How to determine if a settlement is truly equitable

On Behalf of | Jan 25, 2021 | Divorce

Under Colorado divorce law, joint assets must be divided in an equitable fashion. However, there is no single rule as to what constitutes an equitable division of assets in a given case. Instead, multiple factors must be looked at to determine if a divorce settlement can be considered fair.

How much is an asset truly worth?

Let’s say that you agree to give your spouse a traditional IRA valued at $100,000 in exchange for taking ownership of a home worth $100,000. While the two assets have an equal face value, they aren’t necessarily worth the same amount. This is because you wouldn’t have to pay capital gains taxes if the home was sold for $100,000.

Conversely, you would have to pay income taxes on withdrawals from an IRA, and the IRS would impose a 10% penalty if the funds were withdrawn prior to age 59 1/2. Of course, there are no maintenance, property tax or HOA fees associated with a retirement account. A family law attorney may be able to help you calculate the value of a given item before choosing to accept it as part of a settlement package.

What is your income and earning potential?

It’s important to understand that an equitable split of joint assets doesn’t mean that they will be split in a 50/50 fashion. If you stayed at home while married, you may be entitled to a greater share of assets. This may make it easier to maintain a reasonable standard of living as a single individual. You may also be entitled to alimony, child support payments or other forms of financial assistance from your former spouse.

An attorney may be able to help you obtain a fair settlement in a divorce proceeding and may create a strategy for doing so after reviewing financial records, a prenuptial agreement or other relevant documents. If you choose to settle a divorce through mediation, your attorney may review the terms of a proposed agreement before it takes effect.