Community Property v. Equitable Distribution. If you and your spouse can not determine how to divide property that is jointly owned, the courts will divide property under one of two basic schemes: community property or equitable distribution. (By the way, debts are divided according to the same principles). The main difference between community property and equitable distribution is that in community property states there is an absolute 50-50 split of all property acquired during the “marital enterprise.” In equitable distribution states, more assets are considered “marital property,” but the split is not necessarily 50-50.
Community property. In eleven states -- Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and Puerto Rico -- , all property of a married person is classified as either community property (owned equally by both spouses) or the separate property of one spouse. At divorce, community property is generally divided equally between the spouses, while each spouse keeps his or her separate property.
Equitable distribution. In the 39 remaining states assets and earnings accumulated during marriage are divided equitably (fairly), but not necessarily equally. In some of those states, the judge may order one party to use separate property to make the settlement fair to both spouses.
What sometimes makes this confusing is that division of property does not necessarily mean a physical division. A court may award each spouse a percentage of the total value of the property. In that event, each spouse will get personal property, assets, and debts whose worth adds up to his or her percentage. (It is illegal for either spouse to hide assets in order to shield them from property division.)
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