The process of divorce can be emotionally and financially draining. It can also be very complicated, as state laws tend to dictate who gets what property, assets and even debt in a split. Equitable distribution is a system by which many states divide property during a divorce. What does it mean and which states use it? Use SmartAsset’s financial advisor matching tool to find a professional to help you work through the financial challenges of divorce.
Understanding Equitable Distribution
Equitable distribution is a legal term that describes the process of dividing marital property and debt in the event of a divorce. While the term may suggest otherwise, the term equitable distribution doesn’t necessarily mean dividing all marital property down the middle.
Rather, this process takes into account the divorcing couple’s assets, debts, their needs, even their financial contributions to the marriage and how long they were married. It also considers future employability and earning power, as well as spending and saving habits. In this manner, it aims to divide assets equitably, but not necessarily evenly.
Factors that Impact Equitable Distribution
Achieving equitable distribution requires addressing multiple factors that can influence how resources are allocated. Socioeconomic status is a primary factor, as it often determines access to quality education, healthcare, and employment opportunities, which, in turn, impact wealth and income distribution. Geographic location also plays a role; urban areas may have better access to resources and services than rural or underserved regions, leading to disparities in outcomes. Additionally, systemic bias, whether based on race, gender, or other social categories, can result in unequal treatment and access to opportunities, creating barriers that prevent fair distribution.
Education levels and access to information are other key factors, as individuals with higher educational attainment often have better job prospects and earning potential. The structure of policies, such as tax laws, labor rights, and social welfare programs, also significantly impacts equitable distribution by either promoting fairness or inadvertently favoring certain groups over others. Technological access, increasingly essential in today’s digital age, influences equitable distribution by either enabling or limiting access to information, economic opportunities and social services.
States With Equitable Distribution
Most states adhere to equitable distribution. States that do not use the equitable distribution model are what are called community property states.
Community property states in the U.S. are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. The territory of Puerto Rico follows community property principles. In Alaska, couples can decide if they want their property to be considered community property. All other states are equitable distribution states.
How Equitable Distribution Works
If you’re facing a divorce in a state that isn’t a community property state – in other words, one that utilizes the equitable distribution process – there are a few important points to keep in mind. First, this process aims to keep the division of marital property, or property that was acquired during the marriage and belongs to both spouses, fair – but not necessarily equal. In other words, it likely won’t be a perfect, 50/50 split.
Equitable distribution takes into account various factors within the split based on the idea that spouses are inherently unequal. For example, one spouse may be more employable or educated than the other, which would likely result in them getting fewer assets in the split since they could more easily earn more post-divorce. Or if one spouse was abusive or committed infidelity, making them largely responsible for the split, they may also be entitled to less.
Don’t forget about separate property. This is essentially property that belongs only to one spouse, either because it was acquired before the marriage or inherited before or during the marriage. Prenuptial agreements supersede equitable distribution and community property states’ laws regarding the division of assets.
Community Property and Equitable Distribution
While equitable distribution is used in many states to divide marital property, live in a community property state and the process will likely look much different. More specifically, in these states, all marital property is considered community property. This means that in the event of a split, it’s usually divided 50/50.
Unlike equitable distribution, which considers factors such as a spouse’s contributions to the marriage, whether there were underlying issues such as abuse or infidelity, community property states consider all property bought during the marriage to be community property, meaning that it essentially belongs to both partners equally and will be divided up as such.
Bottom Line
Equitable distribution is a system by which certain states divide property during a divorce. It occurs in non-community property states and considers assets and debts, each partner’s financial needs and contributions to the marriage, how long they were married, the age and health of both partners, as well as future employability and earning power. Prenuptial agreements supersede equitable distribution laws.
Tips for Dividing Marital Property
- Many financial advisors specialize in the final implications of divorce. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- The question of what happens to someone’s pension when he or she goes through a divorce can be a contentious issue. Learn more about how to handle this potentially difficult matter.
Photo credit: ©iStock.com/inga, ©iStock.com/Andrii Yalanskyi, ©iStock.com/Natali_Mis