The Difference Between Equitable Distribution and Community Property in Divorce
When dividing marital property in a divorce, each U.S. state is either community property or an equitable distribution state. Here’s what you need to know about the difference between equitable distribution vs. community property in divorce.
Proceedings in court differ depending on state laws, which determine how property is separated between the two parties. In a community property state, marital property is split 50-50 equally. In an equitable property state, property division is considered “equitable” rather than “equal,” and courts decide what each spouse is entitled to from the list of properties. Equitable distribution is more common than community property in the U.S.
In all divorces, “property” is defined as all income, property, and debts accumulated during the marriage. Any property that is acquired before the marriage or was inherited is considered separate and belonging to the original owner.
In community property states, each spouse is entitled to fifty percent of marital property. In community property, the “community” refers to two adults legally bonded through marriage. The property consists of anything acquired during the marriage including debt, earnings, and anything bought with those earnings. Any inheritance or property acquired outside the marriage is not included in community property. Separate property can be taken into consideration. A judge may adjust the equal split if one spouse misuses their spouse’s assets while the marriage is breaking down.
Many community property states do not allow permanent or temporary alimony. States see equal division as adequate, which leaves both parties in the same situation. Temporary or rehabilitative alimony is awarded if one spouse has reduced earning potential resulting from child or home care. The length of a marriage can play a role in whether or not spousal maintenance is awarded. Courts can help a spouse maintain their standard of living and cover costs until job training or education can occur.
Community Property includes items/income/debt acquired during the marriage. Personal property may not be taken or distributed to the other spouse. Wages and property bought during a marriage are community property. Property owned outside of the marriage or is inheritance does not qualify as community property.
Community Property States include:
- New Mexico
In an equitable distribution state, a judge divides all assets, such as earnings, personal property, and debt. The court determines marital property versus separate property, as well as how to best divide these assets. The decision in an equitable distribution case may not be not equal, but rather “fair and equitable.” The court may decide a spouse needs to give something up to the other spouse to compensate for another loss.
Deciding marital property and how much it is worth can be a lengthy process. The loss of career opportunities may be considered. The court will take into account occupation, income, retirement plans, length of a marriage, alimony, age, health, children, and other arrangements in equitable distribution cases. Courts also consider fault in a divorce, even in no-fault states. Some states consider marital misconduct when looking at the distribution.
If spouses agree on how to split their assets before getting the courts involved, they can save time and money, and maintain some input on the results of their case.
What is Considered Property in the Equitable Division?
Anything with monetary value would be distributed.
- Separate property
- A spouse’s business
- Retirement plans
- 401(k) plans
These assets are distributed based on what the court thinks is fair (again not equal).
Equitable Distribution States
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Spouses can choose to go about dividing marital property with community property laws in Alaska, South Dakota, and Tennessee.