If you happen to live in an equitable distribution state (which turns out to be most states), it’s important to know that when it comes to splitting your belongings, the court aims for fairness, not necessarily an exact 50/50 split. They may consider a list of state factors and apply them to your unique situation before making any decisions. But guess what? You have options! You can create a prenuptial agreement, which lets you make your own rules for dividing your stuff. That means you can actually have a say and customize how your assets are divided, overriding what the state’s laws dictate. Let’s get into everything you need to know about equitable distribution states and how a prenup can help.
Which states are equitable distribution?
Most states follow equitable distribution laws. Here are the 41 states utilizing the equitable distribution framework for property division in a divorce:
- Alabama,
- Alaska,
- Arkansas,
- Colorado,
- Connecticut,
- Delaware,
- District of Columbia,
- Florida,
- Georgia,
- Hawaii,
- Illinois,
- Indiana,
- Iowa,
- Kansas,
- Kentucky,
- Maine,
- Maryland,
- Massachusetts,
- Michigan,
- Minnesota,
- Mississippi,
- Missouri,
- Montana,
- Nebraska,
- New Hampshire,
- New Jersey,
- New York,
- North Carolina,
- North Dakota,
- Ohio,
- Oklahoma,
- Oregon,
- Pennsylvania,
- Rhode Island,
- South Carolina,
- South Dakota,
- Tennessee,
- Utah,
- Vermont,
- Virginia,
- West Virginia, and
- Wyoming.
On the other hand, the community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
What does equitable distribution mean?
So, you’re going through a divorce, and one of the big concerns on your mind is how your shared assets and debts will be divided. That’s where equitable distribution comes into play. It’s the legal principle that aims to divide everything “equitably” between you and your soon-to-be ex-spouse. Now, you might be thinking, what does “equitable” really mean? Well, it’s all about fairness rather than a strict 50/50 split. It also depends on state law. Courts may take into account the unique circumstances of your marriage and the contributions both of you have made financially and non-financially.
Depending on your state, premarital OR marital assets may be divided up. Usually, it’s just marital property, but there are a handful of states that do divide up premarital assets as well. This includes things like your house, cars, bank accounts, investments, and even those sentimental belongings you’ve accumulated over the years.
How does equitable distribution work in practice?
Equitable distribution isn’t a one-size-fits-all approach. What may be equitable in one situation may not be equitable in another. The equitable distribution framework allows the divorce court flexibility to tailor the division to your unique situation. This means it may not be a perfect 50/50 split; it could be 60/40, 70/30, or any other combination that the court sees fit. The court will take into account what’s fair and reasonable for both of you.
Some states have a list of factors that a court looks at in order to make the decision. Here are some common factors:
- Length of marriage
- Contribution of each spouse
- Age and health of each spouse
- Income and future earning potential of each spouse
The actual process of dividing up assets also involves carefully valuing all your assets and debts. The court may consider expert opinions and financial assessments to determine their value. They want to make sure they have a clear picture of what needs to be divided.
An example of how equitable distribution might work
Every state is different. While most equitable distribution states exclude assets owned prior to marriage from division, courts may still consider them when determining an equitable share of property. In addition, some states have a list of factors that are used to equitably divide up property, such as the length of marriage or contributions. With that said, here’s an example of how equitable distribution may work in real life:
- John and Mary are getting a divorce.
- Mary is a stay-at-home mom with no assets prior to marriage or during.
- John had a $500,000 investment account prior to marriage and also accumulated an additional $500,000 in assets during the marriage.
In many states, John’s premarital $500,000 would remain his separate property, and the court would consider only the $500,000 earned during the marriage to be marital property. However, in some situations—such as if John’s premarital funds were mixed into joint accounts, or if Mary’s financial dependence was significant—the court might use its discretion to award Mary more than half of the marital assets to account for the wealth John had prior to the marriage. For example, assuming the court only considers the $500k as the marital pot, the court might award Mary $300,000 and John $200,000 from the marital portion, but leave John with his original premarital $500k.
How does a prenup come into play in an equitable distribution state?
So, let’s talk about prenups and how they fit into the picture when it comes to equitable distribution states. Don’t worry, it’s not as complicated as it sounds. Here’s an easy-to-follow breakdown of what to know about prenups and living in an equitable distribution state.
Setting your own rules
A prenup is a personal contract that couples create before tying the knot. It gives you the power to set your own rules for how your assets and debts will be divided if you ever decide to part ways. It quite literally overrides the equitable distribution property division rules of your state as long as it is valid and enforceable.
Clarity and peace of mind
With a prenup, you can bring clarity and peace of mind to your financial future. It helps avoid potential conflicts and uncertainties by clearly stating each person’s rights and responsibilities when it comes to dividing property, assets, and debts. No more second-guessing or surprises down the road.
Safeguarding what’s yours
One awesome thing about prenups is that they can protect your separate property. This includes assets you had before the marriage, assets you purchase during the marriage, or things you receive as gifts or inheritance. With a prenup in place, you can ensure that these treasures stay with you if the unfortunate happens and you decide to part ways.
Custom terms
Prenuptial agreements allow you to personalize how your marital property gets divvied up. You can have a say in how certain assets or debts are allocated. Maybe you have a sentimental attachment to that vintage car or want to ensure a fair distribution of your business interests. A prenup lets you customize it according to your unique situation and priorities, and not have to rely on the default (equitable distribution) laws of your state.
Terminology to understand in equitable distribution states
Below is a breakdown of some of the key terms you should understand if you are living in an equitable distribution state:
- Marital Property: When something is categorized as marital property, it means that it is subject to being split up in the divorce. When you write in your prenup that something should be considered “marital property” you are essentially saying “I give the court the ability to divide my property according to the state’s equitable distribution rules.”
- Non-Marital/Separate Property: When something is categorized as non-marital property (sometimes also called “Separate Property”), it means that it is not subject to division by a court. It means it is the property of the owner, and their spouse has no access to it in a divorce.
- Assets: Assets are things you own that have value. Think of your home, real estate portfolio, car, savings accounts, retirement funds, and even that vintage comic book collection you’ve been holding on to. Equitable distribution involves deciding who gets what when it comes to these valuable items.
- Community Property: While most states follow equitable distribution, a few stick to the concept of community property. Community property means that everything acquired during the marriage is considered equally owned by both of you, and it should be divided equally if you get a divorce. That means 50/50 with a few exceptions. Remember, this is different from equitable distribution because it’s usually split 50/50 without many other considerations. On the other hand, equitable distribution considers the situation as a whole to split up the property.
- Distribution Factors: When deciding how to divide everything, the court takes various factors into consideration. Each state lays out its own set of factors to look at when making this determination. The factors that are used in Illinois may be completely different than another state. Typically, states require courts to look at things like how long you’ve been married, the money each of you contributed, your future needs, your ability to earn money, your health, and other important details.
The bottom line on equitable distribution states
If you live in an equitable distribution state, the most important thing to understand is that the court is going to split your stuff based on what is equitable, not necessarily 50/50. A court will look at the totality of your circumstances and make the call on how to split your property up. If you don’t like this, we have good news: you can get a prenup and make your own rules for how to divvy up your assets. Yes, you can actually override the equitable distribution laws of your state with a prenuptial agreement! And the best news? Prenups are now easier to get than ever, and dare we say, fun? So go on and get your prenup journey started—your future self will thank you!
Nicole Sheehey is the Head of Legal Content at HelloPrenup, and an Illinois licensed attorney. She has a wealth of knowledge and experience when it comes to prenuptial agreements. Nicole has Juris Doctor from John Marshall Law School. She has a deep understanding of the legal and financial implications of prenuptial agreements, and enjoys writing and collaborating with other attorneys on the nuances of the law. Nicole is passionate about helping couples locate the information they need when it comes to prenuptial agreements. You can reach Nicole here: Nicole@Helloprenup.com
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