Community property is a term most often used in family law to characterize the property owned by married couples in states with community property laws. It is referred to most often in cases of divorce or legal separation in some states. Community property is the property a married couple acquires during their marriage and owns together, with certain exceptions. This is the case in community property states.
Property that either spouse acquires before they get married and property specified in a prenuptial agreement as separate is not community property, even in a community property state. Property that the couple acquires while living in a state that is not a community property state is not community property.
Also, separate property can be converted to community property by certain actions. Property that a spouse acquires after separation or divorce or that is given to either spouse as a gift during the marriage is also considered to be separate property.
For example, suppose one spouse is given a house as a gift before getting married. After marriage, the spouse puts the other spouse’s name on the title of the house. TThe couple might then take out a home equity line of credit (HELOC) on the house and, together, from combined earnings, start to pay off the HELOC.
A court might determine that the house has become community property. Those deliberate choices made by the spouse who was given the house as a gift shows that they intended it to belong to the community, i.e., both spouses and not to the spouse who first received it alone.
In a divorce or legal separation proceeding, a court has to determine who owns what property and how a couple’s property should be divided between them. The court divides property based on the type of property distribution methods required by the law in the state in which a couple gets divorced. Only a handful of states abide by community property standards.
If the state is a community property state, then the couple’s property usually will be split evenly between the parties. Hence the name “community property” or “shared property.”
Community property is the law in the following nine states:
The rest use a different framework for property division called “equitable distribution.”
What Is Equitable Distribution?
Equitable distribution is the more commonly used method that courts employ to divide property during a divorce or legal separation proceeding. Unlike community property rules, equitable distribution requires a court to look at a number of factors and variables when deciding which party should get what item of property. Equitable distribution is used in states that are not community property states.
The most important thing to know about the process of equitable distribution is that it does not mean dividing assets equally, as does community property law. Instead, equitable distribution refers to a division of property that is supposed to be both fair and comprehensive for the parties. In other words, the main focus of the decision for property division is based on fairness to the parties under all the circumstances of their particular situation.
Some of the factors that a court may consider in order to reach a fair and equitable result include the following:
- How long the couple’s marriage lasted;
- Whether a prenuptial agreement exists, that specifies how property is to be distributed in the event of divorce;
- The employment, skills, and financial background of each of the spouses;
- Whether there are any issues related to child custody and child support;
- The age and health of each party, including any existing medical conditions;
- Whether one of the parties requires spousal support or alimony;
- What each person’s own separate estate may offer compared to the marital estate;
- Whether there are any businesses that are jointly owned by the spouses or independently owned by one spouse; and
- Various other factors, including the couple’s debts, must also be distributed between the spouses, just like assets.
Again, the point of analyzing these factors is to achieve a fair and comprehensive distribution of marital assets between the parties.
What Is the Main Difference between Community Property and Equitable Distribution?
Each method has its pros and cons. Some advocates prefer equitable distribution because it is arguably more flexible than the community property system. This is due to the variety of factors that a judge must consider in making a decision and how those results tend to be viewed as a more “natural” or “fair” way to divide property.
The downside, however, is that equitable distribution often involves a deeper analysis. This means that the procedure for determining how to distribute the assets and debts in a case may take longer and can present greater challenges.
Community property rules, on the other hand, are arguably more straightforward. They can require a court to apply easily understandable principles when dividing property. This may end with results that some people consider less fair. Others may feel that a simple rule to the effect that every asset a married couple acquires while married belongs to both of them equally is entirely fair. Of course, in the final analysis, which system is better is a matter of opinion.
The community property system may make the proceedings less complicated and more straightforward. The parties may even be able to predict the outcome beforehand. As for any issues pertaining to marital misconduct, such as having an affair, neither community property nor the equitable distribution of property factor in these kinds of “fault” issues when determining property rights.
And in all states, a couple can always fashion a prenuptial agreement that provides for the division of assets that they think is reasonable for them.
When Is Each Type of Property Distribution Method Used?
As previously mentioned, whether a court applies community property rules or equitable distribution guidelines ultimately depends on the law of the state in which the couple gets divorced. Thus, it does not matter whether the parties prefer. The law dictates the use of one system or the other.
Additionally, just because the process is based in a state that uses community property or equitable distribution does not necessarily mean that every state that uses the same process follows the same rules. For instance, the results in a case in which the community property laws in Washington state are applied may lead to a different result if the community property laws in Texas or California are applied.
In addition, a state may have certain rules in place that a court must use to divide property, which has nothing to do with either of these methods, but simply have to do with a state’s property laws. Finally, if a couple has a valid prenuptial agreement, a court is most likely to apply the provisions specified in that agreement.
On a final note, hiring an attorney for these types of matters may prove to be useful because many decisions in a divorce proceeding are made on a case-by-case basis, and each case involves unique facts and circumstances.
Do I Need the Help of a Lawyer for My Property Distribution Issue?
Community property and equitable distribution are two very different sets of laws for determining the distribution of property owned by divorcing spouses. They are often part of the reason why divorce cases can become complicated.
It is better to consult a property division lawyer to avoid any confusion over which set of laws apply in your case and to ensure that the case is handled properly rather than do it alone and risk making mistakes that may prove costly.
Your lawyer can protect your rights and your interests in the assets from your marriage. Thus, when it comes to the portion of a divorce proceeding that involves managing property distribution, it is often a good idea to have the help of an experienced divorce lawyer, especially if children are involved.
Consulting a local lawyer gives you access to solid information regarding your particular state’s laws on property distribution. Your lawyer can help you negotiate your divorce settlement or represent you in court if that should become necessary.
