Equitable Distribution and Community Property Distribution of Properties and Assets

Apr 6, 2017 by

Equitable Distribution and Community Property Distribution of Properties and Assets

Spouses not agreeing on the issue of division of properties and assets is one of the reasons why some divorce cases become contested and so end up in a divorce court. Division of properties and assets will have a direct major impact in the spouses’ lives right after divorce. Due to its effect, being assured of a substantial share of assets (and lesser marital debts) will be important, especially for those who have sacrificed their own career and professional growth to support of their spouse and care for the children.

To save couples from the stress and worry that this divorce-related issue usually brings, many financial experts, legal professionals and even marriage counselors advise those planning to get married to consider entering into a pre-marital (or pre-nuptial) agreement. Besides the fact that a pre-nuptial agreement is never aimed at spoiling marital unions, it can also really provide lots of benefits if the marriage eventually fails.

Before attempting to decide “who gets what,” a judge (if the divorce is contested) or a mediator (in mediated divorce) will first need to determine which of the couple’s properties and assets are marital assets and, therefore, subject for distribution. Properties identified as inheritance or gift to one spouse during the time of marriage, profits earned from properties which one of the spouses got to own before the marriage, a property purchased by one of the spouses using the money that he/she earned before marriage, and all other properties mentioned in the pre-marital agreement are considered personal and, therefore, cannot be divided between the spouses.

With regard to those that may be distributed, courts apply one of these two basic systems: equitable distribution or community property. In equitable distribution, marital properties and assets are divided fairly and reasonably (not necessarily equally) between the spouses. This system of distribution takes into account the following factors:

  • the income and earning potential of each spouse;
  • the age of each spouse;
  • the spouses’ emotional and physical conditions;
  • the tax consequences of the assets, properties and debts;
  • the value of the personal properties [like retirement plans, 401(k) plans, business, business interests, bonds, stocks, financial incentives] of each spouse;
  • child support (if there are children) and/or alimony requirements;
  • the future financial needs of each spouse;
  • the degree of contribution of each spouse in to the acquisition of marital properties; and,
  • length of marriage.

The community property distribution system, on the other hand, is based on equality. In this system, the spouses are considered equal owners of all the properties and assets earned and acquired during their marriage even if only one of them had been employed. This legal position is also applied with concern to debts, rendering both spouses equally liable for all unpaid balances on car loans, home mortgages, credit cards, and so forth.

The community property system or equal distribution system is currently observed in nine US states (all other states observe the equitable distribution system: Wisconsin, Washington, Texas, New Mexico, Nevada, Louisiana, Idaho, California and Arizona.

As explained by Raleigh divorce attorneys of Marshall & Taylor PLLC, “Throughout the course of a marriage, most couples accumulate a wide range of shared property. Additionally, most partners come into the marriage with their own individual property, while many also receive property or assets that could be considered solely theirs during the marriage. As a result of both of these issues, trying to navigate the property division process and make sure you get the property and assets you deserve when getting a divorce or separation can be difficult.

For this reason, many individuals choose to enlist the support of a legal professional in order to ensure that their rights and interests are fully protected in any property division agreement that may be reached. A skilled legal professional understands how much the outcome of a property division agreement can mean for anyone going through a divorce, and, fortunately, with his/her help, you stand a much better chance of getting the outcome you are seeking.”

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