Equitable Distribution

During the life of a marriage, couples typically acquire assets and debts which may be divided upon separation and divorce. A party who seeks a division of marital property or property acquired during the marriage must file a claim for equitable distribution. Generally, a court will distribute the property to each party equally based on the net value of marital property.

Marital Property

“Marital property” is real and personal property acquired by either spouse or both spouses during the marriage and before the date of separation, except separate property or divisible property. Once certain property is classified as “marital property,” it is then subject to an equal division by the court. For example, if you and your spouse bought a home during the marriage now valued at $800,000, each party would be entitled to a value of $400,000. Parties should be aware that there is a presumption that all property acquired after the date of marriage and before the date of separation is marital property subject to division. This presumption may be rebutted by the greater weight of evidence, but the party opposing the classification of the asset as marital property has the burden to show that such property is in fact separate property.

Separate Property

“Separate property” is real and personal property acquired by a spouse before marriage or by devise, descent, or gift during the marriage. Separate property is not divided upon equitable distribution. For example, if one party bought a $150,000 boat prior to the date of marriage, the boat would be considered separate property and not subject to division by the court. If one spouse receives a gift or inheritance of property during the marriage, that property is also considered separate property and not subject to division. The increase in value of separate property and the income derived from separate property remains separate property during the marriage and thereafter unless an exception applies.

Divisible Property

Generally, divisible property is real and personal property that comes into existence after the date of separation of the parties. Courts value marital property as of the date of separation. Divisible property does not fall under this rubric because it comes into existence after the date of separation. For example, you may have passive income from marital property received after the date of separation, such as interest and dividends. The interest and dividends are divisible property which the court shall equitably divide and distribute.

Mixed Property

Mixed property is property that has a dual character in that it is part separate property and part marital property. Mixed property is property that was separate property, but during the marriage, the spouses changed the property in such a manner as to create a marital interest in the property. For example, if one party owns a home prior to the marriage, but the couple adds several rooms to the home, there is a marital interest in the improvements to the home.

The Property Settlement Process

There are four steps in any equitable distribution matter:

  1. identification;
  2. classification;
  3. valuation; and
  4. distribution

First, you must identify all of the assets and debts acquired during the marriage. Such assets can include the marital home, other real estate, boats, cars, stock or investment accounts, bank accounts, retirement accounts, and household furniture. Martial debts are identified as well, including credit card debts or other loans.

Once the property has been identified, it is classified as:

  1. marital property
  2. separate property
  3. divisible property, or
  4. mixed property

After the property has been classified, the court values the property. All assets and debts are given a fair market value as of the date of separation. Thus, the court determines the net value of the marital property on the date of separation and that net value is subject to division.

All marital property and divisible property is subject to division upon separation and divorce, while separate property remains separate and is not subject to division. If mixed property is involved, parties need to determine the marital interest in such property.

The court distributes the property equally after it has been valued, unless an equal division is not equitable or fair. In determining whether an equal division is fair, the court considers sixteen factors, including the duration of the marriage, contributions of a party, tax consequences, contributions to an increase in the value of separate property, and income, property, and liabilities of each party.