Property Division in Divorce: Community Property vs. Equitable Distribution

Property division during divorce or dissolution of marriage consists of all the property, including some future income like pensions and retirement funds, being divided between the spouses. Property division can also include the goodwill value of a business and the value of increased earning capacity from a degree or professional license obtained during the marriage. There are two general systems for making a division of property, community property and equitable distribution.

Community Property

Some states have what are called community property laws, which means generally that the money both spouses have earned during the marriage belongs to both of them, and the money that either spouse had before the marriage or from an inheritance or gift belongs to that spouse as separate property. Increased equity in separate property may become community property in certain circumstances, and separate property that is commingled with community property often becomes community property. You should check your state law and get advice if there are questions.

The courts in community property states will usually divide the community property equally between the parties and give each spouse his or her separate property. This is not always the case, so if you have an unusual situation—where one spouse is disabled and unable to work, for example—you should seek advice in community property states to find out how the law in your state and your personal circumstances might change the result of the divorce property division. This also doesn’t mean that the court will divide every asset in half. The property is divided so that each spouse gets half of the total net value, which is the fair market value of assets minus community debts.

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Equitable Distribution

The other system is called common law, marital property law, or equitable distribution. In that system the spouse whose name appears on an ownership document, like a title, deed, or registration, owns the property. Unlike in community property states, a spouse is not entitled to keep separate property. Each spouse is entitled to receive a fair and equitable share of the property of the other spouse.

There is no set measure of what is fair and equitable. Equitable grounds in some states may include the fault of one or both parties in the divorce, while in other states fault is not considered in property division. The factors most commonly considered in the division are the needs of the spouses, the length of the marriage, and the fairness of the division. In practice, the average division is 2/3 to the higher wage earner and 1/3 to the other spouse, but there are no guarantees.

Case Studies: Property Division in Divorce

Case Study 1: Community Property Division

John and Lisa, residents of a community property state, are going through a divorce. They have been married for 10 years, and during that time, they both worked and accumulated assets together. However, Lisa also received a significant inheritance from her parents. The court must determine how to divide the property between them, considering the community separate property rights.

Case Study 2: Equitable Distribution

Sarah and David, residents of a common law state, are seeking a divorce. Sarah is the sole owner of their marital home, as her name appears on the deed. David is concerned about receiving a fair share of the property, as he contributed to its upkeep and mortgage payments throughout the marriage. The court must decide what constitutes fair and equitable distribution of the property.

Case Study 3: Unique Circumstances in Community Property Division

Michelle and Michael, a couple residing in a community property state. Michelle is disabled and unable to work, while Michael has been the primary breadwinner throughout their marriage. Due to Michelle’s disability and limited earning capacity, the court must consider the unique circumstances and potential impact on the division of their community property.

Case Study 4: Factors in Equitable Distribution

Emily and Mark, residents of a common law state, are divorcing after a 15-year marriage. Emily sacrificed her career to support Mark’s professional advancement, which significantly increased his earning capacity. The court must assess various factors, such as the length of the marriage, the spouses’ needs, and the fairness of the division, to determine an equitable distribution of the property.

 

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