As the name implies, “equitable distribution” seeks to give the divorce court some discretion to distribute property equitably in divorce. Many common-law states and some community property states use equitable distribution for dividing marital assets and debts between divorcing spouses. Many equitable distribution states also apply the scheme to divisible property, and some so-called “all property” states may apply it to all of the spouses’ property.
Marital property for purposes of equitable distribution is property that both or either of the spouses acquired during the existence of their marriage, usually by means other than inheritance or gift from a third party. Separate property includes all property that the spouses bring into the marriage or that they acquire after they separate or file for divorce, unless the spouses agree to alter the separate nature of particular property items.
Divisible property generally consists of:
- changes in the value of marital property between the separation date and the property division date;
- assets earned or acquired before separation, but received after separation;
- marital property-related passive income received between the separation date and the property division date; and
- increases in marital debt occurring between the separation date and the property division date.
Courts exercise discretion in applying equitable distribution, but they primarily consider each spouse’s financial status when determining the property division. The concept of equitable distribution encompasses equal distribution plus intangible factors that may affect the distribution calculation. Those factors include:
- the duration of the marriage;
- marital misconduct and dissipation of property by either spouse;
- the physical and emotional health of spouses and their respective ages;
- the property or income that each spouse brought to the marriage;
- the standard of living established during the marriage;
- the spouses’ written agreement(s) governing property distribution;
- the spouses’ relative financial position when the property is being divided;
- the spouses’ income and earning potential;
- a spouse’s contribution toward the other spouse’s education, training, or increase in earning ability;
- a spouse’s homemaking contribution during the marriage;
- the spouses’ relative contribution toward the acquisition of marital property;
- tax consequences to each spouse;
- anticipated retirement benefits;
- the present value of marital property;
- marital debts and liabilities and the spouses’ relative ability to service those debts and liabilities; and
- other factors that the courts deem relevant for the purpose of such calculation.
States that use equitable distribution do not apply it when the spouses have a valid pre-nuptial agreement that governs the property division.
Equitable distribution is more common and generally more flexible than pure community property distribution and is used in most states. Division under equitable distribution can be less predictable than division under fixed statutory schemes.