Equitable Distribution and Community Property

Key Points

Depending on the state you are divorcing will determine how assets and debts will be classified as marital and/or separate.
Equitable distribution and community property laws offer a different approach by state.

When a couple cannot agree about the terms and conditions of their property division, the court does it for them guided by either the regime of equitable distribution or a lawful division of community property.

Nine of the states -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin – divide the marital estate based on the theory of community property; the other 41 and the District of Columbia work from the reasoning of the equitable distribution.

These approaches can produce dramatically different results. In practice, equitable division tends to produce a division deemed fair; division by the community property regime tends to produce settlements that are equal. However, in several community property states and all equitable distribution states courts are permitted to "fine tune" property divisions in the interests of what is considered fair and reasonable.

Under the equitable distribution regime, the court apportions property "based on equity and fairness, regardless of who held legal title to the assets during the marriage...however, each spouse is the sole owner of her/her income earned during the marriage." By comparison, under the community property routine, "a husband and wifeown their own marital holdings in common (regardless of title) giving each spouse an undivided one-half interest in the whole assetsplus, one half the earnings of one spouses is considered to be owned by the other spouse."

The thinking behind equitable distribution comes from English common law, says Marlene M. Browne, the author of The Divorce Process Empowerment Through Knowledge. In this, marriage is "a marital enterprise, akin to a joint venture or economic partnership. Consequently, the common law of equitable distribution analyzes the marriage with a view that the respective spouse made contributions to the success (or failure) of that joint enterprise (the marital relationship) and the acquisition of property and income throughout the official union."

In contrast, says Ms. Browne, the community property routine finds its antecedent in the idea of bienes ganaciales, a Spanish legal prototype holding that "property acquired by either spouse during the marriage (apart from inheritances, gifts from third parties, and property owned by the individual before the marriage) was considered jointly owned by both spouses, regardless of who held legal title." She notes that eight of the community property states are Southwestern or Western jurisdictions in territory originally under Spanish rule that retained the "indigenous concept of bienes ganaciales."

Information Provided by: Divorce Source, Inc.