Campbell Family Law
Equitable distribution is the division of marital property (assets) and debts acquired by the parties during the marriage.
Assets that are classified as separate property are not subject to distribution. It is important to note that while this area of law is referred to as “equitable distribution” not “equal distribution,” there is a presumption that an equal distribution of the marital estate is in fact fair, or equitable. A court may award an unequal division of the marital estate if the court determines that an equal division would not be equitable in a particular case.
Determining an Unequal Distribution
When determining whether to make an unequal distribution, the court will consider the following factors:
- The income, property, and liabilities of each party at the time the division of property is to become effective.
- Any obligation for support arising out of a prior marriage.
- The duration of the marriage and the age and physical and mental health of both parties.
- The need of a parent with custody of a child or children of the marriage to occupy or own the marital residence and to use or own its household effects.
- The expectation of pension, retirement, or other deferred compensation rights that are not marital property.
- Any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services, or lack thereof, as a spouse, parent, wage earner or homemaker.
- Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse.
- Any direct contribution to an increase in value of separate property which occurs during the course of the marriage.
- The liquid or non-liquid character of all marital property and divisible property.
- The difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest, intact and free from any claim or interference by the other party.
- The tax consequences to each party, including those federal and State tax consequences that would have been incurred if the marital and divisible property had been sold or liquidated on the date of valuation. The trial court may, however, in its discretion, consider whether or when such tax consequences are reasonably likely to occur in determining the equitable value deemed appropriate for this factor.
11.a Acts of either party to maintain, preserve, develop, or expand; or to waste, neglect, devalue or convert the marital property or divisible property, or both, during the period after separation of the parties and before the time of distribution
11.b The financial effect of the death of either party prior to the entry of an order for equitable distribution.
- Any other factor which the court finds to be just and proper.
As a general rule, equitable distribution takes into account the financial factors listed above. The division of marital assets and debts is not intended to be punitive and the fact that your spouse may have cheated on you will not necessarily result in your receiving a greater share of the marital estate. There are some types of financial misconduct (i.e., intentionally devaluing the marital estate) that may fall into one of the factors that the court can consider in determining whether an equal distribution is in fact equitable.
A bonus received after the date of separation may be divisible property. This means that even though it was received after the date of separation, it may be divided between the parties. For example, if you separated in February and a bonus was paid in March, but that bonus was paid for the prior year’s performance, then the bonus would be considered divisible property and subject to division in equitable distribution.
Section 1041 of the Internal Revenue Code provides that transfers between spouses and former spouses that are incident to divorce are tax-free transfers.