Family courts divide property in one of two ways: equitable distribution or community property. Most states divide marital property according to what’s fair, or equitable, for both parties during a divorce. This isn’t the same as equal distribution, however, as the goal of equitable distribution is to consider the needs of each party and the facts of the case.
The equitable distribution of marital assets is determined on a case-by-case basis. It is subject to negotiation between the two parties and the discretion of the judge. If you’re getting divorced in a common law property state (where equitable distribution is recognized), you’ll want to understand how property division will be determined.
This article addresses the two ways in which assets are divided between a couple during their divorce.
Community Property vs. Equitable Distribution: The Basics
In the nine community property states, which include California and Texas, marital property (generally, all property acquired between the date of the marriage and the date of separation) is generally divided fairly equally. This is done regardless of who contributed more to the marriage (whether in regard to money, housekeeping, etc.), who has more separate property, or whether one of the spouses is largely to blame for the divorce.
Generally, anything purchased with money earned by either spouse during the marriage is considered community property. Community property is subject to a roughly 50/50 split in a divorce. However, separate property may be established through a written contract. Examples of such contracts are prenuptial agreements or postnuptial agreements, sometimes called antenuptial agreements.
In equitable division property states, courts take a much more delicate approach to property division. Instead of automatically dividing marital property down the middle, these states take a step back and consider what would be the fairest to both parties. This includes consideration of separate property as well as marital property, and the needs and means of each spouse.
For example, consider if one spouse gave up their career in order to stay home and raise children. They now have a difficult time earning a living after the divorce. In this instance, the court may award that party a larger cut of the marital property. Conversely, if one spouse was abusive or otherwise at fault for the failure of the marriage (even in a “no-fault” divorce), the court may award them a smaller percentage of the marital property.
Determining What’s Equitable: Factors Considered
Like community property states, in equitable distribution states, the divorcing couple has an opportunity to reach an agreement on their own (subject to court approval) before the courts intervene. This may take place in a collaborative environment or through the parties’ attorneys. If the parties are unable to reach an agreement about the division of marital property, the courts will use their discretion (within the parameters of state marital property law) in order to reach a resolution.
When courts are tasked with determining the division of assets, they’ll generally consider the following factors under equitable distribution laws:
- Duration of the marriage;
- Which spouse has primary custody of minor children;
- The financial needs and liabilities of each spouse, present and future (for instance, one party may need to invest in a college degree in order to earn a decent wage);
- The financial well-being and earning power of each spouse, present and future;
- Amount contributed by each spouse to the combined marital property;
- Pensions earned by either spouse;
- Non-monetary contributions to the family (such as child-rearing, unpaid work on the home, etc.);
- Marital debt accumulated during the duration of the marriage (such as credit card debt);
- Age, health, and special needs of each spouse;
- Child support (and/or spousal support) obligations of either spouse for previous relationships;
- Total fair market value of separate property (again, this isn’t subject to division, but does factor into the overall determination); and
- Marital misconduct by each spouse (such as gambling debts, extramarital affairs, or instances of domestic violence).
Note that premarital property is not included in equitable distribution. This is because personal property acquired before the marriage is not considered part of the marital estate. Only assets acquired during the marriage are considered part of the marital estate and are subject to equitable distribution.