Community vs equitable property division
The issue of how to divide property comes up in most divorces, which is why it’s important to know if you live in a community property state or an equitable property state. The way your state handles property division depends on which of these property systems apply. The exceptions to this happen when there was a prenuptial agreement, or if the parties to the divorce draft an agreement that divides the property according to those specific terms.
Most states are equitable property states (or separate property states). Under the equitable system, a court divides marital property according to what it considers to be equitable, or just, to both parties. This is why an equitable division isn’t necessarily always a 50-50 split. In some of the rarer circumstances, one spouse can end up with almost all of the assets if this is what the court deems as fair. In equitable property states spouses are generally awarded property in proportion to how much they contributed to the marriage. Often, the spouse who earned more will receive the larger portion of the property and assets because they contributed more financially to the union. However, a court often balances things out by taking other factors into consideration as well. Some of examples of these factors include the length of the marriage, the earning potential of each spouse, the standard of living established during the marriage, the value of a stay-at-home spouse who took care of the children, etc. The court evaluates the financial ability of each spouse when considering marital debt and liability distribution.
Community property law only applies to these nine states: California, Arizona, Idaho, Nevada, Louisiana, New Mexico, Wisconsin, Washington, and Texas. (Puerto Rico also falls into this category.) In a community property state, a court looks at all assets that were acquired during marriage and then divides them equally between the spouses during divorce. All assets are divided equally regardless of who owns title to them. For example, both spouses are considered to own all money equally even if one spouse doesn't work. The only time when marital assets aren't split equally is if a prenuptial agreement was in place. In addition, community property laws also apply to all joint debts and liabilities because these count as marital property. This means that all debts and liabilities are equally divided between both spouses.