Community Property vs. Equitable Distribution Divorce
If spouses cannot come to an agreement about property division but instead leave the decision up to a judge, the judge will follow the law of the state in which the spouses are divorcing. Generally, states follow one of two systems for division: community property or equitable distribution.
Did You Know?
Community Property = marital property is split equally between each spouse Equitable Distribution = marital property is distributed "equitably," although not necessarily equally
Equitable distribution is the more common system of property division, used in about 40 of the 50 states. Courts in equitable distribution states will split all assets, earnings, personal property, and debts between the spouses in a division that is fair (in the eyes of the judge) but not necessarily equal. Rather than awarding each item to a spouse as a whole, the court may order the sale of a certain item and then split the proceeds of the sale fairly between the spouses. Sometimes, but not usually, the court may order a spouse to give separate property to the other spouse in compensation for an unequal distribution of their marital property.
Judges in some states may start with the presumption that marital property should be divided equally, but they may deviate from an equal division in the interests of fairness. For instance, a spouse who has squandered or otherwise significantly disturbed (or hidden) assets may be ordered to give up a certain share of assets to the other as compensation. This is sometimes known as "waste" or "dissipation." Judges may also consider factors such as any agreements between the parties, the length of the marriage, the conduct of the parties, their age, health, occupations, and income, their needs and their children’s needs, the contribution of either party to the acquisition of marital assets, whether one spouse sacrificed career advancement for the betterment of the other or the marriage, and any child custody arrangements.
Some courts may consider fault when dividing property. Depending on the state, this may be true even if spouses pursue a no-fault divorce. However, other courts tend to prefer distributing assets based largely on financial considerations and will only take fault into account if it led to the waste or dissipation of marital property.
Community property is an alternative system of dividing property. Although only about 10 states and Puerto Rico follow the community property system, it is the method of property division in some of the nation’s most populous states, such as California and Texas. Before dividing the property, the court will decide whether each item should be classified as community property or as the separate property of one spouse. Then, everything that is classified as community property is divided equally between the spouses, while each spouse keeps all of his or her separate property.
Community Property States
Alaska, South Dakota, and Tennessee allow spouses to opt into a community property framework if they meet certain requirements, which vary by state.
Community property typically includes everything that either spouse earned during the marriage and all property that was acquired with those earnings. It also usually includes the debts that either spouse incurred during the marriage, unless those debts were somehow attached only to the separate property of one spouse (for example, an education that began before the marriage and that was financed by the student spouse’s separate property). Some courts label assets acquired during marriage in a non-community property state "quasi-community property" and treat that property as if it were acquired in a community property state.
Assets acquired with a mixture of separate and community property tend to be classified as community property, unless their acquisition can be traced to funds from separate property. Mixing separate property with community property ("commingling") often turns the separate property into community property, but individual circumstances can affect that outcome.
Community property states will sometimes consider fault, dissipation, or other factors in dividing property, but they tend to prefer an equal division of community property while leaving each spouse their own separate property. However, a court may begin with the presumption that all property is community property and place the burden on each spouse to successfully argue that a certain piece of property is separate. Therefore, most disagreements during property division in community property states involve the categorization of marital and separate property, rather than the distribution of community property itself.