castro, the wife had sold a condominium, during the marriage, that she purchased before the marriage.  She used the proceeds of the sale ($100,000.00) in the purchase of a marital home.  The Trial Court had set aside funds to reimburse her for her initial contribution of separate property towards the purchase of the home.  These funds were not considered part of the division of the marital estate.

The Court of Appeals corrected this error on the part of the Trial Court by pointing out that in Colorado, there is a presumption of a gift to the marriage when separate funds are used to purchase a marital asset; in this case the marital home.  So, if you sell the home you owned prior to the marriage and put the equity into another home during the marriage, that entire amount becomes marital property and is subject to division upon divorce.  The only way to overcome this presumption of a gift to the marriage is to show, through evidence, that your intention was for the separate equity to remain separate property.  For instance, you could have a post-nuptial agreement that states  the financial contribution of separate property to the marital home is intended to remain separate property.  The evidence needs to be stronger than retrospectively stating that this was your intention.

The bottom line is that if you want to keep the proceeds of a sale of separate property separate, you need avoid co-mingling it with marital assets.  Keep the proceeds in a separate account with only your name on them, or, if you put them into a marital asset like another home, execute a post-nuptial agreement stating your intent for those proceeds to remain separate.

When Marital Funds are Used to Pay down the Debt on Separate Property
Let's say that you own a home that you purchased before you were married.  That home is your separate property and it should not be part of the division of marital assets.  However, if that home has increased in value during the marriage, that increase in value is marital and will be considered in the division of marital assets.

In Marriage of Cardona and Castro, the Court of Appeals took this one step further.  Beyond the increase in value, there is also another possible marital component to a separate property home.  Take the situation where there is no increase in the value to the home during a marriage.  Lets say that you are in a recession and the value of the home has stayed stable in the last 5 years.  However, during those same 5 marital years, the owner of the home (married) has been paying down the mortgage so that there is now more equity in the home because the debt has been reduced during the marriage.  In Marriage of Cardona and Castro, the Appellate Court found that the increase in equity in the property based on the use of marital funds to pay down the dept is marital property.  In other words, if the debt has been reduced by 20,000.00 during the marriage, even if the value of the property has not increased, the equity has and that 20,000.00 in increased equity is marital property.

Is Accrued Vacation and Sick time a Marital Asset?
The last separate vs. marital property issue addressed in Marriage of Cardona and Castro involves accrued vacation and sick leave time.  This is an issue of first impression in Colorado.  The question is:  Is accrued leave time a marital asset to be divided on dissolution of a marriage?   In Cardona, the Trial Court  held that the husband's accrued leave time was valued at $23,232.00 and required him to pay $11,615.00 of that value to his wife as part of the division of marital assets.   The Appellate Court disagreed stating that accrued leave time is NOT a marital asset and not divisible on dissolution of marriage.  The rational was that the value is contingent upon using it or not. 

If you have further questions about marital and separate property please click here for more information.

In a recent opinion, the Colorado Court of Appeals reviewed two questions relating to the treatment of separate real property in a divorce.  They also made one new determination in the treatment of accrued vacation and sick time as property to be divided.

How the Divorce Court Treats the Re-Invested Proceeds of a Home Purchased Prior to Marriage
In the Case of Marriage of Cardona and Castro, the wife had sold a condominium, during the marriage, that she purchased before the marriage.  She used the proceeds of the sale ($100,000.00) in the purchase of a marital home.  The Trial Court had set aside funds to reimburse her for her initial contribution of separate property towards the purchase of the home.  These funds were not considered part of the division of the marital estate.

The Court of Appeals corrected this error on the part of the Trial Court by pointing out that in Colorado, there is a presumption of a gift to the marriage when separate funds are used to purchase a marital asset; in this case the marital home.  So, if you sell the home you owned prior to the marriage and put the equity into another home during the marriage, that entire amount becomes marital property and is subject to division upon divorce.  The only way to overcome this presumption of a gift to the marriage is to show, through evidence, that your intention was for the separate equity to remain separate property.  For instance, you could have a post-nuptial agreement that states  the financial contribution of separate property to the marital home is intended to remain separate property.  The evidence needs to be stronger than retrospectively stating that this was your intention.

The bottom line is that if you want to keep the proceeds of a sale of separate property separate, you need avoid co-mingling it with marital assets.  Keep the proceeds in a separate account with only your name on them, or, if you put them into a marital asset like another home, execute a post-nuptial agreement stating your intent for those proceeds to remain separate.

When Marital Funds are Used to Pay down the Debt on Separate Property
Let's say that you own a home that you purchased before you were married.  That home is your separate property and it should not be part of the division of marital assets.  However, if that home has increased in value during the marriage, that increase in value is marital and will be considered in the division of marital assets.

In Marriage of Cardona and Castro, the Court of Appeals took this one step further.  Beyond the increase in value, there is also another possible marital component to a separate property home.  Take the situation where there is no increase in the value to the home during a marriage.  Lets say that you are in a recession and the value of the home has stayed stable in the last 5 years.  However, during those same 5 marital years, the owner of the home (married) has been paying down the mortgage so that there is now more equity in the home because the debt has been reduced during the marriage.  In Marriage of Cardona and Castro, the Appellate Court found that the increase in equity in the property based on the use of marital funds to pay down the dept is marital property.  In other words, if the debt has been reduced by 20,000.00 during the marriage, even if the value of the property has not increased, the equity has and that 20,000.00 in increased equity is marital property.

Is Accrued Vacation and Sick time a Marital Asset?
The last separate vs. marital property issue addressed in Marriage of Cardona and Castro involves accrued vacation and sick leave time.  This is an issue of first impression in Colorado.  The question is:  Is accrued leave time a marital asset to be divided on dissolution of a marriage?   In Cardona, the Trial Court  held that the husband's accrued leave time was valued at $23,232.00 and required him to pay $11,615.00 of that value to his wife as part of the division of marital assets.   The Appellate Court disagreed stating that accrued leave time is NOT a marital asset and not divisible on dissolution of marriage.  The rational was that the value is contingent upon using it or not. 

If you have further questions about marital and separate property please click here for more information.

I had lunch this week with one of the Certified Divorce Financial Analysts that we work with in our divorce cases that involve maintenance.  Her name is Deb Johnson and the work she has done in some of our cases has made a critical difference in being able to reach a good settlement for our client.  You can reach Deb at the Divorce Resource Centre of Colorado, LLC at 303-468-5626

I have spoken in other blog entries about Maintenance awards in Colorado, the process and the standard the Court uses to determine if there is a need for maintenance as well as the need for expert testimony and advice on what is a fair settlement in a long term marriage where the incomes of the two parties are vastly different.  (see the category Divorce, Maintenance (Alimony)).  In this blog entry I want to focus on the possible roles that a Certified Divorce Financial Analyst can play in a divorce.

Option 1:  Advocate for your position
A Certified Financial Analyst can take all of the financial information in your divorce proceeding and come up with options and scenarios to equalize the two parties financially.  This could include an unequal distribution of the marital assets and debts as well as the use of maintenance to assure that the lesser earning spouse receives the full benefit of their partnership for the entire length of the marriage.  This is often very powerful evidence that can be used to settle the case or as testimony at trial to influence the Judge's decision on asset distribution and maintenance.  As I have said before, using a good Certified Divorce Financial Analyst is a smart investment in your long term future if you are the lesser earning spouse.

Option 2:  Bringing Clarity to Chaos
The second way you can use a Certified Divorce Financial Analyst is to go alone or with your spouse to just get a clear picture of the financial situation and what the effect of a divorce will have on each of you.  Deb Johnson reviewed a couple items with me that I thought would be so useful for a divorcing couple.  First she can take all the financial information and come up with a future budget and cash flow analysis for both parties.  So you can see what it would really look like financially after the divorce.  She can answer questions about the house and if you can afford to keep it or what the tax return issues will look like following the divorce.  This process can assist with the concerns of both spouses.  The spouse that is worried that maintenance will break them can see that in fact it may be possible to make it all work with the ensuing tax breaks and the spouse that has little to no earning capacity can see that they will be able to make it financially.  This clarity is invaluable because people get stuck in their emotional reaction about money rather than figure out the reality of the situation.  A CDFA can make the difference in bringing everyone onto the same reality based financial picture.

Option 3:  Financial Mediation
One of the things that Deb Johnson let me know at our lunch is that she is now doing financial mediation in divorce cases.  You can find a good mediator in Denver.  In fact, we do family law mediation at our firm, Matthews & Matthews PC.  However, few mediators have the financial background to do the kind of scenario planning that a good CDFA can do.  Deb now offers mediation to resolve the financial issues between divorcing spouses or between non married couples or long term gay or lesbian partners.  You could also do a full mediation with both financial and parenting issues addressed and have Deb take on the role of financial mediator in partership with another mediator.  I can imagine that this partnership could be very powerful for a complex financial divorce mediation.  The tools that Deb or others with the skills of a CDFA can bring to the tale in a mediation for outweigh what is possible with an attorney or therapist mediator when it comes to well thought our financial scenarios.  I believe that using Deb or another CDFA is worth the extra cost of having a true financial expert in the mediation mix.

I am certainly glad that I had lunch with Deb this week and learned about all the ways we can use her talents to support our clients in their divorce or those that ask for legal advice but want to do their case without attorneys.  These folks could also benefit greatly by spending some time and investing some money in getting a clear picture of the financial realities of their divorce situation.  Too many people go through a divorce on their own and then call us later upset that they did not understand the financial ramifications of their divorce decisions.  Often they want to re-open their case to correct a mistake they made and most of the time I have to tell them that it is too late.  Once the divorce is final, in most cases, you cannot do anything about financial mistakes you made.  Even if you do not want to use attorneys, you can at least get the financial reality of your decisions by going to a CDFA.  I highly recommend it.

I had lunch this week with one of the Certified Divorce Financial Analysts that we work with in our divorce cases that involve maintenance.  Her name is Deb Johnson and the work she has done in some of our cases has made a critical difference in being able to reach a good settlement for our client.  You can reach Deb at the Divorce Resource Centre of Colorado, LLC at 303-468-5626

I have spoken in other blog entries about Maintenance awards in Colorado, the process and the standard the Court uses to determine if there is a need for maintenance as well as the need for expert testimony and advice on what is a fair settlement in a long term marriage where the incomes of the two parties are vastly different.  (see the category Divorce, Maintenance (Alimony)).  In this blog entry I want to focus on the possible roles that a Certified Divorce Financial Analyst can play in a divorce.

Option 1:  Advocate for your position
A Certified Financial Analyst can take all of the financial information in your divorce proceeding and come up with options and scenarios to equalize the two parties financially.  This could include an unequal distribution of the marital assets and debts as well as the use of maintenance to assure that the lesser earning spouse receives the full benefit of their partnership for the entire length of the marriage.  This is often very powerful evidence that can be used to settle the case or as testimony at trial to influence the Judge's decision on asset distribution and maintenance.  As I have said before, using a good Certified Divorce Financial Analyst is a smart investment in your long term future if you are the lesser earning spouse.

Option 2:  Bringing Clarity to Chaos
The second way you can use a Certified Divorce Financial Analyst is to go alone or with your spouse to just get a clear picture of the financial situation and what the effect of a divorce will have on each of you.  Deb Johnson reviewed a couple items with me that I thought would be so useful for a divorcing couple.  First she can take all the financial information and come up with a future budget and cash flow analysis for both parties.  So you can see what it would really look like financially after the divorce.  She can answer questions about the house and if you can afford to keep it or what the tax return issues will look like following the divorce.  This process can assist with the concerns of both spouses.  The spouse that is worried that maintenance will break them can see that in fact it may be possible to make it all work with the ensuing tax breaks and the spouse that has little to no earning capacity can see that they will be able to make it financially.  This clarity is invaluable because people get stuck in their emotional reaction about money rather than figure out the reality of the situation.  A CDFA can make the difference in bringing everyone onto the same reality based financial picture.

Option 3:  Financial Mediation
One of the things that Deb Johnson let me know at our lunch is that she is now doing financial mediation in divorce cases.  You can find a good mediator in Denver.  In fact, we do family law mediation at our firm, Matthews & Matthews PC.  However, few mediators have the financial background to do the kind of scenario planning that a good CDFA can do.  Deb now offers mediation to resolve the financial issues between divorcing spouses or between non married couples or long term gay or lesbian partners.  You could also do a full mediation with both financial and parenting issues addressed and have Deb take on the role of financial mediator in partership with another mediator.  I can imagine that this partnership could be very powerful for a complex financial divorce mediation.  The tools that Deb or others with the skills of a CDFA can bring to the tale in a mediation for outweigh what is possible with an attorney or therapist mediator when it comes to well thought our financial scenarios.  I believe that using Deb or another CDFA is worth the extra cost of having a true financial expert in the mediation mix.

I am certainly glad that I had lunch with Deb this week and learned about all the ways we can use her talents to support our clients in their divorce or those that ask for legal advice but want to do their case without attorneys.  These folks could also benefit greatly by spending some time and investing some money in getting a clear picture of the financial realities of their divorce situation.  Too many people go through a divorce on their own and then call us later upset that they did not understand the financial ramifications of their divorce decisions.  Often they want to re-open their case to correct a mistake they made and most of the time I have to tell them that it is too late.  Once the divorce is final, in most cases, you cannot do anything about financial mistakes you made.  Even if you do not want to use attorneys, you can at least get the financial reality of your decisions by going to a CDFA.  I highly recommend it.

Obstacles to Good Preparation
For most people, just making the decision to divorce can be very difficult and emotionally exhausting.  Thinking about taking specific actions to prepare for the divorce process can seem overwhelming.  However, in many cases, preparation can be the pivotal factor in a divorce process that produces a fair, just and hopefully expeditious result.

Collecting the Financial Documents
All divorces require full financial disclosure.  However, in many cases, both spouses do not have equal knowledge and understanding of the family finances.  Once the divorce has been filed, some people find that they no longer have access to the financial information and they are left in a vulnerable position if the other side is not forthcoming regarding all of the finances.  Any money that was earned by either spouse during the marriage and the increase in value of all investments are marital property.  Both parties have the right to all of the financial information.  If you do not handle the finances or you may be unaware of all of your family financial information, it is a good idea to make copies of all financial documentation for the past three years before the divorce process begins.  You should know about all bank accounts, investment accounts, credit card debt and any other assets and liabilities.  It does not matter who's name is on the account, it is still marital property if it was acquired or increased in value during the marriage and you have an equal right to these documents.

If there is a vital piece of financial information that is not disclosed, you do have five years from the date of the Petition for Dissolution of Marriage to re-open the case.  However, you might not find out about it at all or even if you do, and you re-open the case, there will be significant legal fees involved.  So, it is best to have all the financial information in hand before you file.  Even though you might find it uncomfortable to venture into these documents and make copies, it is your right to do so and it might be very important for your financial protection.

Provide for at least Three Months of Financial Independence
Here is a scenario I have seen too many times:  A stay at home wife and mother wants to file for divorce after 20 years of marriage.  The couple has joint checking accounts, savings accounts, investment accounts and joint credit cards.  The wife tells me that her husband would never cut her off financially.  I give her my advice but she is confident that nothing will happen.  She files for divorce and within two to three days, all accounts and credit cards have been cut off and she has no access to marital funds.  The wife is shocked.  Her Husband has never done anything like this before.  Sometimes people behave in totally uncharacteristic ways when they are presented with a divorce.  You just never know.

The funds still belong to her, but she can't get to them until we get a court order.  Even though this is a financial emergency, the Courts in Colorado will not set a date right away to deal with a purely financial problem.  In most cases, you will have to wait for a Temporary Orders Hearing.  This can take up to three months to set. 

To be on the safe side, it is important to know what amount of money you are going to need for a three month period.  This includes money to pay the mortgage, car payment, utilities, food etc...  You should assume that your spouse could stop paying for anything.  You should also include the money you would need to retain an attorney and possibly other experts as well including counselling for yourself or your children.  Take the time to do a budget and consider contingencies.  Then, right before you file, remove 3 months of expenses from your accounts and set up an account with only your name on it.   Also open a credit card with only your name on it if possible.  I would let my spouse know that I did this once the Petition for Dissolution of Marriage is filed.  I would have to know all the circumstance to say if and how this should be done.  You should discuss this fully with your attorney.  However, generally, I would send an email that tells my spouse the amount I have removed and that it is still marital funds and will only be used for day to day expenses but that you needed to feel secure about funds for the time being because you have no current earning capacity.

Counselling and Keeping a Journal
Sometimes, it is clear, even before the divorce is filed that there are and will be issues around parenting time and decision making for the children.  If there is trauma in the household, physical or emotional abuse or just overt confrontation on a regular basis that the children are exposed to, consider counselling for your self or more importantly for the children.  If you get the children into counselling before you file for divorce you have a number of advantages.  First, while you are married and have no Court Orders, a counsellor or therapist can begin assessment and treatment with the permission of only one parent.  If, later on, you have Court Orders that include joint decision making, the therapist will require the permission of both parents.  Also, if there are parenting issues going on for the children, you will have someone who is an objective expert working with the children and able, after a period of time, to give an expert opinion on what is going on and what they see is in the best interest of the children.

Secondly, if there are problems with parenting, you should be making a journal of any relevant interaction.  You can do this prior to filing for divorce and have a record leading up to the point when you might ask the other spouse to leave the home environment.  Again, the right thing to do here depends on all the circumstances and you should talk about the best preparation steps with your attorney before you file.

In conclusion, my best advice is to meet with a family law attorney before you file for divorce and discuss what is in your best interest to do in preparation for divorce.  Your attorney might not have this conversation with you automatically.  You need to bring up preparation and ask for a full assessment of your situation.

If you have further questions in relation to preparation for divorce please feel free to give me a call at Matthews & Matthews PC.  Our number is 303-329-3802/

Obstacles to Good Preparation
For most people, just making the decision to divorce can be very difficult and emotionally exhausting.  Thinking about taking specific actions to prepare for the divorce process can seem overwhelming.  However, in many cases, preparation can be the pivotal factor in a divorce process that produces a fair, just and hopefully expeditious result.

Collecting the Financial Documents
All divorces require full financial disclosure.  However, in many cases, both spouses do not have equal knowledge and understanding of the family finances.  Once the divorce has been filed, some people find that they no longer have access to the financial information and they are left in a vulnerable position if the other side is not forthcoming regarding all of the finances.  Any money that was earned by either spouse during the marriage and the increase in value of all investments are marital property.  Both parties have the right to all of the financial information.  If you do not handle the finances or you may be unaware of all of your family financial information, it is a good idea to make copies of all financial documentation for the past three years before the divorce process begins.  You should know about all bank accounts, investment accounts, credit card debt and any other assets and liabilities.  It does not matter who's name is on the account, it is still marital property if it was acquired or increased in value during the marriage and you have an equal right to these documents.

If there is a vital piece of financial information that is not disclosed, you do have five years from the date of the Petition for Dissolution of Marriage to re-open the case.  However, you might not find out about it at all or even if you do, and you re-open the case, there will be significant legal fees involved.  So, it is best to have all the financial information in hand before you file.  Even though you might find it uncomfortable to venture into these documents and make copies, it is your right to do so and it might be very important for your financial protection.

Provide for at least Three Months of Financial Independence
Here is a scenario I have seen too many times:  A stay at home wife and mother wants to file for divorce after 20 years of marriage.  The couple has joint checking accounts, savings accounts, investment accounts and joint credit cards.  The wife tells me that her husband would never cut her off financially.  I give her my advice but she is confident that nothing will happen.  She files for divorce and within two to three days, all accounts and credit cards have been cut off and she has no access to marital funds.  The wife is shocked.  Her Husband has never done anything like this before.  Sometimes people behave in totally uncharacteristic ways when they are presented with a divorce.  You just never know.

The funds still belong to her, but she can't get to them until we get a court order.  Even though this is a financial emergency, the Courts in Colorado will not set a date right away to deal with a purely financial problem.  In most cases, you will have to wait for a Temporary Orders Hearing.  This can take up to three months to set. 

To be on the safe side, it is important to know what amount of money you are going to need for a three month period.  This includes money to pay the mortgage, car payment, utilities, food etc...  You should assume that your spouse could stop paying for anything.  You should also include the money you would need to retain an attorney and possibly other experts as well including counselling for yourself or your children.  Take the time to do a budget and consider contingencies.  Then, right before you file, remove 3 months of expenses from your accounts and set up an account with only your name on it.   Also open a credit card with only your name on it if possible.  I would let my spouse know that I did this once the Petition for Dissolution of Marriage is filed.  I would have to know all the circumstance to say if and how this should be done.  You should discuss this fully with your attorney.  However, generally, I would send an email that tells my spouse the amount I have removed and that it is still marital funds and will only be used for day to day expenses but that you needed to feel secure about funds for the time being because you have no current earning capacity.

Counselling and Keeping a Journal
Sometimes, it is clear, even before the divorce is filed that there are and will be issues around parenting time and decision making for the children.  If there is trauma in the household, physical or emotional abuse or just overt confrontation on a regular basis that the children are exposed to, consider counselling for your self or more importantly for the children.  If you get the children into counselling before you file for divorce you have a number of advantages.  First, while you are married and have no Court Orders, a counsellor or therapist can begin assessment and treatment with the permission of only one parent.  If, later on, you have Court Orders that include joint decision making, the therapist will require the permission of both parents.  Also, if there are parenting issues going on for the children, you will have someone who is an objective expert working with the children and able, after a period of time, to give an expert opinion on what is going on and what they see is in the best interest of the children.

Secondly, if there are problems with parenting, you should be making a journal of any relevant interaction.  You can do this prior to filing for divorce and have a record leading up to the point when you might ask the other spouse to leave the home environment.  Again, the right thing to do here depends on all the circumstances and you should talk about the best preparation steps with your attorney before you file.

In conclusion, my best advice is to meet with a family law attorney before you file for divorce and discuss what is in your best interest to do in preparation for divorce.  Your attorney might not have this conversation with you automatically.  You need to bring up preparation and ask for a full assessment of your situation.

If you have further questions in relation to preparation for divorce please feel free to give me a call at Matthews & Matthews PC.  Our number is 303-329-3802/

On June first, 2010 the Colorado Supreme Court handed down it's long awaited ruling on In re Marriage of Thornhill,Case No. 08SC777.

Two legal issues were decided in Colorado Family Law.

1. Valuation of closely held business assets: Marketability Discounts can apply.
Often times, when you are dividing a marital estate in a divorce matter, a question arises as to the value of one spouse's share in an ongoing business enterprise. If that ownership share was generated during the marriage, then it is a marital asset and subject to division. When a business share is in a company that is not traded on the stock market, there may be no ready trading market for those shares. A marketability discount adjusts the value of specific shares downward to reflect the fact that there is no ready trading market for the shares.

In the Thornhill case, the husband had started and owned shares in an oil and gas service company that was not publicly traded. The Company was valued at 2.5 million, however, the Trial Court had agreed to a Marketability Discount of 33% which brought the value down to 1.625 million for the purpose of division of the marital estate. The wife argued that a Marketability Discount should not occur in a divorce matter (comparing it to minority shareholders when they are being forced out). The Appellate Court disagreed and so did the Supreme Court holding that the Trial Court does have the discretion to use a Marketability Discount if the circumstances warrant it.

2. The Parties' current "Standard of Living" should be looked at as part of the Threshold Test for awarding Maintenance:
When determining if Maintenance should be awarded, the Court looks in part at the following:
a. Whether the spouse seeking maintenance lacks sufficient property, including marital property apportioned to him or her, to provide for his or her reasonable needs, and
b. Is unable to support himself or herself through appropriate employment or is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the house.

The Trial Court in Thornhill considered whether Wife could "maintain her lifestyle" as part of the initial determination that she was entitled to maintenance. The Court of Appeals held that the Court should not have considered her current lifestyle or current standard of living in making that determination. They decided that the Court should only have looked at the standard of living to determine the amount of Maintenance but not for the initial determination of entitlement to Maintenance.

The Colorado Supreme Court overturned the Court of Appeals on this issue. They have made it clear that "the parties' standard of living during the marriage is in fact an appropriate-- and even necessary-- starting point for the trial court's determination of a particular spouse's reasonable needs or whether a spouse would be able to support herself through appropriate employment." In re Marriage of Thornhill, No. 08SC777,(Colo. 2010).

Here is a possible example: Lets say that a couple is getting divorced after 20 years of marriage. The wife works full time at 100,000 per year but her husband has made over one million dollars per year for the last two years. If the parties' standard of living was one that reflected their recent combined income at the time of divorce, then this would be relevant in the Court's determination of the wife's eligibility for Maintenance even though she is able to care for herself at her current income level. The parties' current standard of living is relevant to determining her reasonable needs. The term "Reasonable" is in light of their current standard of living.

If you have further questions about how this case might apply to your situation, feel free to visit our website or call our offices at 303-329-3802 and ask for Leslie Matthews.

On June first, 2010 the Colorado Supreme Court handed down it's long awaited ruling on In re Marriage of Thornhill,Case No. 08SC777.

Two legal issues were decided in Colorado Family Law.

1. Valuation of closely held business assets: Marketability Discounts can apply.
Often times, when you are dividing a marital estate in a divorce matter, a question arises as to the value of one spouse's share in an ongoing business enterprise. If that ownership share was generated during the marriage, then it is a marital asset and subject to division. When a business share is in a company that is not traded on the stock market, there may be no ready trading market for those shares. A marketability discount adjusts the value of specific shares downward to reflect the fact that there is no ready trading market for the shares.

In the Thornhill case, the husband had started and owned shares in an oil and gas service company that was not publicly traded. The Company was valued at 2.5 million, however, the Trial Court had agreed to a Marketability Discount of 33% which brought the value down to 1.625 million for the purpose of division of the marital estate. The wife argued that a Marketability Discount should not occur in a divorce matter (comparing it to minority shareholders when they are being forced out). The Appellate Court disagreed and so did the Supreme Court holding that the Trial Court does have the discretion to use a Marketability Discount if the circumstances warrant it.

2. The Parties' current "Standard of Living" should be looked at as part of the Threshold Test for awarding Maintenance:
When determining if Maintenance should be awarded, the Court looks in part at the following:
a. Whether the spouse seeking maintenance lacks sufficient property, including marital property apportioned to him or her, to provide for his or her reasonable needs, and
b. Is unable to support himself or herself through appropriate employment or is the custodian of a child whose condition or circumstances make it appropriate that the custodian not be required to seek employment outside the house.

The Trial Court in Thornhill considered whether Wife could "maintain her lifestyle" as part of the initial determination that she was entitled to maintenance. The Court of Appeals held that the Court should not have considered her current lifestyle or current standard of living in making that determination. They decided that the Court should only have looked at the standard of living to determine the amount of Maintenance but not for the initial determination of entitlement to Maintenance.

The Colorado Supreme Court overturned the Court of Appeals on this issue. They have made it clear that "the parties' standard of living during the marriage is in fact an appropriate-- and even necessary-- starting point for the trial court's determination of a particular spouse's reasonable needs or whether a spouse would be able to support herself through appropriate employment." In re Marriage of Thornhill, No. 08SC777,(Colo. 2010).

Here is a possible example: Lets say that a couple is getting divorced after 20 years of marriage. The wife works full time at 100,000 per year but her husband has made over one million dollars per year for the last two years. If the parties' standard of living was one that reflected their recent combined income at the time of divorce, then this would be relevant in the Court's determination of the wife's eligibility for Maintenance even though she is able to care for herself at her current income level. The parties' current standard of living is relevant to determining her reasonable needs. The term "Reasonable" is in light of their current standard of living.

If you have further questions about how this case might apply to your situation, feel free to visit our website or call our offices at 303-329-3802 and ask for Leslie Matthews.

Businesses are Marital Property
If you are married in Colorado and you or your spouse own a business, that business is all or in part marital property. If the business was opened during the marriage it is all marital property. It does not matter if your name is listed as an owner or not.

Business Valuation is often a Difficult Task
One of the more difficult parts of a divorce process is to place a monetary value on the marital business for purposes of dividing the business between the parties. This is called the Business Valuation Process. Experts typically need to be hired to accomplish this task and, depending on the size, type and level of complexity of the business, it can become a large, difficult and expensive project.

The recent implosion of the US and world financial markets and the demise of the real estate bubble, have caused a recession that has affected most businesses in the US. This has caused a new problem for valuing businesses for the purposes of divorce.

Past Business Valuation Techniques often don't fit in Today's Economic Enviroment
In the past, Business Valuations have used techniques that are based on the presumption that the historical performance of the business is a good indicator of the future trajectory of that business. Fundamentally, the mathematical models assume incremental improvement over time. Typically, the evaluator will look at the last five years of the business to determine the present value. Even if the current year shows a lower profit level, it will be factored in with the prior four years. The result may be a valuation that is out of sync with the realities of what the recession has done to the present and future revenue forecasts for your business.

In today's business climate, it is necessary to find ways to craft an equitable division of a business with the uncertainty of the business environment in mind. Coming to a bottom line figure to use for division may produce an unfair result on either side. On the one hand, the business could be valued too high because the valuation is based on past years and the person running the business has to pay out, to the other spouse, a large amount that is inconsistent with the current conditions and possible future of the business. On the other hand, the business could be in dire straits at the time of the divorce and therefore valued low, yet have a business rebound in one to three years. This leaves the spouse who did not run the business in a position of getting too small a value because he or she just happened to divorce during a recession slump. We are just not as sure these days what the future will bring.

Flexible Solutions for Today's Economy
One solution being used by family attorneys and business evaluators these days is to look outside the box at more flexible solutions. You have to tap into more complex solutions more often used when a business partnership or other entity is dissolving or when there is a buy out of one of the owners. Some solutions that are being looked at are Earn Out Options, Liquidating Events, Stock Sharing Provisions and more.

Without getting into the complexities of corporate law, the bottom line here is that you have to craft a solution that can be flexible, at least into the near future of the business. If you reach a bottom line figure and leave it at that, you may be setting this couple up to have to go back to court time and again as business conditions change. Also, if the business soars back to health in short order following a low valuation settlement number, you might leave the non-business spouse without recourse.

The Need for Protective Provisions and Professional Oversight
In order to have flexibility built in to the separation agreement, there is probably going to be a need for a professional to have some oversight over watching the business results over time and key business changes to assure that there is no "funny business" going on with accounting to skew the numbers as you move forward. There may also be a need for business oriented provisions to be placed in the settlement agreement to assure that the non-business spouse's interest in the business is protected into the future outlined in the agreement. Maintenance/Alimony may have to go to a sliding scale to avoid the attorneys fees it would take to go back to court over and over as the business re-stabilizes. There are a number of avenues to take for overseeing the future of the business. These avenues can run from working together with a financial expert in periodic review meetings to mediation or to working with a Special Master.

Consider Collaborative and Creative Solutions
The need for flexibility in the division of business interests needs to be considered in today's business climate when contemplating a divorce. Creating and maintaining a collaborative atmosphere to come up with a flexible solution is best given the lack of stability in today's business environment. The more creative the couple is willing to be in problem solving the uncertainty of the business's future the more likely they can come to a result that is equitable.

Every business and business sector is unique. You will need to work with your attorney and the appropriate experts to come up with a solution for business valuation in your particular case. There are still cases where a bottom line value can be reached, but in today's economy it is wise to look into flexible solutions as an option.

Businesses are Marital Property
If you are married in Colorado and you or your spouse own a business, that business is all or in part marital property. If the business was opened during the marriage it is all marital property. It does not matter if your name is listed as an owner or not.

Business Valuation is often a Difficult Task
One of the more difficult parts of a divorce process is to place a monetary value on the marital business for purposes of dividing the business between the parties. This is called the Business Valuation Process. Experts typically need to be hired to accomplish this task and, depending on the size, type and level of complexity of the business, it can become a large, difficult and expensive project.

The recent implosion of the US and world financial markets and the demise of the real estate bubble, have caused a recession that has affected most businesses in the US. This has caused a new problem for valuing businesses for the purposes of divorce.

Past Business Valuation Techniques often don't fit in Today's Economic Enviroment
In the past, Business Valuations have used techniques that are based on the presumption that the historical performance of the business is a good indicator of the future trajectory of that business. Fundamentally, the mathematical models assume incremental improvement over time. Typically, the evaluator will look at the last five years of the business to determine the present value. Even if the current year shows a lower profit level, it will be factored in with the prior four years. The result may be a valuation that is out of sync with the realities of what the recession has done to the present and future revenue forecasts for your business.

In today's business climate, it is necessary to find ways to craft an equitable division of a business with the uncertainty of the business environment in mind. Coming to a bottom line figure to use for division may produce an unfair result on either side. On the one hand, the business could be valued too high because the valuation is based on past years and the person running the business has to pay out, to the other spouse, a large amount that is inconsistent with the current conditions and possible future of the business. On the other hand, the business could be in dire straits at the time of the divorce and therefore valued low, yet have a business rebound in one to three years. This leaves the spouse who did not run the business in a position of getting too small a value because he or she just happened to divorce during a recession slump. We are just not as sure these days what the future will bring.

Flexible Solutions for Today's Economy
One solution being used by family attorneys and business evaluators these days is to look outside the box at more flexible solutions. You have to tap into more complex solutions more often used when a business partnership or other entity is dissolving or when there is a buy out of one of the owners. Some solutions that are being looked at are Earn Out Options, Liquidating Events, Stock Sharing Provisions and more.

Without getting into the complexities of corporate law, the bottom line here is that you have to craft a solution that can be flexible, at least into the near future of the business. If you reach a bottom line figure and leave it at that, you may be setting this couple up to have to go back to court time and again as business conditions change. Also, if the business soars back to health in short order following a low valuation settlement number, you might leave the non-business spouse without recourse.

The Need for Protective Provisions and Professional Oversight
In order to have flexibility built in to the separation agreement, there is probably going to be a need for a professional to have some oversight over watching the business results over time and key business changes to assure that there is no "funny business" going on with accounting to skew the numbers as you move forward. There may also be a need for business oriented provisions to be placed in the settlement agreement to assure that the non-business spouse's interest in the business is protected into the future outlined in the agreement. Maintenance/Alimony may have to go to a sliding scale to avoid the attorneys fees it would take to go back to court over and over as the business re-stabilizes. There are a number of avenues to take for overseeing the future of the business. These avenues can run from working together with a financial expert in periodic review meetings to mediation or to working with a Special Master.

Consider Collaborative and Creative Solutions
The need for flexibility in the division of business interests needs to be considered in today's business climate when contemplating a divorce. Creating and maintaining a collaborative atmosphere to come up with a flexible solution is best given the lack of stability in today's business environment. The more creative the couple is willing to be in problem solving the uncertainty of the business's future the more likely they can come to a result that is equitable.

Every business and business sector is unique. You will need to work with your attorney and the appropriate experts to come up with a solution for business valuation in your particular case. There are still cases where a bottom line value can be reached, but in today's economy it is wise to look into flexible solutions as an option.