§ 3.03 Equitable Distribution Systems

• Jurisdiction: United States
• Publication year: 2021

§ 3.03 Equitable Distribution Systems

[1]—In General

All title states have abandoned the pure title system of property division at divorce, and have adopted some form of an equitable distribution system.²³ These systems provide that, at divorce, a court can divide some or all of the spouses' property. Title is not determinative.

Alimony, sometimes now referred to as spousal support or maintenance, is still possible under equitable distribution systems. Nevertheless, it is infrequently awarded.²⁴ The courts now primarily rely upon property division at divorce to attempt to provide for spouses after divorce.

The equitable distribution systems that have been adopted are by no means identical. However, three different types of systems have evolved. For the purpose of this text, they are referred to as "kitchen sink," "marital property," and "hybrid" systems.

[2]—Kitchen Sink System

In a "kitchen sink" system, a divorce court may divide all property owned by either spouse at divorce, regardless of when or how it was acquired.²⁵ ("Kitchen sink" states are sometimes referred to as "hotchpot" states.) Some statutes set forth the factors a court should consider when making such a division,²⁶ some do not.²⁷ These systems are deferred universal community systems.²⁸ Before a divorce action is filed, each spouse's respective property is his or her own. At divorce, however, the court may transfer any of one spouse's property to the other.²⁹

The distinction between some "kitchen sink" and "marital property" states (defined below) is made somewhat fuzzy by the fact that in some states that are referred to as kitchen sink states, courts have held that some kinds of property may not be divided at divorce. For example, in Montana premarital accumulations may not be divided at divorce if the spouses made no contribution to the asset during marriage.³⁰ South Dakota applies the same rule to inheritances.³¹ Although South Dakota cases continue to affirm that the state is a "kitchen sink" state,³² they also direct the trial court to classify property as "marital" or "non-marital."³³ The court is said to have great discretion in making this determination.³⁴ Indiana is a kitchen sink state with a statute which provides that all property owned by the parties at divorce should be divided equally. Nevertheless, sometimes courts award a party a premarital acquisition or an inheritance received during marriage before dividing the remainder of the estate equally.³⁵

As a further complication, in a number of kitchen sink states, although premarital accumulations and inheritances are included in the marital estate, the judge is instructed to consider when and how the property was acquired when he or she is dividing the marital estate.³⁶ So, even in a kitchen sink state, a divorce court would be less likely to divide a premarital acquisition by a spouse than an acquisition during marriage from wages.

Only a minority of states have adopted the kitchen sink approach. Alimony may also be ordered in a kitchen sink state.³⁷

[3]—Marital Property System

Most states have adopted a marital property system, concluding that it is fairer than a kitchen sink system. In a marital property system, a divorce court cannot divide all property owned by spouses at divorce. Although all marital property systems are not uniform, most bar the division of property accumulated before marriage, and that was received during marriage by one spouse by gift or inheritance.³⁸ Such property excluded from the jurisdiction of the divorce court is normally referred to as the perspective party's "non-marital," "separate" or "individual" property. All other property, the "marital" property, in most states may be divided equitably by the divorce court.³⁹ Such a system would technically be classified as a deferred community of acquests.⁴⁰

Some equitable distribution statutes provide that an equal division of marital property is presumptively equitable.⁴¹ However, except in some community property states, no state requires an equal division.⁴² Most statutes set forth a number of factors a court is to consider when dividing the parties' property.⁴³ A few, however, merely direct the court to make an equitable division.⁴⁴ Alimony may be ordered in a divorce in a marital property system.

Except in the states of Washington and Wisconsin, all community property systems are also marital property systems. Some require the equal division of the marital estate⁴⁵ ; others permit an equitable division of the marital estate.⁴⁶

Under a marital property system, a divorce court may only divide property acquired by either spouse during marriage due to his or her efforts. It has been generally concluded that, compared to a kitchen sink system, a marital property system is more consistent with the partnership theory of marriage. For example, if one spouse stays at home to raise children and the other works outside the home, under the marital property system the earnings of the spouse working outside the home are considered assets of the marital partnership. This is conceptually justified on the grounds that the spouse's earnings during marriage are really the result of a joint effort; the spouse working at home makes it much easier for the other to work outside the home. Other accumulations, however, such as accumulations before marriage and gifts and inheritances received during marriage, generally are not deemed marital property. The conceptual justification for this result is that these types of property are in no way joint accumulations, so a marital interest should not attach.

Most states have established a "martial property" equitable distribution system via statute that clearly specifies what property can be divided at divorce and what cannot. In contrast, a few state supreme courts have construed more general statutes to establish a marital property system. For example, the Mississippi Supreme Court has done this.⁴⁷

Michigan courts have apparently announced that Michigan is now a marital property jurisdiction, not a kitchen sink jurisdiction.⁴⁸

The discrimination between a kitchen sink system and a marital property system can obviously be quite significant. For example, more people are marrying later in life. Such spouses may have accumulated substantial property before marriage or may inherit a substantial amount from a parent. Under a kitchen sink system, a divorce court can divide all property owned by the spouses, even that accumulated before marriage. In contrast, under a marital property system, the divorce court cannot divide property accumulated before marriage.

Of course, in a "marital property" state, for purposes of divorce all property is presumptively marital. The party claiming it is not marital must establish that it derives from premarital savings or a gift on inheritance during marriage.

[4]—Hybrid System

In some states, as a general rule, only marital property may be divided at divorce. However, separate property may be divided in those limited instances where a division of only marital property would be unfair. These states are referred to herein as "hybrid" systems, since the system is a combination of a marital property system and a kitchen sink system.⁴⁹ Alimony is possible in a hybrid system.

So, for example, in Iowa gifts and inheritances received by one spouse generally may not be divided at divorce, unless hardship would otherwise result.⁵⁰ In Alabama premarital accumulations are generally not divided.⁵¹ Oregon has adopted a similar rule⁵² : to divide the otherwise separate estate, there must be a showing that hardship would otherwise result.⁵³ In Minnesota, separate property may be divided if dividing only the marital estate would be "so inadequate to work an unfair hardship."⁵⁴

[5]—Community Property System

There are obviously some differences between community property and common law marital property systems.⁵⁵ The primary difference between the two systems pertains to the time at which the marital interest attaches. A community property system gives each spouse a present, vested, one-half interest during marriage in all community property when it is acquired.⁵⁶ As a result, in some states, a non-acquiring spouse can have the power to manage community property during marriage.⁵⁷ The ability of one spouse to make a gift of community property during marriage without the other's consent is limited.⁵⁸ Under common law systems, the marital interest does not immediately attach when marital property is acquired. The acquiring spouse has sole management power over property accumulated during marriage, and generally can give this property away without the other spouse's consent.

The differences between the systems generally vanish, however, when a divorce action is filed. For example, a number of marital property systems provide that once a divorce action is filed, both spouses have a vested property interest in all marital property.⁵⁹

Even more significant are the similarities between the divorce property division rules applicable in common law marital property states and community property states. All community property states except one allow a divorce court to divide only the "community property" of the spouses; "separate property" cannot be divided.⁶⁰ In a few community property states, community property must be divided equally.⁶¹ Most of these states, however, permit an equitable division of the community estate.⁶²

The terms "community property" and "separate property," as employed in community property states, are quite similar to the connotation of the terms "marital property" and "separate property" in marital property states. This is not surprising since both systems stem from the view that marriage is an economic partnership, and that both spouses should have equitable rights upon dissolution in all property that stems from the marital partnership.⁶³

A comparison of relevant statutes underlines this similarity between community property and marital...