Property and Law

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Except for child custody, the distribution of marital property is undoubtedly the most acrimonious issue in divorce cases. Prior to filing for divorce, preparing a financial affidavit, or entering into settlement negotiations, it is essential that the parties know what kind of property state in which they reside and understand how their state's property laws will affect the ultimate distribution of the property in the marital estate. There are two kinds of property distribution: marital property states and community property states.

Marital and Non-Marital Property

Most states are marital property states. In marital property states, all property acquired by the parties between the date of the marriage and the date of divorce is considered marital property, except for property obtained through gifts or inheritances. By contrast, all property that the parties brought into the marriage is considered non-marital property. For example, a home purchased by the parties during the course of the marriage is marital property. However, a bank account in one party's name containing the proceeds from the sale of a home she owned before the marriage is non-marital property.

In some cases, property obtained during the marriage may still be classified as non-marital property. These exceptions to marital property typically includes:

  • Inheritances
  • Gifts made specifically to one spouse
  • Property purchased with funds obtained prior to the marriage
  • Property purchased after a judgement of legal separation
  • Property obtained by the result of another divorce
  • Any property specifically excluded from the marital estate by agreement of the parties

Community Property vs. Equitable Distribution:

The manner in which states regard the distribution of marital property falls into two categories: community property states and equitable distribution states.

Community Property States

In community property states, all property acquired by the parties during the course of the marriage (with the exception of gifts or inheritances) is considered community property that presumed to be equally owned by both parties, regardless of their contribution to the overall marital estate. All other property is determined to be separate property. In a divorce, the community property is divided evenly between the two parties, while each party keeps their own separate property.

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. While no two community property states divide property in entirely the same way, some states, like California, mandate that all community property be divided 50/50 between the parties, with no regard for evidence that once spouse has more of a right to certain property than the other. Generally, in distributing community property, financial need, ability to earn income, and fault are not factors acknowledged by the court. Rather, the community property theory is premised on the notion that both parties contribute equally to the marriage and to the marital estate, regardless of their respective income levels or affluence prior to the marriage.

Equitable Distribution States

States that do not subscribe to the "community property" theory of property distribution are called "equitable distribution" states. In determining what constitutes an equitable distribution of the marital property, an equitable distribution court will begin by assuming the marital property should be divided equally, but will then consider evidence that the property distribution should be disproportionate. Some reasons the property should not be divided 50-50 are as follows:

  • One party contributed significantly more to the marital estate than the other
  • One party is entitled to a reimbursement for funds expended during the course of the marriage
  • One party has a substantially larger non-marital estate than the other
  • One party has a substantially larger earning capacity than the other

It should be noted that, particularly in cases where one party postponed high education or a career in order to care for the parties' children or to support their spouse in a different way, disproportionate distributions of property (such as a 60-40 distribution of the estate) is often agreed to in lieu of spousal support. For example, rather than paying spousal support to a former homemaker, a father may agree to give up his interest in the marital residence rather than pay his former wife alimony.

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