Questions about: Spousal Income and Spousal Debt
A question that comes up often is: How do Spousal Income and Debt actually work in the state of Colorado?
(Colorado is where I am physically located and those are the laws we are speaking to today- reach out to someone who is familiar with the local laws if you are not in Colorado).
To answer this question let’s take a minute to talk about what that the words mean, how it generally works, and when to make friends with a professional who specializes in divorce.
What do you mean when you say Spousal Income and Spousal Debt?
Spousal Income is the gross (pretax) income of each spouse that happens during the marriage. To clarify (because this question happens often) examples sources of income include:
- Income from self employment Commissions from sales Bonuses earned
- Dividends received
- Capital Gains
- Retirement benefits received
- Social Security benefits received
- Income from Rent
- Income and distributions from trusts
The state of Colorado does have an exhaustive list of what is considered income and what can be included when making decisions around spousal maintenance.
One topic that does come up and is relevant to this conversation: OVERTIME. First question to ask: Is the overtime voluntary or mandatory? This matters.
- If overtime pay is the result of voluntary additional hours that typically does not apply towards income for the purposes of calculating maintenance.
- If the overtime is mandatory (eg a condition of staying employed) that is considered income for the purposes of this conversation.
Spousal Debt is debt that has been acquired during the marriage. Any outstanding debts are treated like marital property.
“What about Student Loans?” is a question that comes up often.
The short answer is that it depends on your specific situation. Questions to ask on the student loans include:
- Was the student debt incurred during the marriage?
- Did the other spouse co-sign on the loans?
- Did you consolidate the student loans and other debt during the course of the marriage?
Great question, in the state of Colorado spousal income is a big part of the conversation for figuring out spousal maintenance (alimony is another word people recognize).
How exactly do Spousal Income and Spousal Debt factor into the divorce conversation?
With regard to spousal debt, as previously discussed it’s treated as marital property and will be divided equitably (see this blogpost here on property distribution in an equitable state).
Yes, BUT my situation is nuanced.
Great, it’s time to go make friends with a professional who specializes in divorce. Who should you go and see?
Certified Divorce Financial Analyst (CDFA)- These professionals can do things like life style analysis, cash flow analysis, and different projections of property division to provide transparency on what different scenarios translate to today, later on, and through different time frames (like retirement or life expectancy). Often CDFAs are hired to talk about tax efficiency in different settlement options too.
Family Law Attorney- These professionals can help you navigate the local laws and advocate for you based on your nuanced situation. Another professional that is helpful to know:
Certified Divorce Lending Professional (CDLP)- If you need to refinance something into your name, or take out a loan to help buy out your soon-to-be-ex these professionals can provide a lot in terms of knowledge in helping navigate nuances of the lending world.
Take a big breath
We talked about a lot.
Remember:
- Spousal income is gross earnings during the marriage Spousal debt is debt incurred during the marriage
- These terms matter in the spousal maintenance and property division conversations
- There are professionals who specialize in divorce and can help
Divorce can be stressful and complicated. You don’t have to go it alone.
Brianna Beski is a financial advisor and CDFA at Raymond James, based in Colorado. She and her team focuses on helping people have confidence in their financial futures. For the rest of the story, please visit her website or email her at brianna.beski@raymondjames.com.
While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJA, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brianna Beski of Raymond James Branch 3CC and not necessarily those of Raymond James or Raymond James Financial Services.
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