How Property Is Divided Under The Law Of Equitable Distribution

The following is a simplified primer on the law of equitable distribution. America is one of the majority of countries that implement an “equitable distribution” scheme for the distribution of property in the event of a divorce. There are three steps to this process:

Classification of property (that is, whether it is “marriage” and subject to equitable distribution or separate and assigned to the named spouse); Evaluation; and Distribution.

1. Classification

There is an assumption that all property owned by a spouse is marital property to be divided equally between them in the event of a divorce. A husband/wife who claims that the property is hers separately has the burden of proof to show that the source of the property falls into one of the following “separate” categories:

(a) property that he owned before the marriage of the parties which was not placed in the joint name of the spouse.

(b) property inherited by the spouse, either before or during the marriage which remains the property of the spouse who inherits it;

(c) the property was given to one spouse by anyone other than the other spouse.

(d) property received by the spouse as compensation for personal injury in a lawsuit.

In all of these cases, property claimed to be “separate” may not be combined with marital or income property or placed in the joint name of the spouse.

There are two exceptions to the strict rule that separate property may not be combined with marital property:

(a) If funds (for example, the Husband receives an inheritance check for $100,000) are placed in the spouse’s joint account solely for convenience until the check is paid and then withdrawn and placed in the spouse’s account that meets the other requirements of a separate account. assets, the funds are still considered as separate assets of the husband.

(b) If there is no clear paper trail, but no other explanation of the source of the funds being claimed separately, they can still qualify as separate assets. For example, just before the wedding, the wife has a bank account that contains $100,000. During the marriage, he deposited his earnings into the account, and at the time of the parties’ divorce, the account contained $150,000, but only $50,000 can be traced to the wife’s income, $100,000 could qualify as a separate asset from the wife.

2. Assessment

Once the marital and separate properties have been classified, it becomes necessary to appraise each asset. Bank accounts and other monetary assets are valued at market value. When dividing up those assets, it may be necessary to take into account tax consequences, such as capital gains taxes.

If the value of the asset is not easy to determine, it may need to be evaluated by an expert. Real estate appraisers and forensic accountants are the two experts most often called upon to assist with the process.

3. Distribution

America adopts an “equitable distribution” of assets which does not necessarily mean an equal distribution of assets, although there is a clear tendency to divide assets equally, especially in long-term marriages. Factors to consider include the length of the marriage, the amount of property each separate spouse has, and whether either spouse has any marital property that was wasted.