Community Property Vs. Equitable Distribution: What Students Need To Know
Many CDTA graduate practice law in California, but some practice elsewhere throughout the United States. Those attorneys and lawyers-to-be that practice family law in the Western U.S. must be experts in community property. Most of the country does not use the community property system as California does. These states use the equitable distribution system of property in divorce and separation matters.
To understand how a divorce settlement is affected by the law of a state, it is crucial to know the difference between community property and equitable distribution. Here’s a brief summary.
Community property is observed in the following states: Alaska (by agreement), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, a divorcing couple has the option of dividing assets using community property rules instead of using those for equitable distribution.
In a community property state, spouses are presumed to equally own all income and assets earned or acquired during the marriage. Thus, state law considers both husband and wife to equally own all money earned by either one of them during the marriage, even if only one spouse earns employment income.
In addition, all property acquired during the marriage with community income is deemed to be owned equally by both husband and wife, regardless of the purchaser. Equal ownership also means both spouses are equally liable for debts, such as mortgages, credit cards, and auto loans.
While this over-simplistic method reduces the number of arguments regarding the valuation of non-tangible items, it can create feelings of unfairness. It can even cause higher alimony or spousal support obligations since a spouse who became a homemaker likely has lower earnings potential. A family law court may find that a spouse repaying half of the marital debt may require a higher award of support to maintain the marital standard of living.
The law in a community property state considers all assets accumulated by the parties during the marriage to be owned jointly. The value of each asset is added together and then divided in half with each spouse receiving one half. The math is that simple and, unlike equitable distribution, there are no other contributing factors to consider.
The remainder of the states, i.e., most states, equitably distribute assets, which means marital property is not necessarily divided equally fifty-fifty 50-50. This system is significantly more complicated than the community property system, where all real and personal property, tangible and intangible, is split evenly in half.
In equitable distribution states, property acquired during the marriage is awarded to the spouse who earned it. Rather than a simple hard and fast rule, like the community property fifty-fifty rule, the court awards property based on a variety of factors, which means that courts have a lot of discretion in dividing marital assets. That is, provided they do so in a fair and equitable manner.
Courts can consider any contributing, relevant factor in achieving an equitable distribution. The most common factors are the length of the marriage, age of the spouses, relative earning contributions of the spouses, the ability of each spouse to provide self-support, the health of the spouses, and whether one spouse sacrificed a career to care for the couple’s children.
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