Equitable distribution is the process in a divorce for a fair division of the property, assets, and debts from your marriage. The key word here is “fair.” Fair does not necessarily mean a 50/50 split of everything, but rather dividing everything in a way that makes sense for your specific circumstances.
4 Steps to Equitable Property Division
The division of your family’s property, assets and debts can be broken down into four main steps:
- Identification
The first step is to identify all the assets and debts from your marriage. This involves gathering many documents and records—not just those for assets like homes or vehicles, but also documents related to what you owe, retirement accounts, and other financial elements. You and your spouse need to have a complete picture of both the positive and negative financial aspects of your relationship. - Characterization
After identifying the property, you need to determine which assets and debts are considered marital and which are your or your spouse’s separate property. Characterization will involve choosing and agreeing to a specific “cutoff date” to define what counts as marital property. Marital property usually includes anything that was acquired during your marriage. and is subject to division. Separate property are typically assets you or your spouse owned before the marriage or property that was received as gifts or inheritances and was kept separate. Separate property usually is not divided. - Valuation
Once you have identified and characterized the property, the next step is to assign a value to each asset and debt. This valuation will involve choosing and agreeing to a “valuation date” to determine the current worth of each asset and debt. Valuation can get complicated, especially with assets like businesses or retirement accounts, so you may need assistance from additional professional - Division
After everything has been identified, characterized, and valued, then it is time to begin the division conversation. This is where the concept of “equitable” comes in. While you might think splitting everything in half is the easiest solution, that’s not always practical and may not be the best option. Factors that can influence how things are divided, like tax implications, liquidity, or the future earning potential of certain assets, should be considered.
For instance, you might receive the entire retirement account while your spouse keeps the marital home—both assets may be valued equally “dollar-wise”, but one or the other may be more meaningful to your individual situations.
How Is the Actual Division Determined?
Equitable distribution does not always mean splitting every item down the middle. For example, a retirement account worth $100,000 could theoretically be split 50/50, but tax implications or liquidity issues might make that difficult. The goal is to ensure that, when everything is considered together, that the division is fair meaning that you both ended up with roughly equal overall value.
However, if you and your spouse agree to settle outside of court, you have more flexibility. You can negotiate and agree on a division that makes the most sense for your situations, even if it’s not exactly 50/50.
Collaborative Divorce Equals More Flexibility
One of the big advantages of the Collaborative Divorce process is that it allows you and your spouse to have meaningful conversations together, along with getting advice from a team of professionals, about how to best resolve all of your important issues. Instead of a court-ordered division of assets and debts where a judge follows strict legal guidelines, a collaborative or mediated process lets you and your spouse create solutions tailored to your needs.
For example, you might be more interested in keeping the family home, while your spouse values retirement accounts more. Even though you may be entitled to something else, you can negotiate based on what matters most to you personally. The collaborative process provides flexibility, allowing you to reach an agreement that is best for your family and doesn’t leave those decisions to a judge.
An equitable distribution of your family’s assets and debts will help you reach an outcome that is not only fair financially but also emotionally satisfying, as you and your spouse have both had a hand in shaping your future, post-divorce.
