Divorce is a significant life transition that brings with it emotional, legal, and financial complexities. For individuals navigating this process in Colorado Springs, understanding the financial landscape is a key part of moving forward with greater clarity. While every divorce is unique, having a structured approach and working with professionals who are familiar with Colorado laws can make a substantial difference in the process and outcomes.
This guide explores the financial side of divorce from the perspective of a financial professional. It focuses on practical steps individuals can take before, during, and after divorce to remain informed, organized, and better positioned to plan for their future.
Understanding Divorce in Colorado: The Basics
Before diving into financial planning specifics, it’s important to understand the divorce process in Colorado. Colorado is an equitable distribution state, which means the court strives to divide marital property fairly, though not necessarily equally. Property acquired during the marriage is generally considered marital, regardless of whose name is on the title or account.
Colorado is also a no-fault divorce state. This means that neither party needs to prove wrongdoing to file for divorce. The only requirement is to state that the marriage is irretrievably broken. This helps streamline the process and keeps the focus on the logistics of separation rather than personal grievances.
The Role of a Financial Professional in Divorce
A financial professional who understands divorce can provide vital support throughout the process. They help clients organize financial records, clarify short- and long-term needs, and consider the outcomes of various settlement options. In some cases, they may also serve as a financial neutral in a collaborative divorce process, providing impartial insight to both spouses.
Whether an individual is in the early stages of contemplating divorce or is already in the legal process, partnering with a financial professional can bring organization and objectivity to complex decisions.
Step One: Taking Inventory of Your Financial Picture
One of the first and most important steps in any divorce is creating a complete and accurate inventory of financial assets and debt. This includes:
- Bank accounts (checking, savings, money market)
- Investment accounts (brokerage, retirement)
- Real estate holdings
- Business interests
- Pensions and retirement plans
- Credit card debt
- Auto loans
- Mortgages and home equity loans
- Student loans
- Other outstanding liabilities
Organizing this information early provides a foundation for making informed decisions about property division and future planning. It can also speed up the legal process and reduce costs by decreasing back-and-forth document requests between attorneys and financial professionals.
Step Two: Identifying Marital vs. Separate Property
In Colorado, not all assets are considered marital. Assets acquired before the marriage, gifts, and inheritances received by one spouse typically remain separate property unless they were commingled with marital assets. For example, if one spouse received an inheritance but deposited it into a joint bank account, a portion of that inheritance may be considered marital depending on how it was used.
Understanding how assets are classified helps individuals gain a clearer picture of what is likely subject to division and what may remain separate.
Step Three: Evaluating Income and Expenses
Once assets and debts are accounted for, it’s important to analyze current income and expenses for both parties. This exercise lays the groundwork for understanding what each spouse will need to support themselves after the divorce.
A financial professional can help develop a realistic post-divorce budget by taking into account:
- Housing expenses
- Utilities and maintenance
- Groceries
- Transportation
- Health insurance and medical care
- Child-related costs (if applicable)
- Retirement contributions
- Taxes
- Entertainment and discretionary spending
Understanding cash flow is critical, especially when one spouse has been financially dependent on the other or if incomes are significantly different. A budget allows individuals to test how different settlement options would affect their day-to-day lives.
Step Four: Planning for Property Division
Colorado courts aim to divide marital assets equitably, which involves more than simply splitting accounts down the middle. The goal is to distribute assets in a manner that is fair considering each person’s financial situation, earning capacity, and contribution to the marriage.
Some of the key considerations in property division include:
Real Estate
In many divorces, the marital home is one of the largest assets. Couples must decide whether one spouse will remain in the home, whether it will be sold, or whether one party will buy out the other’s interest. Each choice carries financial implications related to equity, mortgage refinancing, tax basis, and maintenance costs.
Retirement Accounts
Dividing retirement accounts such as 401(k)s and pensions often requires a legal document known as a Qualified Domestic Relations Order (QDRO). A financial professional can help interpret the value of different plans and how the division will impact long-term financial security for both spouses.
Business Interests
If one or both spouses own a business, it may need to be valued and considered as part of the property division. The process of valuing and dividing a business can be complex, requiring input from financial professionals who understand both valuation and tax implications.
Investment Accounts and Taxable Assets
When dividing investment accounts, individuals need to consider not only the account balances but also the tax characteristics of the assets within them. Some investments may have significant capital gains, which could impact one spouse more than the other if assets are not divided thoughtfully.
Step Five: Understanding Spousal Maintenance (Alimony)
In Colorado, spousal maintenance (commonly referred to as alimony) may be awarded when one spouse has a financial need and the other has the ability to contribute. The state provides advisory guidelines for determining the amount and duration, but the court has discretion to deviate from these recommendations based on the facts of the case.
Factors considered in spousal maintenance decisions include:
- The length of the marriage
- Each spouse’s income and financial resources
- The lifestyle established during the marriage
- Age and health of both parties
- Employment history and earning capacity
For financial planners, helping clients understand the cash flow implications of paying or receiving spousal maintenance is key to long-term planning.
Step Six: Planning for Children’s Financial Needs
If minor children are involved, the financial planning process also includes child-related expenses. In Colorado, child support is calculated using an income shares model, which considers the income of both parents and the number of children.
Beyond child support, parents may need to plan for:
- School tuition and supplies
- Extracurricular activities
- Childcare and after-school programs
- Health insurance and medical expenses
- College savings
Including these items in a financial plan ensures that both parents are aligned on how costs will be shared and managed over time.
Step Seven: Considering the Tax Landscape
Divorce changes many aspects of a person’s tax situation. Filing status, exemptions, deductions, and taxable income can all shift. Here are a few tax-related considerations to keep in mind:
- Who will claim children as dependents?
- How will alimony be treated for tax purposes under current law?
- What is the tax impact of transferring certain assets or selling a home?
- How will capital gains or losses be handled?
A financial professional can help assess the tax consequences of proposed settlement options and offer strategies to reduce tax liabilities where appropriate.
Step Eight: Updating Financial Documents and Estate Plans
After a divorce is finalized, individuals should review and update all financial and legal documents. These may include:
- Wills and estate plans
- Powers of attorney
- Beneficiary designations on retirement accounts and life insurance
- Health care directives
- Titles on bank accounts, vehicles, or real estate
Failing to update these documents can lead to confusion or unintended outcomes later on.
Life After Divorce: Building a New Financial Foundation
Divorce marks the start of a new chapter. Whether someone is entering the workforce for the first time in years or simply rethinking their financial goals, it’s important to take time to develop a plan that reflects current needs and future priorities.
Some post-divorce financial planning goals might include:
- Creating or adjusting an emergency fund
- Revising retirement savings strategies
- Exploring new investment approaches
- Reassessing insurance coverage
- Setting new goals for homeownership, education, or travel
A financial professional can provide insight and support in building a plan that fits the new reality and helps pursue meaningful objectives over time.
Special Considerations for Colorado Springs Residents
While the core divorce laws are consistent across Colorado, residents of Colorado Springs may have specific concerns related to the local cost of living, property values, and employment landscape. For example:
- The housing market in El Paso County has shown steady growth, which may influence decisions about selling or refinancing a marital home.
- Military families, which are prominent in Colorado Springs, may face unique questions about dividing military pensions and benefits.
- Professionals employed at regional institutions such as hospitals, universities, or government agencies may have access to pensions or retirement plans that require specialized analysis.
Working with a financial professional who understands the local landscape can provide added clarity and context during decision-making.
How Concerto Financial Supports Divorce Financial Planning
At Concerto Financial, we understand that divorce can be a time of uncertainty. Our approach to financial planning during and after divorce is designed to support clarity, collaboration, and thoughtful decision-making. Whether you are just beginning to explore your options or are working through the final stages of a settlement, our team can help you organize your finances and consider the potential outcomes of different paths.
Our services may include:
- Assistance gathering and organizing financial documents
- Budgeting and cash flow analysis
- Retirement projections
- Education funding scenarios
- Tax impact assessments
- Ongoing financial planning after divorce
We strive to offer information and tools that can support confident decisions during a period of change.
Final Thoughts
Divorce is never easy, but it doesn’t have to feel overwhelming. With the right financial guidance, individuals can gain a clearer understanding of their assets, manage their obligations thoughtfully, and plan for a more stable future. If you are navigating divorce in Colorado Springs and would like support from a financial professional who understands both the process and the local landscape, Concerto Financial is here to help. Schedule a confidential consultation today to begin building a plan tailored to your unique situation.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
