Colorado Spousal Support & Alimony Law - Kalamaya

Colorado Spousal Support & Alimony

Money is one of the hottest points of contention during divorce – and when one party feels as if the other is taking advantage of them, things can spiral downhill quickly.

What is Spousal Maintenance?

In Colorado, some people are entitled to receive “spousal maintenance.” Maintenance is the term used by Colorado courts to describe what is called alimony or spousal support elsewhere. This is the financial support provided by one spouse for the other. This is frequently a contentious aspect of a divorce because of the emotional component of paying maintenance. Regardless of right or wrong, divorcing spouses often hate paying maintenance from a philosophical and emotional point of view.

How Much Alimony Will I Pay or Receive?

Whether maintenance is complicated or easy depends on how much you and your spouse earn. If the two of you earn less than $240,000 combined, Colorado has guidelines or a formula to use as a starting point for a discussion on the amount of maintenance.

If the two of you earn more than $240,000 combined, then your divorce is likely going to be much more complicated. This is because Colorado’s maintenance guidelines only go up to $240,000. In these situations, determining maintenance is part art and part science.

How Long Will Spousal Maintenance Last?

As to the duration of maintenance, the starting point is the maintenance guidelines. Generally, the length of maintenance is about 1/3 to 1/2 the length of the marriage. The term of years is about 1/3 if the marriage is about 3 years and goes up to about ½ if the marriage is 12.5 years.

Is It Just a Calculator?

Determining spousal support or alimony (a.k.a. maintenance) in a Colorado divorce is not simply about plugging numbers into a spreadsheet and applying a formula. There is a significant amount of Colorado case law that opens up strategic arguments for each case involving maintenance. ‘

We have represented less affluent clients seeking support to help them meet their needs. We have also advised clients who are concerned with limiting their financial exposure on a monthly alimony obligation that can add up over time.

As a team, we leverage cutting-edge software to analyze the financial issues involved in a case where maintenance is involved. For example, they can calculate the tax effects of maintenance/alimony, budgets depending on inflation or investment returns and provide detailed reports with various scenarios so their clients can intelligently decide if they should settle or go to trial.

Colorado’s Maintenance Guidelines

History of Alimony in Colorado

Historically, judges were allowed a tremendous amount of discretion when considering permanent alimony in a Colorado divorce. Such latitude resulted in unpredictability. The amount and length of maintenance awarded by a judge would seemingly hinge on an arbitrary factor such as the likability of a party. The result was a political push towards a system where maintenance allocations are easier to predict.

The Alimony Reform Act of 2011 in Massachusetts was used as a model. After a number of failed attempts using various formulas and language on how a court should apply the formulas, the Colorado General Assembly finally settled on the “advisory guidelines” of House Bill 13-1058 in 2014. These guidelines were updated in 2018 with House Bill 18-1385 due to the change in the tax treatment for maintenance.

Length of Maintenance

The law contains two significant formulas. The first deals with the maintenance term. There are different policy reasons for alimony in a Colorado divorce. One concept is “reimbursement” to compensate a spouse for supporting the other while in school or start-up phase of a business. Another reason may be “transitional support” to assist someone like a stay-at-home mother as they reenter the workforce.

Colorado’s maintenance law deals with these concepts in a rigid manner by simply providing a table for the suggested length of maintenance depending on the length of marriage. For example, a 3-year marriage results in a proposed maintenance term of 11 months, or 31% as long as the marriage. In contrast, a marriage of 13 years results in a suggested term of 6.5 years, or a maintenance award 50% as long as the marriage.

Amount of Maintenance

The second formula applies to the amount of maintenance. Colorado’s law on spousal support is generally calculated as follows:

40% of Parties’ Combined Adjusted Gross Income LESS the Lower Income Party’s Adjusted Gross Income

If the calculation results in a negative number, the amount of maintenance is zero.

It used to be that this was the end of the story. However, there was a significant tax change for spousal maintenance in 2018. Spousal maintenance for divorces occurring after 2018 is no longer taxable income to the recipient or deductible for the payor. As a result, there is another step needed to calculate maintenance payable in Colorado.

The gross amount that one calculated above must be reduced by the appropriate percentage of taxes to obtain the “net maintenance” amount. Net maintenance is what is actually payable from one spouse to the other.

Calculating Net Maintenance Amount

If gross combined income is less than $120,000 per year then gross maintenance is multiplied by 80% (0.80) to arrive at net maintenance.

If gross income is between $120,001 and $240,000 per year then gross maintenance is multiplied by 75% (0.75) to arrive at net maintenance.

The rationale behind these percentages is that a party pays more in taxes as income increases. In other words, income of $120,000 per year is assumed to be taxed at 20% whereas income above that amount is taxed at least 25%.

Combined Income Over $240,000

According to the most recent update in 2018 to the Colorado law on spousal maintenance, if the parties’ adjusted gross income exceeds $240,000, the guideline amount does not apply.

Factors Affecting Maintenance

Instead, the trial court is supposed to consider the various factors outlined below. These factors have been addressed in more detail through various historical case opinions.

The financial resources of the recipient spouse, including the actual or potential income from separate or marital property or any other source and the ability of the recipient spouse to meet his or her needs independently;
The financial resources of the payor spouse, including the actual or potential income from separate or marital property or any other source and the ability of the payor spouse to meet his or her reasonable needs while paying maintenance;
The lifestyle during the marriage;
The distribution of marital property, including whether additional marital property may be awarded to reduce or alleviate the need for maintenance;
Both parties’ income, employment, and employability, obtainable through reasonable diligence and additional training or education, if necessary, and any necessary reduction in employment due to the needs of an unemancipated child of the marriage or the circumstances of the parties;
Whether one party has historically earned higher or lower income than the income reflected at the time of permanent orders and the duration and consistency of income from overtime or secondary employment;
The duration of the marriage;
The amount of temporary maintenance and the number of months that temporary maintenance was paid to the recipient spouse;
The age and health of the parties, including consideration of significant health care needs or uninsured or unreimbursed health care expenses;
Significant economic or noneconomic contribution to the marriage or to the economic, educational, or occupational advancement of a party, including but not limited to completing an education or job training, payment by one spouse of the other spouse’s separate debts, or enhancement of the other spouse’s personal or real property;
Whether the circumstances of the parties at the time of permanent orders warrant the award of a nominal amount of maintenance in order to preserve a claim of maintenance in the future;
Whether the maintenance is deductible for federal income tax purposes by the payor and taxable income to the recipient, and any adjustments to the amount of maintenance to equitably allocate the tax burden between the parties; and
Any other factor that the court deems relevant.

When Does the Court Award Maintenance in a Divorce?

Before a court even gets into the Colorado spousal maintenance (alimony) guidelines, a threshold test is applied. There are two prongs of the “threshold test” under C.R.S. 14-10-114.

Sufficient Property

First, the court must find that a spouse lacks sufficient property to provide for his or her reasonable needs. This means that a court must divide property in the divorce before turning to the issue of maintenance. If a spouse is awarded an income-producing asset, such as a rental property, they are less likely to need maintenance/alimony from the other party. However, a spouse is not required to sell or consume property awarded to them before being entitled to maintenance.

What does “reasonable needs” mean? It depends on the particular circumstances of each case – an inherently squishy and debatable concept. The standard of living established during the marriage is a relevant factor. A marriage where frequent travel and fine-dining were enjoyed is different than a spartan one. The reasonable needs will be based on the present circumstances at the time of the hearing rather than the past or future conditions.

Spousal maintenance is to provide the means to obtain food, clothing, habitation and other necessities. Colorado courts have taken a fairly expansive view of “reasonable needs,” and stated that it does not mean the minimum requirements to sustain life. Nevertheless, a court is not required to ensure spouses have an equal lifestyle forever.

The totality of the parties’ financial circumstances will also be considered. If a spouse is the beneficiary of a trust, that may be considered even though the trust is not “property” under Colorado law. The reasoning behind this rule is easy to understand – a party doesn’t need maintenance/alimony if they’ll be perfectly fine on their own.

Appropriate Employment

If property awarded to a spouse is insufficient to provide for their reasonable needs, the court will move on to the second part of the threshold test: employment. A person won’t need maintenance/alimony if he or she can support themselves on their own. Again, each case is different.

The court will determine what is “appropriate employment” for a spouse requesting an award of maintenance. The expectations and intentions established during the marriage will be considered along with the age, education, work history, health and of the requesting spouse. A court will also take into account if a person is voluntarily underemployed or completely unemployed. A famous Colorado divorce case (In re the Marriage of Elmer) involved an attorney that voluntarily quit practicing law and decided to pick apples at $10/hour. The court imputed income to that party based on his higher earning capacity.