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What Is the Difference Between Community Property and Equitable Distribution

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Most people in the United States understand that the property a married couple owns will be divided between them upon divorce. The rationale for dividing marital property when a marriage ends is somewhat intuitive. This concept is similar to how business partners generally have equal ownership interests in the assets of their business. In the unfortunate event that business partners “break up,” it probably wouldn’t surprise anyone that the partners usually divide the company’s assets and liabilities between them.

Issues of divorce are resolved under the specific laws of each state, including property division. Most states use principles of “equitable distribution” to determine the property division of marital assets. However, some states—including California—use the community property system of asset distribution in divorce cases.

Community Property vs Equitable Distribution

Both equitable distribution and community property states ultimately end up in the same place—with each spouse receiving a share of all property they accumulated during their marriage.

Under community property rules, all property that a married couple acquires during their marriage is considered to be community property that is subject to division upon divorce. In equitable distribution states, all property the couple acquires during marriage constitutes “marital property” that must be divided when the couple divorces.

Furthermore, most community property states consider any assets a spouse acquires solely in their name, before marriage, after divorce, or during the marriage through gift, bequest, or devise, to be that spouse’s separated property which is not divided at divorce. Similarly, most equitable distribution states also consider a spouse’s separate property to be “nonmarital property” that isn’t divisible upon divorce.

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How Assets Are Divided Upon Divorce

The primary distinction between the community property approach to dividing marital assets and the equitable distribution method concerns how marital or community property is exactly divided between the divorcing spouses.

In California, each spouse is entitled to an equal, fifty-fifty split of community property assets. In most equitable division states, it is the court’s responsibility to figure out how to split the parties’ marital assets. Under the principles of equitable distribution, marital assets are subject to “equitable distribution” for divorce purposes.

Although there is a strong presumption than an equal split of marital assets is “equitable,” most courts in equitable distribution jurisdictions have held that “equitable” does not necessarily mean “equal.” Instead, “equitable” simply means “just” or “fair.” The court must consider certain factors when conducting the division of marital property in a divorce case. Additionally, the parties may have the burden of convincing the court why the court should deviate from a fifty-fifty split of marital assets.

Furthermore, some community property states like California have something called “quasi-community property.” For example, under California law, any property, wherever located, that the couple acquired during their marriage while residing outside California, will be treated as community property if it would be characterized as community property had the couple been residing in California.

Which States Use Equitable Distribution?

There are 41 states that use the equitable distribution method. The remaining 9 states that utilize community property are California, Idaho, Arizona, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. There are exceptions to this however, spouses in Alaska, South Dakota, and Tennessee can opt in to community property. Alaskans can request to use a community property system, whereas the other two states can have a modified community property approach. This can be done by transferring assets into a valid community property trust.

Seek Comprehensive Legal Representation from Neshanian Law Firm

Property division issues in divorce cases can be challenging to understand. Thankfully, the helpful attorneys at The Neshanian Law Firm, Inc. are prepared to guide you through difficult legal concepts that arise during your divorce litigation. We are dedicated to protecting the best interests of you and your family under California family law.

Call us at (949) 577-7935 or contact our office online to arrange for an initial consultation with a member of our legal team about your case today.