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Tuesday, November 18, 2008

Equitable Distribution

There is a growing trend across the country to view marriage as an economic partnership. As a result, most states have adopted the philosophy of "Equitable Distribution" in determining the division of marital property and assets in the case of a divorce. In most states, this has become the law, along with "Community Property."

Under Equitable Distribution, title to the property does not determine ownership. If an asset is acquired during the marriage, even if one spouse holds the sole ownership of the title, it is treated as "marital property." In the event of a divorce, both spouses will be able to share the asset.

There are two exceptions:

  • If the asset was purchased completely with the pre-marriage funds of one spouse, and the funds remained separate and identifiable at all times prior to the purchase of the asset.
  • If the asset was acquired as a result of a gift to one of the spouses from a third party (such as a parent), and the title always remained in the name of the spouse who received the gift.

However, assets that were acquired with pre-marriage funds can still be treated as marital property in certain situations. For example, if a couple purchases a house for $500,000, and one spouse uses pre-marriage savings to put a $100,000 down payment on the house, then the remaining value of the asset will be split between both spouses. So if by the time of the divorce, the house has appreciated in value to $800,000, then $700,000 will be split between both spouses after the $100,000 down payment is credited to the spouse who provided it.

Your divorce lawyer should be able to predict the division of assets fairly accurately. By analyzing assets in advance and determining the dollar distribution mandated by the law, your lawyer can guide you to a more amicable settlement agreement with your estranged spouse. This will save you a great deal of time, money, and headaches from protracted litigation. Ultimately, you will end up with the same amount of money regardless of the course of action you choose.


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