The Need for Life Insurance in Custody and Child Support Cases

Oftentimes parents will ask, “Well why do I have to maintain life insurance if I’m going through a divorce and we have children? Why do I need life insurance?” There are two ways I have seen that a court will enter orders for a parent or parents to keep life insurance in effect.

One is obviously where children are involved and the parents are both providing support for the child or children. A life insurance policy will protect the children’s interest if the children lose the love, affection and economic support of a parent if that parent dies before the children turn 19 years of age or older.

The other situation is mandated by statute and spousal maintenance cases where a parent or a party has been ordered to pay spousal support to the other party, commonly referred to as alimony. Colorado revised Statute 14-10-114 says when there is a spousal maintenance obligation the Court shall enter an order that the party who is paying spousal maintenance also be ordered to carry a life insurance policy on his or her life so that in the event that that person dies before the spousal maintenance obligation is paid in full there will be sufficient life insurance, called collateral, to go to the party receiving spousal maintenance.

To determine the amount of life insurance that’s going to be necessary in those kinds of cases I oftentimes consult with a forensic CPA who is instrumental in helping me and the parties decide what the appropriate amount of life insurance is. But the answer to that question is that the court certainly will order life insurance in those cases involving spousal maintenance and you should be aware that when you are making these kinds of decisions in your case.

Recent Changes to Spousal Maintenance

This topic involves the changes to the spousal maintenance statute in Colorado. Colorado has a very unique statute that deals with spousal maintenance. It’s found in Colorado revised statute 14-10 114. And this statute was passed on January 01, 2014 to provide the court with advisory guidelines that take into consideration a number of factors in a court’s decision as to whether or not one party should receive spousal support from the other party. This law formally called those kinds of support payments alimony. In many states in the country it’s still called alimony, but in Colorado we call it spousal maintenance or spousal support.

As a result of Congress passing a massive tax bill in 2017, as of January 02, 2019 there will be an impact to the Colorado spousal maintenance statute. Under the way that the law is written now, spousal maintenance paid by one party to the other is considered to be a tax deduction to the spouse that’s paying spousal maintenance and must be declared as income to the spouse who receives the support payment.

As of January 02, 2019, that’s no longer going to be allowed. So, Colorado has a new law that will take into consideration the definitions of gross income of the parties in adjusting the spousal maintenance that must be paid if there is a ruling by the court or an agreement by the parties.

There’s two parts to spousal maintenance in every case that you need to consider. Does the spouse who is requesting spousal maintenance have a need? That’s called necessity, for economic support. And does the spouse that is being asked to pay spousal maintenance have the ability to pay?

So, there are a lot of factors that go into this including how debts are to be paid, how property has been divided, whether there is any income producing property to either party. It’s very wise to consult with a lawyer and possibly a CPA to see how this is going to impact you and your taxes.

The other thing that I want to emphasize is this: for marriages that are going through divorces in 2018, before the new law kicks in on January 01, 2019, if you have a signed written agreement as to the amount and duration of spousal maintenance and it is approved prior to January 01, 2019, then the spouse paying spousal maintenance will be allowed to claim the deduction for everything that is paid in spousal maintenance and the spouse who is receiving the maintenance will be required to report it as income. As long as it’s done before January 02, 2019.

What You Need to Know About Colorado’s Spousal Maintenance Law

If you are about to file for a Divorce in Colorado or you have a pending Divorce that has already been filed, you will want to have a complete understanding of Colorado’s Spousal Maintenance law, which is found in Section 14-10-114 of the Colorado Revised Statutes. In many states, this area of the law was under the heading, “Alimony.” The simple definition of Alimony as found in Black’s Law Dictionary is: Payments made from one spouse to the other, on a regular interval, to provide for the financial support of the spouse who receives same. A Court usually orders these kinds of payments when the spouse requesting “support” proves that there is a financial need for such support and the spouse who is being requested to pay “support” has a clear ability to pay what is ordered. When a judge issues an order for the payment of Spousal Maintenance, it confers a duty upon the obligor that support be paid for either a specific period of time or an indefinite period of time. An indefinite period of time usually means a lifetime duty of payment unless otherwise modified by orders of the court.

There are numerous factors listed in Colorado’s Spousal Maintenance law that you should discuss with an experienced Family Law attorney, along with the facts in your case, so that you have an understanding of what factors may or may not apply to your situation. Every case is different and sometimes it is not clear whether Spousal Maintenance is applicable. Either spouse may request Spousal Maintenance and either of them may also “waive” the right to receive Spousal Maintenance. When parties waive Spousal Maintenance, they must do so with knowledge of the guidelines in the law, and any such waiver, must be entered into, “freely and voluntarily.” This means that a party cannot waive Spousal Maintenance because of any threats or because of the existence of coercion. When the Court receives a written signed agreement that indicates either one or both parties are waiving Spousal Maintenance, there is specific language that must be contained in that agreement in order for a judge to approve the parties’ agreements. If a judge is not convinced that the parties knowingly have waived Spousal Maintenance or that they have disregarded the guidelines in the law or for other reasons, the judge does not have to approve the parties’ agreements.

When a Court accepts the parties’ written signed agreement that one or both parties “waive” Spousal Maintenance, it means that the Court will not allow that “waiver” to ever be modified in the future. This is an important and significant legal issue. In essence, a Court will lose jurisdiction to ever modify any such waiver of support in the future. Before “waiving” Spousal Maintenance, it is extremely important to have an understanding of the law, so you know what you are giving up.

Colorado’s Spousal Maintenance law is complex with many different provisions that must be taken into consideration when analyzing how the law may apply to your case. The legal issues involved in any maintenance case is not a matter that can be easily understood by a layperson. Without proper guidance and advice regarding Spousal Maintenance, long-term financial mistakes can occur that may not be able to be reversed. This is another reason, that I suggest the hiring of a qualified lawyer when confronted with this issue in any divorce action.

I am asked this question virtually every day in my practice: What is the most common situation where Spousal Maintenance is ordered by a judge? The answer to this question is going to depend on the specific facts of your case. However, according to Colorado law, a maintenance award is designed to balance the equities between the parties so that the party who lacks sufficient financial resources, future earning capacity and/or the ability to become financially independent, is not prejudiced. I see this kind of situation in those cases where there has been a long-term marriage and one of the parties has been a stay at home spouse/parent and the other party has been the long-term breadwinner in the family. Marriages over 5 years in length are usually most impacted by the Colorado maintenance law. Overall, maintenance is a problem that must be solved based upon the parties’ earnings or their capacity to earn an income. Often times this is not an easy or simple thing to understand, as earnings and incomes become difficult to pinpoint and go in many different directions. Keep in mind that the ranges of marriages, where the guidelines are to be considered, are those marriages between 3 and 20 years in length.

The guidelines include calculations for Spousal Maintenance and a formula is used to determine the amount that is recommended. Although the law calls the guidelines, “advisory” most of the judges will rely on the guidelines in entering their orders at either or both, Temporary Orders ad Permanent/Final Orders.

Lawyers, who practice Divorce Law, are required to be competent in this area of the law and must have specialized training and expertise in Colorado’s Spousal Maintenance law. As a client, you should not hire an attorney who has no actual courtroom experience or practical experience in this area of Domestic Relations law. A client is entitled to receive the very best legal advice that the client has sought.

The time to analyze whether or not this issue is present in any given case, must occur during the early phases of any given case so that there is adequate preparation done before mediation and before a court hearing. The building of a proper legal argument, either in favor of Spousal Maintenance or argument against Spousal Maintenance, takes a great deal of effort and time for the qualified lawyer. Some of these kinds of cases will require expert testimony from a CPA or other qualified financial expert that has courtroom experience.

Spousal Maintenance may be ordered by a judge at a Temporary Orders hearing or at a Final Orders hearing. When a party in a divorce is ordered to pay Spousal Maintenance at Temporary Orders, those payments must continue until a judge enters Final Orders. At Final Orders, the judge will be guided by the statute in deciding whether or not Spousal Maintenance will be ordered, and if so must enter written orders as to the amount of the payments and the duration of those payments. The guidelines spell out the suggested length of time when the court orders a maintenance award. As an example, in a 10 year marriage (120 months), when the Court orders that a spouse pay Spousal Maintenance, the guidelines reflect that those payments be made for a term of 54 consecutive months. Any award of maintenance by a judge is modifiable according to the law that governs modification. “Only after the property division has been made can the trial court determine, by application of the statutory standards, whether maintenance is necessary to provide for the reasonable needs of one of the parties. IRM Jones, 627 P.2d 248 (Colo. 1981); IRM Huff, 834 P.2d 234 (Colo. 1992);

Spousal Maintenance will terminate by operation of law upon the death of either party or when the party receiving maintenance, remarries. Parties may also agree in writing, usually in a document called a, Separation Agreement, the terms of Spousal Maintenance. As an example, when parties enter into an agreement that sets out an amount of support and the length of time that maintenance will be paid, that differs from the guidelines, is called a “contractual maintenance agreement.” While parties can agree in writing to contractual maintenance, a judge has no authority to bind the parties to a similar holding, as any award of maintenance by a judge is deemed, “modifiable” by terms of the applicable statute. It is not an easy or simple process to modify a judge’s award or parties’ written agreements when it comes to this issue.

When the United States Congress passed the, “Tax Cuts and Jobs Act of 2017, as signed into law by the president, it had tremendous implications for divorcing parties in Colorado regarding the legal issues surrounding Spousal Maintenance. After January 1, 2019, the entry of a Court Order, commonly called, a “Decree of Dissolution of Marriage,” where the court has ordered an award of Spousal Maintenance, will not allow those payments to be declared on federal tax returns as a, “tax deduction.” Additionally, the spouse who receives the payments of Spousal Maintenance will not have to declare what is received as, “income.” Recent legislation in 2018 by the Colorado legislature has addressed the impact of the federal laws on Colorado’s Spousal Maintenance statute. There will be adjustments made to the guidelines to compensate for the removal of the deduction and declaration of income on tax returns. This is another reason why the consultation of a financial expert or tax expert, such as a CPA, may be needed.

Reasonable Expectations for Alimony in Colorado

If a party in a divorce cannot support themselves without their spouse, they may qualify for spousal maintenance, also known as “alimony.” Spousal maintenance is only appropriate if “a spouse needs support and the other spouse has the ability to pay support” (CRS. 14-10-114). Read more

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Does Common Law Marriage Affect Spousal Maintenance?

In many divorce cases, an ex-spouse will receive spousal support for a duration of time. This financial obligation can be re-assessed for a variety of reasons, including financial hardship of the supporter and any evidence that contradicts the need for financial assistance.

A common law marriage can most certainly terminate the need for spousal assistance. But, your divorce attorney will need to prove that the relationship in question is in fact a common law marriage.
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Spousal Maintenance and Marijuana Law Changes

The Legal Forecast for 2014

In 2014, two major developments will take place in Colorado. First (and most famously), Colorado will legalize the recreational use of marijuana. Second, the State will enact new guidelines pertaining spousal maintenance. Both laws have major consequences for family legal matters, especially divorce. Read more

New Colorado Spousal Maintenance/Alimony Law for 2014

There are some significant changes coming to Colorado’s Family Laws in 2014. The biggest news will be the implementation of CRS Section 14-10-114, entitled, “Spousal Maintenance-guidelines”

The statute will allow a judge to make a determination, whether a party in a dissolution of marriage, legal separation or declaration of invalidity of marriage proceeding, has to pay Spousal Maintenance, based upon a formula. Read more

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Understanding Spousal Maintenance

Financial stability is a major concern of many people going through divorce. Shared life and finances may have allowed one spouse to stay at home to raise children, making the prospect of becoming financially self-sufficient very daunting. Circumstances may actually make some individuals unable to work and financially support themselves. Read more

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Alimony in 2012 and Beyond

Alimony comes from the Latin word, alimonia meaning sustenance and means, therefore, “the sustenance or support of the wife by her divorced husband and stems from the common law right of the wife to support by her husband.” Allowances which husband, by court order, pays wife for maintenance while they are separated or after they are divorced, is a common way for a court to order a husband to pay alimony to his wife. Read more