In certain states, a divorcing couple’s property will be divided under a community property approach, while in other states equitable division rules apply. Whether you’re getting ready to tie the knot or you're breaking up, it’s important to know how your savings and assets will be affected by a marriage or divorce.
Community Property States
A handful of states follow a community property approach. Community property states include:
- Alaska (opt-in by agreement)
- New Mexico
For couples getting divorced under a community property scheme, each spouse has an equal right to “community" or joint property acquired during the marriage. Community property is divided down the middle—a court won’t consider whether it would be fair to give one spouse a right to more than half of the marital assets.
The major analysis in a community property state is the nature or character of the property—whether it's community (joint) or separate (owned exclusively by one spouse). Community property can include anything earned, purchased, or acquired during the marriage, through either spouse's efforts. This includes income, a home, furnishings, cars, stocks, retirement accounts, and real estate. Separate property is an exception to the community property rule. Some examples of separate property are:
- property owned by one spouse before the marriage
- proceeds from a personal injury settlement, and
- an inheritance or a gift to one spouse—even if the spouse received it during the marriage.
If you live in a community property state and are contemplating divorce, it’s important to understand how the laws of your state will impact your case. In many cases, savings or property you’ve worked hard to earn can be awarded to your spouse during a divorce. Talk to a local attorney if you need help keeping property separate.
Equitable Distribution States
Most states follow equitable distribution rules. In these states, equitable doesn’t necessarily mean equal. A judge will divide property fairly or equitably, rather than equally or 50/50 between the spouses. So, for example, a low-earning spouse, who has primary custody of young children may be awarded more property as part of a divorce. Judges consider various factors to decide how property should be divided, including:
- each spouse’s financial condition at the time the property will be divided
- each spouse’s contributions to the other spouse’s career
- each spouse’s earning potential
- the length of the couple’s marriage, and
- which spouse has physical custody of the couple’s children.
A judge will also consider each spouse's financial needs, assets, and earning potential. In an equitable division state, the goal of a divorce settlement is to put the spouses on even financial footing, so they can begin their new lives.
Like community property states, in equitable division states, separate property isn’t part of the marital estate and isn’t subject to division. A spouse who comes into the marriage with a vehicle or real estate can usually keep that vehicle or property after a divorce, as long as it’s been kept separate. If you've commingled property by using marital funds to maintain or improve your separate property, a judge can award a portion of it to your spouse. In certain cases, you may want to consider a prenuptial agreement to protect your separate property and earnings in the event of divorce.
Questions for Your Attorney
- What if I live in an equitable distribution state, and my ex lives in a community property state? How will that affect our divorce?
- Should I opt-in to Alaska’s community property scheme? Why or why not?
- Does it matter that my property is located in a community property state, but I now live in an equitable distribution state?