Community property vs. equitable distribution states

Apr 25, 2023 | Divorce

There are two types of legal frameworks for property division in a divorce in the United States: community property and equitable distribution. If you live in a state that uses equitable distribution framework (which is most states–41 to be exact), then your assets may be divided much differently than if you had lived in a community property state (which is only nine states). 

Understanding these concepts and which one applies to you is crucial for anyone going through a divorce, getting married, or considering a prenup. Keep reading to learn about the differences, the misconceptions, a few examples to help you conceptualize, and FAQs. 

 

Community property states

There are nine community property states in the U.S.: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. The general rule in a community property state is that assets acquired during the marriage are divided 50/50 in a divorce. 

The term “community property” means any property that was accumulated during the marriage. The term “separate property” refers to any property accumulated before marriage. 

Pop quiz: If you already owned a boat before the marriage and then purchased a home during the marriage– which one is separate and which one is community? That’s right–the boat is generally considered separate property (bought before the marriage), while the house is generally considered community property (bought during the marriage). This means that the house is subject to the 50/50 split, but the boat is not. 

Fair warning: there are a few exceptions to the 50/50 rule, which will vary across each community property state.

 

Equitable distribution states

On the other hand, in equitable distribution states (which are the majority of the states), assets are divided equitably, not necessarily equally. What do we mean by that? Well, the rule isn’t automatically 50/50; it’s “what is equitable in this particular situation based on a set of factors.” That may end up being a 70/30, 60/40, or even 50/50 split, depending on the case and the state factors. 

Each equitable distribution state lays out its own factors in order to make the decision on “who gets what.” These factors may include the length of the marriage, the contributions of each spouse, the age/health of each spouse, and many more.

Equitable distribution states include 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.

For example, if a couple in New York (i.e., an equitable distribution state) divorces after a long marriage (20+ years) in which one spouse was the primary breadwinner and the other stayed home to raise children, the court may award a larger share of the assets to the stay-at-home spouse to help them get back on their feet and maintain the ability to support themselves until they are able to find a job (if that is a possibility for them). 

Examples to help conceptualize the differences between the two types of states 

Equitable distribution divorce* scenario 1:

Property (purchased before or during the marriage) Wife buys out husband Wife gets Husband gets
House Yes N/A N/A
Car No Her car His car
Bank account No 70% 30%

*Outcomes can be extremely variable depending on your state and your circumstances. 


Equitable distribution divorce* scenario 2:

Property (purchased during the marriage) Wife Husband
House Split 50/50 Split 50/50
Car Split 50/50 Split 50/50
Bank account Split 50/50 Split 50/50

 

*Outcomes can be extremely variable depending on your state and your circumstances. 

 

Equitable distribution divorce* scenario 3:

Property (purchased before or during the marriage) Wife buys out husband Wife gets Husband gets
House Yes N/A N/A
Car No Her car His car
Bank account No 70% 30%

*Outcomes can be extremely variable depending on your state and your circumstances. 

 

Community property divorce 

Property (purchased during the marriage) Wife Husband
House Split 50/50 Split 50/50
Car Split 50/50 Split 50/50
Bank account Split 50/50 Split 50/50

 

Differences between community property and equitable distribution

The key difference between community property and equitable distribution frameworks is how assets are divided. Community property states divide assets equally, while equitable distribution states divide assets based on what is fair and reasonable given the circumstances of the marriage.

The community property system tends to be a little bit more simple and more predictable. Since assets are divided equally, there is less room for judicial discretion, disagreement between the parties, and negotiations between the divorce lawyers. On the other hand, being so cut and dry can leave some people in a less-than-ideal situation.

Equitable distribution allows for a more flexible and nuanced approach to asset division. The court can consider factors such as each spouse’s contribution to the marriage, the length of the marriage, the age/health of the spouses, and more. On the other hand, this system can be much more complex and lead to heavier negotiations, disagreements, and variations between outcomes (less predictability in what will happen to you). 

 

Common misconceptions about community property and equitable distribution

There are several common misconceptions about community property and equitable distribution. 

One common misunderstanding is that community property always means a 50/50 split. While assets are generally divided equally in community property states, there may be exceptions to this rule in certain circumstances. 

Another misconception is that all property purchased before the marriage (in either state) is considered separate property, not subject to division. Wrong! For both types of states! In equitable distribution states, it’s quite common to have property purchased before the marriage pulled into the “marital pot” due to different factors such as the length of the marriage (for a very long marriage, it’s more likely that ALL property will be considered marital property). In community property states, there are carve-out exceptions that may allow for property purchased before the marriage to become community property and, thus, subject to the 50/50 split.

 

How a prenup can help for either state 

Now, how does a prenup play into these two legal frameworks (community property and equitable distribution)? Well, if you create a valid and enforceable prenup, you can actually override your state laws. That’s right; if you live in a 50/50 state, but you want your stuff to be split 60/40, you can make sure that happens with a prenup! On the flip side, if you live in an equitable state, you can make sure your stuff is divided in a way that you see fit without leaving it up to fate and the court system. 

Now, if your prenup is challenged and thrown out, then these default laws kick in again, and either community property or equitable distribution laws will apply to your case. 

 

Frequently Asked Questions (FAQs) about community property and equitable distribution states

Still confused? We get it; these concepts can be dense and hard to wrap your head around (people go to law school for a reason, right?!) We’ve gathered some of your most commonly asked questions below.

 

Q: Is my state community property or equitable distribution? 

A: Community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Equitable distribution states: 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.

 

Q: Is community property always divided 50/50 in a divorce?

A: Most of the time, but not always. There may be certain exceptions in your community property state that alter this rule.

 

Q: Do prenuptial agreements override community property laws?

A: Yes, they can override certain aspects of community property principles as long as it’s a valid and enforceable agreement.

 

Q: How does the length of a marriage affect equitable distribution?

A: The longer the marriage, the more likely that a judge will see all of your property as joint property, even if it was purchased before the marriage, kept completely separate, etc. The court may see a longer marriage as blurring the lines of “this is mine, and that’s yours” because you’ve been a “team” for so long. 

 

Q: What do spousal contributions mean? 

A: In the context of an equitable distribution divorce, a court may take into consideration the contributions of each spouse to the marriage. This may be raising the children, taking care of the home, supporting the other spouse while they obtain a degree, financial support, etc.

 

Q: Can separate property become community property?

A: Yes, through things like commingling and transmutation. In a few words, commingling is the mixing of funds to the point of no return (i.e., mixing your separate property funds with community property funds to the point that they can’t be separated out). Transmutation is the act of changing the character of property through things like a contract, title change, etc. 

 

Q: Can I opt out of community property laws?

A: With a prenup, you can override the general 50/50 split rule in community property states.

 

Final Thoughts

Community property and equitable distribution are the two ways that states split up property in a divorce. They are very separate and distinct legal frameworks that should be understood before getting married, during a divorce, and when considering a prenup, as it will have a great impact on your life! Luckily, prenups can override these laws and make sure your assets are divided in a way that you and your partner feel comfortable with!

 

All content provided on this blog is for informational purposes only. HelloPrenup, Inc. (“HelloPrenup”) makes no representations as to the accuracy or completeness of any information on this site. HelloPrenup will not be liable for any errors or omissions in this information nor for the availability of this information. These terms and conditions of use are subject to change at any time and without notice. HelloPrenup provides a platform for contract related self-help. The information provided by HelloPrenup along with the content on our website related to legal matters (“Information”) is provided for your private use and does not constitute legal advice. We do not review any information you provide us for legal accuracy or sufficiency, draw legal conclusions, provide opinions about your selection of forms, or apply the law to the facts of your situation. If you need legal advice for a specific problem, you should consult with a licensed attorney. Neither HelloPrenup nor any information provided by Hello Prenup is a substitute for legal advice from a qualified attorney licensed to practice in an appropriate jurisdiction.

0 Comments

Recent Posts

Top 12 Reasons Not To Sign A Prenup

We’ve told you over and over again the reasons why you SHOULD consider signing a prenup, but what about the reasons why NOT to sign a prenup? Well, it was sort of difficult to come up with these reasons since we’re all #TeamPrenup, but we were able to scrape a few...

Are Prenups Effective?

We sometimes hear that people don’t believe prenups are effective because they can get thrown out or “always favor the richer person.” But the reality of the matter is that prenups are effective (if done right and with good legal assistance). Making sure that the...

Pets, Prenups, Divorce, And Texas State Laws

Pets are a man's and woman's best friend! Who doesn't love a four-legged furry friend? We know Americans sure do. The pandemic has proven this true with the infamous pet boom that resulted from many lonely quarantine hours. In fact, by October 2020, around one-third...

Ready to join the thousands of couples completing their prenup?