Capital Gains and Colorado Divorce

People with substantial assets sadly get divorced in Colorado just as often as the general population. When a married couple with high net wealth are divorced a number of complicated issues come up.

One issue that we commonly see is how courts should value assets held in trading or brokerage accounts. Recently the Colorado Court of Appeals addressed how to value the unrealized gains in a brokerage account for purposes of determining “income” for spousal maintenance and child support. Spousal maintenance is the technical term used in Colorado for what people colloquially call alimony or spousal support.

This issue had never previously been addressed by the Colorado courts. As a result, this decision is likely going to have wide ranging impacts on how high net wealth individuals make arguments about child support and spousal maintenance moving forward.

In In re Marriage of DePumpo, the Colorado court of appeals reviewed an order by the trial court where the judge had used the unrealized gains in a trading account to assess the “income” of the wife. In practice, this meant that the trial court looked at a trading account with approximately $2 million in value and said “I think your income is $16,000.00 per month,” despite the fact that the trading account was not producing that income to the wife.

According to the Colorado Court of Appeals, the trial court erred. Unrealized capital gains are merely paper gains and not real income. According to the appellate court, these unrealized gains in an investment account “are not income for maintenance and child support purposes.”

Do you have a complicated divorce with substantial financial assets? If your divorce is likely to involve high net wealth in Jefferson County, Clear Creek County, Summit County, or Park County Colorado, you should contact Newland Legal today at (303) 948-1489 or by email to zach@newlandlegal.com.