Equitable Division of Property: How is it Determined?

Imagine this: You're going through a divorce. Emotions are running high, tensions are flaring, and on top of that, you must figure out who gets what. How do you divide your property? How do you ensure fairness? This is where equitable division of property comes in—a legal concept that aims to distribute assets and debts fairly between spouses during a divorce.

What Does Equitable Division of Property Really Mean?

Equitable division doesn’t necessarily mean “equal,” but it does mean “fair.” The court evaluates multiple factors to determine how property should be divided between two people in a way that considers both parties’ circumstances. In the end, the goal is to reach a fair division based on individual contributions, future needs, and other factors that make sense for the couple involved.

Equitable Division vs. Community Property

In the U.S., states follow one of two systems when it comes to dividing property during a divorce: community property or equitable division.

• Community Property States: Here, any property acquired during the marriage is typically split 50/50 between the spouses. Nine states, including California and Texas, follow this rule.
• Equitable Division States: In contrast, most U.S. states (41 to be exact) use equitable division. The court looks at several factors to decide who gets what, and the division may not necessarily be equal.

How Courts Determine Equitable Division

Divorce courts consider a wide range of factors when determining how to divide property fairly. Some key factors include:

1. Length of the Marriage: In longer marriages, courts often strive for a more balanced division of assets, especially if both spouses contributed significantly to the marriage, whether through income or non-financial roles such as caregiving.
2. Income and Earning Capacity: Courts will take into account both spouses' current and future earning abilities. If one spouse stayed home to take care of the children and sacrificed career opportunities, they might be awarded a larger portion of the marital assets to compensate for their reduced earning potential.
3. Age and Health of Each Spouse: If one spouse is older or in poorer health, they may require more resources to support themselves moving forward, and this could lead to a larger share of the property being awarded to them.
4. Contributions to the Marriage: Contributions aren’t limited to financial income. Courts also consider non-monetary contributions, such as one spouse staying home to take care of children, as significant contributions to the marital estate.
5. Standard of Living Established During the Marriage: Courts often aim to preserve the standard of living for both spouses, especially in cases where one spouse may have become accustomed to a certain lifestyle during the marriage.
6. Custodial Arrangements for Children: If one spouse is awarded primary custody of the children, the court may grant them the family home or other assets to ensure stability for the children.

What Counts as "Property"?

When dividing assets, it's crucial to understand what is included in the marital estate. Generally, anything acquired during the marriage is considered marital property. However, items owned before the marriage, inheritances, or gifts to one spouse are usually considered separate property. Here’s a breakdown of what might be included:

• Real Estate: The family home, vacation properties, or rental properties.
• Retirement Accounts: Pensions, 401(k)s, or IRAs, especially those that accumulated during the marriage.
• Investments: Stocks, bonds, mutual funds, or business interests.
• Debts: Mortgages, car loans, credit card debts—these liabilities are also considered in the division process.
• Personal Property: Vehicles, furniture, artwork, or jewelry.

It's important to note that even if a property is titled in one spouse's name, it can still be considered marital property if it was acquired during the marriage or benefited both spouses.

Equitable Division and High-Net-Worth Divorces

In high-net-worth divorces, equitable division becomes much more complex. Assets like businesses, foreign investments, and stock options must be valued, and this can lead to disputes about how to divide these properties fairly. The stakes are much higher, and both parties often hire financial experts to ensure assets are valued properly and equitably distributed.

Equitable Division and Hidden Assets

Unfortunately, not all divorces are amicable, and sometimes one spouse tries to hide assets to avoid a fair division. This could involve anything from undisclosed offshore bank accounts to underreporting income. Courts don’t take kindly to hidden assets, and if found, the offending party could face penalties, including being awarded a smaller share of the marital property.

Key Misconceptions About Equitable Division

• Myth 1: Equitable Means Equal. Just because property division is equitable does not mean it will be an even 50/50 split. Courts consider fairness, not strict equality.
• Myth 2: Only Financial Contributions Matter. Non-financial contributions, such as homemaking and childcare, are highly valued when determining how to divide assets.
• Myth 3: The Breadwinner Gets More. While income is a factor, courts look at the entire picture, including non-monetary contributions and future earning potential.

A Global Perspective on Equitable Division

While this article has primarily focused on the U.S., equitable division is a concept that can be found in other legal systems around the world. For example:

• In the U.K.: Courts have the discretion to divide marital property based on what is “fair” rather than splitting it equally.
• In Australia: Property is divided based on contributions made by each party to the marriage, with courts considering both financial and non-financial contributions.
• In Canada: While some provinces follow a community property regime, others, like Ontario, apply an equitable division model, distributing assets based on fairness rather than strict equality.

Conclusion: The Road to Fairness

Divorce is already an emotionally charged process, and the division of property can add additional stress. Equitable division of property aims to mitigate some of that by providing a framework that courts can use to ensure that both parties receive a fair share of the marital assets. Though it’s rarely easy, understanding the principles behind equitable division can make the process more transparent and manageable. Ultimately, the goal is to provide both parties with the resources they need to move forward and build a new life post-divorce.