Equitable Distribution Defined
Community property laws control the distribution of property in dissolution, divorce and legal separation in nine states including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Equitable division law governs property division or distribution in the remaining forty-one states.
An important note: Although California is not a equitable distribution state, the courts are required to make a fair and equitable division of the community property assets. In other words, when they are dividing the community property into equal shares they must divide the shares fairly and equitably – not to disadvantage one spouse.
Under the equitable distribution laws of other states, generally speaking, all real or personal property owned by either spouse separately or by both spouses jointly, may be distributed or divided in divorce.
The equitable division of property is not based on a specific formula, such as the fifty-fifty rule of community property, but is instead it is based on the premise of fairness. State judges and commissioners determine what is fair on a case-by-case basis after considering a number of factors including, but not limited to the following:
- Future earning capacity of the spouses
- Future ability to acquire assets
- Children’s special needs
- Length of marriage
- Nonmonetary contributions to the marriage
- Premarital contributions
- Separate property
- Asset liquidity
- Loss of inheritance rights and benefits
- Appreciation of separate and joint assets
- Reasons for the dissolution of marriage (in fault states and cases)
- Alternative sources of income
- Tax consequences of the division of assets
All property acquired before or during marriage by either or both spouses is subject to division. Any assets including income, dividends, rents, savings, real estate, bank, investment and brokerage accounts, boats, cars, art, and other property, real or personal, may be divided in dissolution, divorce or legal separation.
The equitable or fair distribution of property can require the actual division of every asset acquired before or during marriage, or the division of all assets acquired during, but not before marriage, and the unequal distribution of any or all assets. Generally speaking however, judges and commissioners focus only on the division of property acquired during marriage except in special circumstances.
Examples of the equitable distribution of property:
(1) Husband and wife are each awarded one-half of all of the assets acquired by husband and wife during marriage, and all of the assets acquired by husband or wife before marriage remain his or her separate property, or
(2) Because wife is a stay-at-home mother who did not work during the couple’s eight-year marriage, the couple has a young special needs child, and husband is a mortgage broker earning $500,000 annually, wife is awarded sixty percent of the marital property and husband is awarded forty percent of the marital property, or
(3) Because husband and wife were married for two years, did not have any children, are both employed and self supporting, all of wife’s premarital assets are confirmed as her separate property, and husband and wife are ordered to each assume one-half of the couple’s $20,000 credit card debt that was accumulated during marriage, or
(4) Because husband and wife did not acquire any assets during marriage, husband is unemployed and wife has premarital liquid assets totaling $250,000, wife is ordered to pay-off the couple’s $30,000 personal line of credit used during marriage for miscellaneous expenses like food, travel and clothing.
In equitable distribution states it is difficult to predict the outcome of property division in divorce, dissolution or legal separation. All assets are subject to the court’s discretion however if you have separate property assets that you want the court to confirm as your own, gather all of the necessary evidence that proves you acquired the property before marriage and there are no special circumstances in your case that justify a judge or commissioner awarding any of the property to your husband. Alternatively, consider negotiating your divorce settlement and the distribution of property so you can avoid the sometimes unpredictable and subjective decisions of family court judges and commissioners.