What Is Equitable Distribution?
Equitable distribution is a legal theory guiding how property acquired during a marriage should be distributed between a divorcing couple. Equitable distribution, also known as equitable division or division of property, takes into account a variety of factors when dividing assets and debts, including how long the parties were married, their needs, and the financial contribution each party made during the marriage.
Understanding Equitable Distribution
Rather than treat each party as equal, equitable distribution holds that some factors make the ownership of property inherently unequal. Factors that make the parties unequal include educational attainment and employability, how much each party earns and spends, what the financial needs of each party are, and the age and health of each party. The theory also takes into account the causes of the divorce, including whether one party was abusive or unfaithful. Equitable distribution is forward-looking as it considers the financial position of each party post-divorce.
- Equitable distribution is a legal theory whereby marital property is distributed equitably in a divorce proceeding.
- Property assets are classified as either separate property or marital property.
- Most US states follow the equitable distribution theory.
- If willing and without dispute, parties to a divorce can decide how to allocate assets and debts without a third-party.
Equitable Distribution vs. Community Property
Property is often divided into two groups. The first is separate property, which is property that belongs to one spouse. Examples include property acquired before the marriage or inherited before or during the marriage. Some states allow separate property to be excluded from equitable distribution. The other group, marital property, represents property acquired during the marriage.
Dividing up property during divorce proceedings is often complicated, and different legal theories treat this distribution differently. The community property theory holds that property should be divided equally since both parties are considered to have joint ownership of all property (both assets and debts). This theory posits that marriage creates an economic community, in which property attained is part of the community. In short, property is linked to the newly formed community rather than to each person.
In the US, most states are equitable distribution states, meaning courts hearing divorces there divide property according to what's fair and equitable. Only Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states, and Alaska allows the couple to decide whether they want their property to be community property. In 2010, Tennessee also adopted a law akin to Alaska's in which spouses can choose community property laws to govern via a community property trust.
Prenuptial agreements are superior to property distribution laws, meaning property is divided according to the agreement rather than judicial command.
Property division does not have to be decided by a third party. If a couple can decide how to split up their assets and debts, they do not have to follow either property division rule. However, if the parties in a divorce cannot agree independently or settle during arbitration, the divorce heads to court with a judge ultimately deciding who gets what based on the laws of their state.