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Splitting retirement accounts and pensions in Colorado divorces

In Colorado, family courts are considered courts of "equity." When a court is helping a divorcing couple divide their assets and debts, the court is directed to split the assets and debts equitably, or in a way that is fair. Typically, this means everything will be divided equally. But, in some instances dividing assets 50/50 is not fair. Courts have discretion to determine what is fair based on the circumstances of each divorcing couple.

Divorcing couples who have a high net worth or a high annual income often face financial challenges during a divorce. Splitting marital assets often causes tension between spouses.

Retirement accounts and pensions are often a large portion of a couple's net worth. These accounts can be some of the largest assets you have acquired during your marriage. Retirement accounts are typically in one person's name, and because they were likely earned through that party's employer it is often very emotional for divorcing parties to divide retirement assets in a divorce. It is hard to "give away" money that you worked hard to earn.

In Colorado, typically any income that is earned by either party during the marriage is considered marital property. Therefore, any deposits into bank accounts or retirement accounts during the marriage are also considered marital property, and subject to division upon divorce.

Divorcing parties in Colorado have the opportunity to try and settle their case through mediation and other settlement negotiations, prior to going to a hearing. Unless the parties agree on how to divide the marital assets, including retirement accounts and pensions, the Colorado family courts will decide how these assets will be divided.

Premarital portions of your retirement and pension accounts may be exempt from division. If portions of your retirement account are premarital, and portions are marital, it is important to talk to an attorney to gather the appropriate paperwork to determine the premarital portion of your account.

When determining how much of your retirement account is marital, the Court will look at when the account was acquired. If you made all of the contributions to your retirement account prior to your marriage, and you kept the account in your name alone, only the increase in value of that account will be marital. However, if you acquired your retirement account after you were married, the account will be considered marital, no matter whose name is on the account. This is true unless you have a prenuptial agreement stating otherwise.

Employer sponsored pensions can be divided in a divorce. These accounts are often difficult to value and it is important to talk to a lawyer, and potentially a valuation expert, to determine the marital portion of pension accounts and how they may be divided upon divorce.

One way that retirement accounts can be divided after divorce is through a Qualified Domestic Relations Order (QDRO). The QDRO orders the division of a retirement or pension account. The QDRO tells the retirement company which percentage of the account to transfer to the spouse not named on the original account. The money will be transferred into a new account for the spouse who is receiving the funds.

Courts do not have to order that every account be divided equally. Instead, the court can award other assets or debts to each party, to try and balance the amount of assets that each person gets. It may be easier for one party to take a larger portion of another asset, such as equity in the marital home, rather than dividing multiple retirement accounts.

Splitting retirement accounts in a divorce is difficult emotionally, as you may walk away from the divorce with less retirement savings than you had planned on having. It is important to know this going into a divorce in order to prepare yourself, and to help you make financial decisions for retirement after your marriage has ended.

**Please remember that each case is different. It is important to talk to a family law attorney about the specific facts of your case to determine what this process will look like for you. Please call our office, or send us an email, if you have any questions. 303-991-2740, **

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