Equitable Distribution of Property - NC

North Carolina law takes the position that marriage is a partnership to which both spouses make vital contributions and which entitles each party to receive a fair, or equitable, share of the property acquired during the marriage. In the absence of a Separation Agreement between the parties, a party may file for an equitable distribution of property prior to the entry of an absolute divorce. If the action is not filed prior to the entry of the absolute divorce, the right to file is forever lost.

The first step in the equitable distribution process is to classify the property. For the purposes of classification the marital estate is frozen as of the date of separation. This means that no new assets or debts shall be added to the list of existing property after the date of separation. Property is typically either marital or separate, or a combination of both. Marital property is all real and personal property acquired by either spouse during the marriage and before the date of separation that is presently owned, with a few exceptions. Separate property is all real and personal property acquired by a spouse before the date of marriage or by bequest, devise, descent or gift during the marriage. However, property acquired by gift from the other spouse is marital property. In the instance that a certain piece of property has characteristics of both marital and separate property, the courts will employ a “source of funds” test to determining where the money came from to acquire the certain property.

The second step in the equitable distribution process is to value the property. Net value is considered when determining the worth of property. Net value is defined as the market value minus any amount of liens or encumbrances. For the purposes of equitable distribution, marital property is dated as of the date of separation of the parties. Any increases or decreases in the property (i.e. interest or appreciation) between the date of separation and the date of division of property are called divisible property. Divisible property is considered by the courts and divided in and equitable fashion just as marital property is. North Carolina law provides that the net value of marital and divisible property shall be equally divided. If a portion of the property is considered to be marital property then the next step is to place a value on it. This can be done by agreement between the spouses or in situations where the spouses do not agree experts such as real estate appraisers, personal property appraisers, business valuators and other professionals may be called upon to offer their opinion. If the spouses are still in disagreement then the judge will typically decide upon a value for the property after considering all of the evidence offered.

The third and last step is to distribute the property to one spouse or the other. As the title “equitable distribution” suggests the law in North Carolina regarding property division is that the division of property shall be equitable. Thus, the marital and divisible property will be divided equally unless a determination is made that an equal distribution would not be equitable. The presumption is that there shall be an equal distribution of marital property in equitable distribution cases. North Carolina law does law out a list of factors which shall be considered in making the distribution equitable including but not limited to the following: the income and liabilities of the parties, the need of a parent with custody of a child or the children to occupy or own the marital residence, any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse, the duration of the marriage, the age and physical conditions of the parties, and the acts of either spouse to maintain or waste marital or divisible property. Factors a judge will consider when dividing the property include:

1. The income, property and liabilities of each party at the time the division of property is to become effective;
2. Any obligation for support arising out of a prior marriage;
3. The duration of the marriage and the age and physical and mental health of both parties;
4. The need of a parent with custody of a child or children of the marriage to occupy or own the marital residence and to use or own its household effects;
5. The expectation of non-vested pension, retirement, or other deferred compensation rights, which is separate property;
6. Any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services, or lack thereof, as a spouse, parent, wage earner, or homemaker;
7. Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse;
8. Any direct contribution to an increase in value of separate property which occurs during the course of the marriage;
9. The liquid or non-liquid character of all marital property;
10. The difficulty of evaluating any component asset or any interest in a business, corporation, or profession, and the economic desirability of retaining such asset or interest, intact and free from any claim or interference by the other party;
11. The tax consequences to each party;
12. Acts of either party to maintain, preserve, develop, or expand; or to waste, neglect devalue or convert such marital property during the period after separation of the parties and before the time of distribution; and
13. Any other factor which the court finds to be just and proper.

The amount of weight given to each factor is in the judge’s discretion.

Either party may file for equitable distribution at any time after the parties have separated. The General Statutes and Local Rules govern the time frame which certain documents and affidavits must then be filed. Injunctions or restraining orders to prevent the disposal, waste or neglect of marital property may be filed as well.

The division of property during a divorce or separation can be a complicated procedure. At Marshall & Taylor, we want to help you ensure that your interests are fully represented during the equitable distribution of property. If you want to learn more about equitable distribution and how we can help you, contact us today to schedule a confidential consultation.

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