Equitable Distribution and The Division of Marital Property in a Divorce

What Is Equitable Distribution? Which States Apply Equitable Distribution? How Does It Differ from Community Property?

When you take legal action to dissolve or terminate a marriage, one of the essential components of the process is the division of marital debts and assets. The divorcing couple might be able to reach agreement, without involvement of the court, regarding who receives what specific property and who will be responsible for payment of the couple’s debts. When spouses cannot work out their own agreement, the court typically considers evidence (testamentary, documentary, and/or physical, as necessary), and issues an order on the division of marital debts and assets. Known generally as a property settlement, the court order is based on state law. While nine states (listed below) follow the legal principle of community property when dividing a marital estate, the vast majority (41) follow the equitable distribution approach.

What Is Equitable Distribution?

Equitable distribution is a legal principle that governs the division of marital debts and assets in a divorce proceeding. The parties to a divorce may work out a property settlement without the involvement of the court and if they do so, they are not required to follow equitable distribution principles (although the court is likely to review the agreement and make sure both parties understand it and enter it willingly). However, if the parties cannot agree to the allocation of marital property (or if the court finds problems with an agreement proposed by the parties), the court will use the principles of equitable distribution to determine who receives what property and who will be responsible for any remaining marital debts.

Under the concept of equitable distribution, the court seeks to work out a settlement that is equitable and fair, based on the needs of the parties and the relevant facts surrounding the divorce. The term “equitable,” though, does not necessarily mean “equal.” The factors considered by the court vary from state to state, but commonly include the following:

• The length of time the parties were married
• Custody arrangements, e.g., a spouse with primary custody of a minor child may have priority for retaining the marital home
• The ability of each party to be financially self-sufficient
• The extent to which one party contributed to the accumulation of marital assets
• The extent to which one party caused the accumulation of marital debt
• The extent to which one party gave up career opportunities to be a homemaker
• The age and health of the parties at the time of divorce
• Whether either of the parties engaged in marital misconduct, including adultery or other deceit

How Does Equitable Distribution Differ from the Community Property Approach?

Currently, nine states follow the community property approach to the distribution of marital property: California, Texas, Idaho, New Mexico, Arizona, Washington, Nevada, Louisiana, and Wisconsin. All other states apply equitable distribution principles to marital settlements. (Alaska is unique in that the default is equitable distribution, but couples may opt-in to community property by filing an agreement before or during marriage.)

Under the community property approach, the court first reviews the couple’s property to determine whether all of it is community property or if some of it might be considered “separate” property. Separate property includes any assets owned by an individual prior to the marriage. It also typically includes assets obtained by gift or inheritance during the marriage, as well as the proceeds of a personal injury lawsuit awarded to one individual. All property not deemed separate property is community property. The total value of all community property is then divided equally between the parties.

Summary

Under the legal principle of equitable distribution, a court attempts to divide the debts and assets of a marriage equitably (or fairly). The court does not necessarily attempt to allocate property and obligations equally. The laws of each state, which may vary from one to the next, allow a court to consider various factors when determining what is fair or equitable, including length of the marriage, the age and health of the parties, the respective earning capacities of the parties, whether a party will have custody of minor children, and, in some states, any inappropriate or wrongful behavior (such as marital infidelity). The principle of equitable distribution governs in most states. Nine states, however, follow the community property approach, where all property and debts acquired during the marriage are divided equally.