Divorce at Altitude: A Podcast on Colorado Family Law

Illiquid Assets & Divorce | Episode 109

May 30, 2022 Ryan Kalamaya & Amy Goscha Season 1 Episode 107
Divorce at Altitude: A Podcast on Colorado Family Law
Illiquid Assets & Divorce | Episode 109
Show Notes Transcript

Ryan Kalamaya describes the difference between liquid and illiquid assets. According to Investopedia.com, “Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price. …. Cash is considered the standard for liquidity because it can most quickly and easily be converted into other assets.” 

 Key Points in Episode:

Step by Step Colorado Divorce Guide

The initial thought of trying to file for divorce can be overwhelming and emotionally exhausting. 

Ryan Kalamaya, one of the founding partners of innovative law firm Kalamaya | Goscha, has created a simple, step by step guide to the Colorado divorce process, so you know what to expect and how to best protect yourself and your assets.  

Each 5-minute episode will cover the process for divorce, parenting in a divorce, property division, and more. To watch the videos of each episode, click here.

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Kalamaya | Goscha is an innovative law firm with an award-winning team of trial lawyers specializing in highly personal disputes — divorce, child custody, property division, maintenance/alimony,

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Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.

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Ryan Kalamaya (1s):
Welcome to Divorce at Altitude, a podcast on Colorado family law. I'm Ryan Kalamaya each week, along with my business partner and cohost Amy Goscha or an expert, we discuss a particular topic related divorce or co parenting in Colorado. In addition, we have created a short series of lessons that will take you through the legal process of divorce and answer your questions from simple to complex divorce. Isn't easy. The end of a marriage, especially when children are involved, brings a great deal of loss and change. We hope these practical tips and insights will help you on your journey to a new and better life.

Ryan Kalamaya (42s):
This is a how to episode on Divorce and Illiquid Assets. Now, in another episode, in which I go over tangible and intangible assets, I described a scenario in which Eric Wolf and Melanie are going through divorce and they are splitting up $10 million of which 7.5 is a patent. Now this gets into the problem of having Illiquid Assets and how that can change a Colorado divorce in terms of a property division. Now in defining liquidity Investopedia online says that liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without effecting the assets.

Ryan Kalamaya (1m 28s):
Price cash is considered the standard for liquidity because it can most quickly and easily be converted into another asset. If for example, a person wants a $1,000 refrigerator cash is the asset that can most easily be used to obtain it. If that person has no cash, but instead they have a rare book collection that has been appraised at a thousand dollars. They're unlikely going to find someone willing to trade them, their refrigerator for their used a rare book collection. Instead they will have to sell the collection and use the cash to purchase the refrigerator. That may be fine if the person can wait months or years to make the purchase, but it could present a problem.

Ryan Kalamaya (2m 8s):
If the person only had a few days, they may have to sell the books at a discount instead, waiting for a buyer who was willing to pay the full value. Rare books are there for an illiquid asset. Now that Investopedia definition really strikes home for me because my father collects rare books and my mother and I look at him and say, dad, you die. Doesn't really help us to have in rare book collection because we don't truly understand the value of an F Scott Fitzgerald first edition or something else in lost generation. So our criticism of our father is that it's an Illiquid Assets. Other examples of an illiquid asset that really come up in a, a divorce are houses, cars, art, those sorts of things.

Ryan Kalamaya (2m 53s):
Now those are tangible assets and they are Illiquid. It takes a while to a house, and it's not something that is reduced to cash out of $5 million house is not the same as $5 million in a bank account in tangible assets that is arguably liquid would potentially be cryptocurrency. Now Illiquid Assets going on an extension of the rare book collection would be a private business stock options and restricted stock, which I describe in a, how to episode on executive compensation are another example of an Illiquid Assets round out. We've got trust interests and pension plans.

Ryan Kalamaya (3m 33s):
Those are Illiquid Assets that frequently come up in a collar or a divorce. Now we don't simply chop everything in half, which is a common misunderstanding for people in a call or a divorce because you can't cut up in half that F Scott Fitzgerald first edition, if you do, then it reduces its value, but you don't go down the house and take a chainsaw and cut it in half. You have to take into consideration the liquidity, the taxes, and the timing when you are dividing property. So frequently, what divorce attorneys do. And by extension the court as well is to look at who gets what in dividing property. And one factor is going to be the liquidity and or lack thereof.

Ryan Kalamaya (4m 16s):
So in going back to our final example, where Eric has a $7.5 million patent, there might be a circumstance. And indeed there's likely going to be a circumstance in which there would be a disproportionate allocation of property or another consideration that the court is going to figure out if there is some sort of property division payment, and Eric's going to have to be making payments to Melanie, to buy out her interest or to offset her interest in that Illiquid patent over time. And it may be something that court and Melanie are going to have to consider in finalizing that Colorado divorce. But for now, that is an overview of how Illiquid Assets can drive Colorado divorce with property.

Ryan Kalamaya (5m 4s):
Thanks for listening or watching this short lesson on the Divorce at Altitude podcast. If you found this helpful, please leave a review or share with a friend. It does help for others that are going through or thinking about a divorce in Colorado. If you want to find out more information, please visit Kalamaya dot law or Divorce at Altitude dot com. And that's K a L a M a Y a.law. Remember, this is educational information. It's not intended to be legal advice. Please consult with an attorney about the particulars of your case. We're happy to answer questions. Feel free to give us a call at (970) 315-2365.