What is Equitable Distribution?
Equitable distribution is a legal principle that divides a couple’s marital assets once the divorce is final. This method of property distribution does not necessarily mean that the division will be equal but will be fair after the court considers various factors pertaining to the unique situation of your case.
How is Property Classified With Equitable Distribution?
First, the different categories of property must be understood and value known to determine an equitable distribution. Equitable distribution specifically divides marital property between both parties, not separate property. Each party will keep the property they brought into the marriage so long as it’s kept separate during the marriage. Know that any increase in separate property value during the marriage is considered marital.
Marital Property
Marital property includes all property that either party acquired after the marriage, regardless of whether one or both parties’ names are listed on a title or deed. All property, debts, and assets are included, with the exception of the following:
- Property that is acquired as a gift, bequest, devise, or descent
- Property that is acquired in exchange for separate property that was acquired prior to the union or in exchange for property that is acquired by gift, bequest, devise, or descent
- Property that either party acquires after a legal order of separation
- Property that is excluded by the valid agreement of both parties, such as by use of a prenuptial agreement
Examples of marital property that may be subject to equitable division include:
- Real estate equity
- Bank accounts
- Investments, such as stocks, mutual funds, etc
- Retirement accounts, such as IRA, 401k, FERS, PERA, military retirement, etc
- Vehicles, RVs, boats, etc
- Personal property or household goods
- Business interests
- Pets
- Stock options, frequent flyer miles, etc
- Increase in equity from separate property during the marriage
Separate Property
Generally, property that was acquired by either party prior to the marriage is considered separate property and is not subjected to equitable division. Separate property also includes the following:
- Gifts or inheritances that either party receives before or during the marriage
- Personal injury awards or settlements received by either party during the marriage
- Property that either party acquires after an order of legal separation
- Property that is explicitly stated as separate through a valid prenuptial or postnuptial agreement
Examples of separate property may include:
- Property or real estate owned by one party prior to marriage
- Contributions to retirement accounts by one party prior to marriage
- Gifts or inheritances received by one party before or during the marriage
Any property that is claimed to be separate property must be proven as such by the claiming party.
Commingled Property
The differentiation between marital and separate property becomes difficult when property becomes commingled. Separate property becomes commingled when either party uses marital funds to contribute, improve, maintain, or pay for an asset. When both parties invest money in the property, it is no longer considered separate.
Examples of commingled property may include:
- An inheritance, gift, or settlement that is deposited into a shared account
- Property purchased with income or resources from both parties
- Investments and contributions from before and after the marriage
Commingled assets can be avoided most simply by using a prenuptial agreement. If no agreement was signed, the following options may help:
- Avoid the use of marital funds to pay off remaining balances for separate property, debts, or mortgages.
- Avoid the use of separate funds to pay off remaining marital property or debt.
- Discuss all major purchases with a partner prior to buying.
- Keep updated and accurate records to prove purchases and payments originate from separate accounts.
What Factors Are Considered When Property is Distributed?
After the property is divided fairly and equitably, the parties may still need to negotiate, or the Court may need to determine financial support from one spouse to another. Known as maintenance and spousal support, here are the factors considered.:
- The length of the marriage
- Each party’s financial and non-financial contribution to the marriage
- The contribution of each party to the raising of children or as a homemaker
- The desirability of awarding the marital home to the party with primary custody of shared children
- Each party’s financial needs following the divorce
- The value of each party’s separate property
- Any existing agreements between both parties regarding the division of property
- Any existing child custody arrangements
How Are High-Value Assets Divided?
When a shared business or other high-value asset is subjected to equitable distribution, typically, a CPA or forensic account is used to assist with valuations. If both parties do not agree to the values given to the assets, then a court will decide on the asset division on their behalf.
The easiest way to settle property division is through the filing of a valid prenuptial or postnuptial agreement.
Do I Need an Attorney?
During the emotional battle of divorce, you need reliable legal help you can count on. Call Divorce in Colorado today at 720-943-7707 or submit a contact form for a complimentary consultation.
