What Is Equitable Distribution In Divorce? (2024)

Couples can choose to divide up property in any way that they wish if they can agree. If a couple has a premarital agreement, that is usually enforceable if it is valid. But if no pre-arrangements are in place and a couple turns to the court to divide up their assets, equitable distribution is used.

Out-of-Court Marital Settlement Agreement vs. Court-Ordered Property Division

Ideally, when a couple divorces, they create a settlement agreement on their own outside of court that divides up property and child custody. If the couple can agree, divorce is usually cheaper and the outcomes are often better.

Couples do not have to follow equitable distribution rules when they negotiate how to divide property. They can decide what is right for their family, as long as both parties are in agreement and the outcome is reasonably fair and not unconscionable. Couples can choose to work with a mediator to make decisions about how property should be split up if they can’t agree without outside help.

Separate Property vs. Marital Property

When a court divides up property via equitable distribution, the first step involves determining exactly what property should be divided. Any assets considered separate property will not be split up by the court.

Separate property includes property that each spouse owned prior to entering into the marriage–unless it was converted to marital property. For example, if a spouse had a bank account in their own name prior to marriage, they kept that account separate, and their spouse never contributed to it, the spouse who created the account would keep that account after divorce. But, if a spouse had a separate account and they commingled the money with shared assets in a joint account, that money would become marital property.

Other examples of separate property include property inherited by one spouse during a marriage that was not later mixed with shared assets or gifts given to one spouse during marriage that were kept separate.

Valuing Marital Property

It is important to know the value of marital property in order to determine how to divide it up equitably. Valuing assets is usually the next step in court proceedings after all of the marital property is identified.

Typically, courts consider the fair market value of the property when determining what it is worth. This may be different than the amount the couple paid for it. Depending on the type of property, professional appraisals may be required in order to determine what it is worth.

Marital Debt

Many couples don’t just have shared assets. They have shared liabilities as well. If you have mortgages, car loans, credit card bills and other debt acquired during the marriage, this must be divided up, too. In equitable distribution states, the court tries to divide up debt fairly and determine who should be responsible for paying off which bills.

It’s important to note that even if the court says your spouse must pay a particular bill, creditors can still try to collect from you if the debt is jointly held. So you may wish to request that the debt be refinanced in your spouse’s name only or paid out of marital assets during the divorce process.

Factors Considered in Dividing Property

When a court is asked to decide how to divide property equity, there are a number of different factors it might consider. These vary by state, but some of the things the court usually looks at include the following:

• Whether there was a premarital agreement
• Whether there are minor children and whether child support is ordered
• Whether alimony is ordered
• Whether one spouse was a stay-at-home parent or homemaker
• The length of the marriage
• The standard of living developed during the marriage
• The contributions each spouse made to acquiring marital property
• The contributions one spouse made to the other’s career or training
• The earning power and income of each spouse
• The age and health of each spouse
• The liquidity of marital property
• The value of non-marital property

The goal is to ensure that property is divided up in a fair way based on each spouse’s past contributions and future needs.