If you and your spouse are facing divorce, you know the court is going to divide up the assets and debts you've acquired together over the years. Depending on where you live, this can happen in one of two ways. Some states divide everything 50/50. However, the majority make the division based on a legal concept called "equitable distribution."
Equitable Distribution States
All but nine states use the principle of equitable distribution when dividing property in a divorce. The others -- Wisconsin, Arizona, Washington, California, Texas, Idaho, New Mexico, Louisiana and Nevada -- are community property states. In these states, courts typically divide property in half when spouses divorce, except in very extreme circumstances. Courts in the other 41 equitable distribution states may divide property 50/50 between spouses, or they may distribute property more unevenly. In a legal context, equitable does not mean equal. It means fair, and judges have a great deal of discretion in these states to decide what is fair.
Equitable distribution states start with the premise that each spouse should receive 50 percent of what the couple owns, but judges may then consider the specific factors of each divorce to deviate from a 50/50 split. They can move certain assets from the ownership of one spouse to the other because it seems fair for them to do so. This can ultimately result in a 60/40 division, or in an even more lopsided distribution.
Equitable Distribution Factors
Not all equitable distribution states allow their judges to consider the same factors. The exact criteria for equitable distribution can differ from jurisdiction to jurisdiction. However, courts typically consider some of the same issues, such as the length of the marriage, or the earning potential of each spouse. For example, a spouse who earns significantly more may be able to rebound more easily post-divorce and purchase property to replace what he lost. This might result in the under-earning spouse receiving more marital property. The longer the marriage, the more likely it is that both spouses equally contributed to the acquisition of property, through either earnings or household labor. This factor usually results in a more even split.
In most states, marital fault is not a factor judges can consider when dividing property. It typically doesn't matter if one spouse was unfaithful or abusive, even if this caused the marriage to end. However, exceptions exist. If one spouse spent a significant amount of marital money on his paramour while involved in an adulterous relationship, or if he gambled away assets, courts in equitable distribution states can usually award more property to the innocent spouse in compensation.
The principle of equitable distribution applies only to marital property. Some separate property is exempt, and the spouse who owns the separate property usually gets to keep it. Separate property includes assets such as those acquired before the marriage, inheritances and gifts. However, this rule only applies as long as the spouse who owns the separate property never mixes it with marital property, such as by placing inherited money in a joint back account.
Avoiding Equitable Distribution
Equitable distribution laws apply only in trial situations. If you choose to negotiate a marital settlement agreement with your spouse, you can divide your property any way you like. You don't have to do it according to the laws in your state. You can also override your state's equitable distribution laws by signing a prenuptial agreement, agreeing ahead of time how you'll divide your property if you divorce.