Equitable Distribution and its Ins and Outs
The common idea about equitable distribution is that it is the equal distribution of assets after a divorce. In some community property states, equal division is obligatory. On the other hand, the equitable distribution states allow the Court to ensure a fair share of marital asset for every party. For example, in New York, equitable distribution is applicable.
How does actually Equitable Distribution work?
When a couple acquires assets after their marriage and before the beginning of the divorce process, the assets fall under the marital assets category. Usually, the court approaches toward equal distribution of assets. However, oftentimes, the court may decide to award a holder without title less than half.
The law of the land considers anything other than marital assets as separate assets, which are not under the equitable distribution status. Inheritances and special gifts to one party are also examples of separate assets.
However, the appreciating value of separate assets does not necessarily give the holder any profit. The portion that represents appreciation, on the other hand, does fall under equitable distribution.
If one or both parties worked effectively to increase the value of the asset, a greater award will be in place during equitable distribution.
Consider special circumstances as well.
What happens when a spouse amalgamates his or her separate asset with the other spouse under a joint ownership? People will find it as a way to create a “marital asset”. You would then have to answer why you comingled the assets in the first place, if you did not intent to create a marital asset.
If a party earns the asset through laborious work or pension, the court considers the date of commencement of the action, to make sure that the other spouse is not able to claim a stake in the fruits of the other’s work.
Whereas, when assets fluctuate in value owing to market variables, like real estate and stocks, the court is more likely to use a date of valuation close to the date of distribution. Indeed, this is the date of the trial.
It is, however, troublesome to place a specific value on the assets. One can always read the latest Stock Exchange quote to determine the value of public stocks. Determining the value of an ongoing business is nevertheless difficult. Although accountants take on this type of duty, there can still be a dispute regarding the right value. The court calculates the real value.
Education, degree, or skill training acquired during marriage is also considered as assets to be valued. Once again, accountants will be evaluating the value of these degrees or trainings. The method is to evaluate the improvement in one’s earning potentials. Despite all cautions, disputes are not uncommon. As usual, the court will have the final say.
Final Words
Equitable distribution could be a complex process. This is why you need to be aware of the relevant laws. Before taking any decision, explore your options and speak to an attorney. It will save you from possible grievances caused by irrelevant arguments.