Equitable Distribution
Equitable Distribution is the process by which the Court divides the assets and liabilities accumulated during a marriage.
Often times the parties themselves descide how to distribute their assets and liabilities through negotiation between the parties, lawyers, or mediation. If the parties are unable to reach agreement, the Court will decide after a trial.
Initially, the distribution of assets and liabilities is done on a goal of achieving a 50 / 50 division, with each spouce taking half of the assets and half of the liabilities. This split is modified at times depending on the specific facts of the case,and any special equities being claimed and proven.
Remember the enitire goal of equitable distribution is equity, which is just another way of saying fairness.
Assets and Liabilities
Assets are those possessions that belong to the parties and have some value to them. It is not necessarily a monetary value but it could be emotional value. For example, pictures of the children or a wedding video have no real monetary value but have emotional value. The house, is also an asset as is any financial accounts including retirement accounts. Other Assets include real estate, motor vehicles, jewlery, books, records, dvd, cd's, tvs, dishware and cookware, etc.
Liabilities are monetary obligations of the parties to the marriage.
Non-Marital Assets and Liabilities
There are times when assets / liabilities should be considered non-marital. If an asset or liability is considered non-marital by agreement of the parties or by the Judge then that asset remains the property of the person claiming non-marital status. This has the effect of removing from the equitable distribution equation, the non-marital asset. It is as if the asset does not exist.
The same hold true for non-marital liabilities.
Real Estate
Real Estate is considered an asset as well as a libility. There are many ways to resolve issues involving Real estate distribution. The easiest is if one party wants the real estate, house, and the other does not. The party surrendering the real estate should receive other assets that are the financial equivalent of their share of the value of the real estate.
For example, if the house is valued at $100,000 and has a $50,000 mortgage, the equity in the house is $50,000. The surrendering party should receive 1/2 of the equity of $25,000.
- Example 1) The house is sold for the home's value of $100,000. After the mortgage is paid there remains $50,000 to be divided. However, in the case of a home being sold the remaining money to be divided would be less then $50,000 because of costs associated with the sale such as closing costs, realtor fees, tax stamps, inspections, etc.
- Example 2) If the house was distributed at 1/2 to each that would be $50,000 to each. The mortgage liability of $50,000 would be divided to each. So each person would take a $50,000 value, plus 1/2 of the debt of $50,000 (25,000) so the net value to each is still $25,000.
Any way you slice it, the essential equation is to take the value of the house and subtract from it the mortgage or any other liabiity and that is the equity. The equity is what should be divided.
The true sticking point is what is the value of the house. The person who wants the house might argue the value is much less, therefore the ratio of equity to debt is lower and they woudl have to pay less to reeive the house. Conversely, the person who doesn't want the house will argue the house is worth more therefore they shodl receive more for their share. This is often a point of contention for trial if the parties can not agree.