What is equitable distribution?

Equitable distribution is the distribution of property and debt obligations used by courts in most states when dividing marital property during divorce proceedings. Equitable distribution does not mean “equal” division – it means “fair” division. Instead of a strict fifty-fifty split in which each spouse receives exactly one-half of the property acquired during the marriage, the doctrine of equitable distribution is used to look at the future financial situation of each spouse after the termination of the marriage. While equitable distribution is a flexible system, it is difficult to predict the actual outcome of distribution, because some of the factors that courts take into consideration when dividing property during equitable distribution are subjective.

In states where equitable distribution is not used, a different system called community property is the way property is divided at divorce. A minority of states, namely California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, follow the community property system.

Marital and Separate Property in Equitable Distribution

Courts that use a system of equitable distribution take into account both the marital property and the separate property of the couple going through the divorce proceedings. While both the separate property and the marital property of the spouses will be taken into account, the court will only actually distribute the marital property. The reason that the court considers the separate property of each spouse is that it may have an effect on the distribution of the marital property. For example, if one spouse has an abundance of valuable separate property, and the other spouse has very little, the court may allocate more of the marital property to the spouse with very little separate property.

Separate property is generally defined as all property acquired before or after the marriage, and some property acquired through certain avenues during the marriage. Such avenues include property acquired through inheritance, gifts from a third party, agreement, or when the property was acquired by using a separate property asset. For example, suppose a woman bought an apartment before she was married. After she marries, the apartment remains a separate property asset. If during the marriage she sold the apartment and invested the money in stocks and bonds, the stocks and bonds would also most likely be categorized as separate property, since her separate property asset (the apartment) was used to purchase the stocks and bonds.

Marital property is basically all other property of the spouses which is not separate property. Further, any property purchased or acquired during a marriage is presumptively marital property, and the spouse who claims that a piece of property acquired during the marriage is separate property must prove their claim. In the example above, the woman who sold her separate property apartment and used the proceeds to buy stocks and bonds would be required to show evidence that the funds she used to purchase the stocks and bonds came from the apartment she acquired pre-marriage.

What are some additional factors in equitable distribution?

Aside from considering the individual separate property assets of the spouses, the court also considers additional factors, which vary depending on the state. Factors considered in equitable distribution often include objective factors such as the duration of the marriage and the age and relative health of the spouses. For instance, if one spouse has poor health or medical issues that could affect their future earning power, the court may be more inclined to distribute more of the marital property to this spouse. The court directly considers the earning power of each spouse. In addition, courts consider the value of each spouse’s contribution to the marriage. If one spouse was a homemaker, the court will determine the value of this contribution to the marriage as well.

The court may also use equitable distribution to penalize a spouse if he or she wasted or significantly dissipated marital property, either during the marriage or after separation. Some states may also penalize a spouse if there was abuse or infidelity in the relationship. Further, courts virtually always take into consideration which spouse will receive the primary responsibility of caring for the children of the marriage when distributing the marital assets.

When should equitable distribution be invoked?

Equitable distribution is really a last resort and should be thought of in such a way. It is important to remember that equitable distribution laws only apply in court. Before a judge determines the allocation of marital assets, the spouses have a chance to work this distribution out either on their own or through attorney negotiations. While equitable distribution laws should be kept in mind during negotiation, during negotiation the spouses are free to divide their property in the manner in which they see fit. If the spouses cannot agree on how to divide the property, a decision by a judge may result in a distribution that leaves both parties unhappy. In some cases, spouses may be able to divide a portion of their marital estate and bring the remainder to the court to decide how to distribute the rest.

Case Studies: Protecting Assets Through Insurance Solutions

Case Study 1: Homeowners Insurance for Equitable Distribution, SecureHome Insurance

SecureHome Insurance provided homeowners insurance coverage for a couple going through a divorce and navigating the process of equitable distribution. In this case study, the couple had acquired significant assets during their marriage, including a valuable family home.

As part of the equitable distribution process, the home needed to be divided or sold. SecureHome Insurance offered a comprehensive homeowners insurance policy that protected the property during the transition. The coverage ensured that any potential damage or loss to the home would be financially covered, safeguarding the asset until a final decision regarding its distribution was made.

Case Study 2: Liability Insurance for Equitable Distribution, FamilyProtect Insurance

FamilyProtect Insurance provided liability insurance coverage for a divorcing couple involved in equitable distribution. In this case study, the couple had accumulated substantial debt during their marriage, including joint credit card debt and loans. As they worked through the equitable distribution process, it became necessary to determine how the debt would be allocated.

FamilyProtect Insurance offered liability insurance coverage that protected each spouse from potential financial risks associated with the allocated debt. This coverage provided peace of mind and financial protection in case one spouse faced difficulties in repaying their share of the debt, ensuring that the equitable distribution process could proceed smoothly.

Case Study 3: Life Insurance for Spousal Support in Equitable Distribution, LifeGuard Insurance

LifeGuard Insurance provided life insurance solutions to address spousal support obligations in equitable distribution. In this case study, one spouse was awarded ongoing spousal support as part of the equitable distribution settlement. To secure the financial support in the event of the supporting spouse’s death, LifeGuard Insurance offered a life insurance policy with a substantial death benefit.

The policy ensured that the supported spouse would continue to receive the agreed-upon spousal support even if the supporting spouse passed away. This provided financial stability and protection for the supported spouse, ensuring their well-being during and after the equitable distribution process.