Equitable Distribution – What is it?
Equitable distribution is simply the process in which a court divides assets between spouses in a divorce case. You may hear lawyers or judges refer to it as “ED” for short. Along with child support, spousal support and child custody, equitable distribution is one of the main issues that a court deals with in divorce.
There are two main schools of thought when it comes to dividing assets in a divorce: the equitable distribution model and the community property model. In states that use the community property approach, spouses are deemed to be equal owners of property acquired during the marriage. Under the equitable distribution approach, a court has the ability to award one spouse more or less of the marital estate based on the equities of each specific case (equities is a legal term that simply means “what is fair”). Virginia has adopted the equitable distribution approach.
Virginia Code Section 20-107.3 sets forth the process that courts must follow in dividing property. Generally speaking there are three steps to this: 1) determining the value of the assets; 2) classifying the assets; and 3) determining an appropriate division to award to each spouse.
Valuing the assets can be as simple as identifying the amount of money held in a particular bank account to conducting an independent appraisal of real property or a business. For each asset, the basic question is ‘what is the monetary worth of the asset?’
Classifying the asset involves placing it into one of three categories: marital property; separate property or hybrid property. Marital property is property that is acquired during the marriage. It is property that both spouses have an interest in. It is this property that is divided by the court. Separate property is property belonging to one spouse only. It is either brought into the marriage (owned before the marriage) or obtained during the marriage by inheritance or gift. Separate property is not divided. It simply goes to the spouse to whom it belongs. Hybrid property is property that has both a marital and separate component. The most common example would be a house purchased with separate funds and marital funds (e.g. money earned during the marriage and used to pay the mortgage). The marital and separate components of hybrid property are ascertained through a process called tracing.
When the court divides property, it does so according to the “factors” set forth in Virginia Code 20-107.3. A court does not have to give each spouse equal value from each asset (or a 50/50 division) although this is commonly done.
Equitable distribution can be a complex process. The rules governing how courts may divide, sell and distribute assets can be difficult for attorneys to understand, let alone laypersons. If division of marital assets is an issue in your case, it is almost always advisable to retain an attorney to guide you through the process.