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Equitable Distribution vs. Community Property

I live and practice law in California. When it comes to divorces, California is one of nine US states that follow the Community Property system when it comes to dividing property. In theory, community property is a simple idea — namely, the general rules are that (1) whatever the individual spouses acquire on their own prior to the marriage is their own property and is not split up during a divorce, and (2) whatever the individual spouses acquire during the marriage is generally “community property” and, thus, needs to be divided 50/50 in the event of a divorce.

To be clear, though, (1) and (2) are just the general rules under the California community property system. There are exceptions under which, for example, an item acquired during the marriage is still the separate property of the spouse acquiring it due to the manner in which the item was acquired.

In practice, though, applying the community property system can be quite involved. Over on my Youtube channel, I put out a video a few months back going over some common problems that occur when you try to apply the idea of community property in the real world. Here is the video. If you haven’t seen my Youtube channel, I encourage you to take a look at it as I go over community property as well as various other ideas related to California law also.

What I am going to do in this post, though, is try to compare Community Property to the other system — Equitable Distribution — that is in place in the other 41 US states. By the name, you can probably guess that “equitable distribution” basically refers to a fair distribution under those particular circumstances as opposed to the formula-based (i.e. each spouse gets half of the community property regardless of the situation) that a state like California would use under the Community Property system. New York is an Equitable Distribution state and because I happened to be licensed as an attorney in New York also, I’m going to use New York to illustrate the contrast.

Before I do that, I want to repeat what I usually say when it comes to New York law: I am licensed as an attorney in New York, but I don’t currently — at least, as of the date of this post — maintain a physical office in New York state. Because of this, I am not able to actually take clients in New York state because of Section 470 of New York’s Judiciary Law which requires that a lawyer must have a physical office in New York state in addition to his or her law license in order to accept clients and otherwise represent clients in New York state. If you’re interested, you can read the text of section 470 here.

That said, the way Equitable Distribution works in the state of New York is that what is a “fair” distribution under the particular circumstances of a given case is determined by a list of criteria that is specified in New York statute. The judge in that case will examine the list of criteria and determine if, for instance, it weighs in favor of or against Spouse #1, weighs in favor of or against Spouse #2, if it’s neutral and doesn’t favor or harm either spouse, or if it is not applicable to the facts of the situation. After weighing and considering these criteria, then the judge can make a determination of what is fair or equitable under the circumstances of that case. As you can hopefully see, this means the result here will vary more so than if a judge basically has to follow a more rigid formula, such as all community property items must be divided into equal 50% portions for each spouse.

I have not checked the laws of the other 40 Equitable Distribution states in the United States. If I lived in one of those 40 states, though, and wanted to find out how Equitable Distribution worked in my state, my first thought would be to find out if there was a statute of some kind similar to New York’s statute that lists out various criteria that a judge has to consider when determining what kind of distribution is fair and equitable.

If all of that makes sense, let’s continue and look at the 14 criteria New York law says a judge must consider when determining what is a fair and equitable distribution of property in a given situation. Again, depending on the situation, it’s possible that some of the criteria may not apply. If you want to look this statute up, it is in section 236(B)(5)(d)(1) to (14) of New York’s Domestic Relations Law. Here is a link to Section 236, but be forewarned that 236 is an extremely long statute so you may need to scroll around a bit in order to find these 14 criteria.

Anyway, the criteria are:

  1. The income and property of each party at the time of marriage, and at the time of the commencement of the action;
  2. The duration of the marriage and the age and health of both parties;
  3. The need of a custodial parent to occupy or own the marital residence and to use or own its household effects;
  4. The loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution;
  5. The loss of health insurance benefits upon dissolution of the marriage;
  6. Any award of maintenance under subdivision six of this part;
  7. 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 as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party. The court shall not consider as marital property subject to distribution the value of a spouse’s enhanced earning capacity arising from a license, degree, celebrity goodwill, or career enhancement. However, in arriving at an equitable division of marital property, the court shall consider the direct or indirect contributions to the development during the marriage of the enhanced earning capacity of the other spouse;
  8. The liquid or non-liquid character of all marital property;
  9. The probable future financial circumstances of each party;
  10. The impossibility or 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;
  11. The tax consequences to each party;
  12. The wasteful dissipation of assets by either spouse;
  13. Any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration;
  14. Any other factor which the court shall expressly find to be just and proper.

Note that #14 is the miscellaneous or generic catch-all criteria that allows the judge to, basically, consider any other factor the judge might consider to be relevant. Thus, the relevant facts that go into computing what is or is not fair and equitable are not limited to just what is listed in 1 to 14 above.

The other thought that comes to mind — and perhaps this is just me — is that criteria 1 to 14 above read very similarly to section 4320 of the California Family Code. If you were not aware, section 4320 contains a list of qualitative criteria — oddly enough, also 14 criteria — that a judge in California has to consider when determining what permanent alimony or spousal support to award in a divorce. If you were not also aware, permanent alimony or spousal support under California law is paid after a divorce case is concluded. Alimony or spousal support that is paid during a California divorce case is referred to as temporary support in order to contrast it with permanent support.

Hopefully all of the above makes sense. My goal here was to try and compare and contrast the Community Property system of dividing property in a divorce with the Equitable Distribution system of dividing property in a divorce. I mention Community Property a lot so I thought I’d change it up a bit and talk about Equitable Distribution a little bit also. It just so happens that I’m licensed to practice law in California — which follows the Community Property system — as well as New York, which follows the Equitable Distribution system.

If you live in a state than New York which also follows the Equitable Distribution system, please do remember that I have not looked up the laws of your state and have no idea what distribution criteria — if any — the laws of your state specify.

Hope that helps. Good luck.

 

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Andy Chen

Andy I. Chen is a lawyer licensed to practice law in California and New York. Andy maintains offices in Los Altos, California and Modesto, California. Under the New York Court of Appeals' 2015 decision in Schoenefeld v. State of New York, Andy does not accept cases from those in New York state. He does, however, know many lawyers in New York state and would be happy to make a referral.

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