Property Division Legal Overview - More of the Basics

Understanding the distinction between community property and equitable division states is crucial for individuals navigating a divorce, as it determines the legal framework that governs the division of assets and debts. By consulting with legal professionals and understanding the laws applicable in their jurisdiction, you can make informed decisions and protect your interests during divorce.

The State you are in Matters

The legal analysis depends on what state you are in.  You are either in a Community Property state or an Equitable Division state.

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. Alaska allows couples to opt into a community property system. All other states are equitable division states.

Community Property Analysis

In community property states, marital assets and debts are considered jointly owned by both spouses, regardless of individual contributions or ownership. Both spouses are presumed to have an equal ownership interest in all property acquired during the marriage, including income earned, properties purchased, and debts incurred. Upon divorce, these assets and debts are typically divided equally between spouses. In these states, as long as separate property stays titled in one person’s name, it will typically stay with that person after divorce. However, if this separate property was shifted into both parties’ names, like being moved into a joint account, it is often then treated as shared or joint property and divided equally (even if it was originally separate property).

Equitable Division Analysis

In equitable division states, marital assets and debts are divided fairly and equitably between spouses, but not necessarily equally. Courts consider various factors to determine a fair distribution based on the specific circumstances of each case.  Equitable division states aim to achieve a fair and just allocation of marital property, taking into account factors such as the length of the marriage, each spouse's contributions, financial needs, and future prospects.  Courts have discretion to weigh these factors and may allocate assets and debts unequally if deemed necessary to achieve a fair outcome. An equitable division often ends up in an equal division, just like community property, but it also can mean something different.  If there is some particular reason why one party should receive more than 50% of the property, in an equitable property state, it could end up being divided that way.  In equitable division states, as long as one party can document or "prove" non-marital property, then it typically stays with one party, regardless of how its titled.

Key Differences

Here are some of the key differences between community property and equitable division legal frameworks:

Presumption of Ownership: In community property states, marital assets and debts are presumed to be owned by both spouses based on title and acquisition during the marriage.  While in equitable division states, ownership is determined based on various factors regardless of title.

Division Principle: Community property states typically adhere to a principle of equal division of joint property, whereas equitable division states focus on achieving fairness and may allocate assets and debts unequally based on individual circumstances.

Court Discretion: In equitable division states, courts have discretion to consider a wide range of factors when dividing marital property, allowing for more flexibility in achieving a fair outcome compared to the more rigid equal division principle of community property states.

‍

Keep in mind that the legal framework described in this module dictates how a Court would work through this analysis.  You and your spouse can always negotiate a settlement that treats your property division different than what a court would do.  We will continue to review these concepts along with the specific assets as we proceed to describe the balance sheet and specific types of property.