When a couple is going through a divorce, one of the most difficult and stressful areas is determining how property will be divided. In North Carolina, this is conducted through a process called equitable distribution.
Equitable distribution is the legal division of marital and divisible property between spouses. This process can often become contentious, which is why parties may need to go through mediation or have a judge determine who gets what.
If you are going through a divorce, here is what you need to understand about equitable distribution and how it can affect your property division case.
The Factors Used to Determine Equitable Distribution
It’s not uncommon for divorcing spouses to disagree on the division of property, which includes both assets and debts. In these instances, the law in North Carolina divides marital property using the theory of equitable distribution.
You should note, however, that the term “equitable” distribution does not mean “equal” distribution. Instead, “equitable” means “fair in the eyes of the court,” which could be different than an equal division. As a result, the court can have a great deal of discretion over which spouse gets which assets. A judge can split your property 50-50, unless they determine that it would be inequitable or unfair to do so.
When a judge assesses the fairness of a split, they consider a series of factors, including:
- Each spouse’s income, debts, and property
- How long the marriage lasted and each spouse’s age
- Ways in which a spouse directly or indirectly contributed to the other’s educational and professional opportunities
- A custodial parent’s need to occupy or own the marital home or other household items
- The physical and mental health of both spouses
- Tax considerations related to property division
- Any other factors that are “just and proper”
The court will not consider child support and alimony payments when dividing marital property.
Understand the Differences Between Marital Property and Separate Property
When you get married, it’s generally assumed you’re going to share more than a declaration of love. It’s natural to accrue assets over time, which will need to be divided if you go through a separation and divorce.
For the purposes of equitable distribution, North Carolina law defines marital property and separate property differently. There is also a third category, divisible property. Here are the distinctions:
This category includes any income, assets, property, and debts that you and your spouse have accumulated during the marriage. Marital property can include wages, pension and retirement benefits, investment accounts, real estate, personal property (cars, boats, jewelry, furniture, etc.), mortgages, car loans, and credit card bills.
Separate property refers to assets and debts owned before the marriage, along with gifts or inheritance that was specifically given to one spouse and not the other during the marriage. Typically, your spouse does not get a share of your separate property.
Separate property can transform into marital property, however, if it is mixed with marital assets. For example, if your spouse uses inheritance to buy a jointly titled asset, like a new home for the both of you, then it might become marital property.
This category exists for assets that spouses accumulate in the time between the date of separation and the date the court handles property distribution. This includes assets that change in value during that same period. Note that assets that are acquired before the date of separation will still count as divisible property if it’s received after the date of separation.
To decide the valuation of items in an equitable distribution case, the judge will refer to the fair market value. Fair market value is the price that a hypothetical willing buyer would pay a hypothetical willing seller for the item in question when neither is under a compulsion to buy or sell the property.
Fair market value does not refer to an asset’s price when it was first purchased. It also isn’t the price someone would pay today if they bought an item brand new. Here’s an example: Let’s say you purchased a new sofa two years ago for $1,500. Today, the fair market value may be $500 because the sofa is no longer new and has experienced normal wear and tear.
Evidence Is Necessary When the Burden of Proof Lies With You
Burden of proof is key to disputes regarding equitable distribution in North Carolina. When it comes to the classification of marital property vs. separate property, it is up to each spouse to identify and prove the existence of assets that are going to be divided. This can be accomplished with written documentation, photographs, receipts, and property searches.
The court will only provide classifications and the value of marital property according to the evidence that is provided. In other words, if you want to dispute the classification of an asset as marital property, then the burden of proof would fall on you to present evidence otherwise. For example, if you want to claim a bank account as separate property because it has been in your name since before the marriage and your spouse did not contribute to it, then you will need evidence to prove that.
Tracing the Origins of Mixed Assets Can Prove Challenging
A mixed asset is an item that contains components of both marital property and separate property. One example of a mixed asset is a retirement account that was started before the marriage, but continued to receive contributions after you were married.
Mixed assets are complicated because they require a judge to determine how much value was acquired before and during a marriage. If you want to seek a partial separate property classification, then the burden of proof will be on you to provide evidence from the time before and during the marriage. Tracing the origins of accounts or property can be extremely frustrating and challenging since financial records and dates can go back many years and documentation can be difficult to find. Many times, an expert witness such as a forensic accountant will need to be hired to assist in this process.
Since this evidence can be tough to compile, these assets often wind up classified as marital property. If you are experiencing issues with mixed assets in your divorce case, you may want to contact an experienced law firm to help defend your legal rights.
Who Is Responsible for Debts Accrued During My Marriage?
Another common pain point in divorce cases relates to marital debt. In North Carolina, marital debt refers to debts accumulated during the marriage and prior to the date of separation for the joint benefit of both parties. Examples of marital debt include mortgages, credit card debt, and car loans.
If you are looking to claim that a debt was marital, then the burden of proof once again falls on you to prove that you and your spouse enjoyed a joint benefit. Joint benefit means that you and your spouse both found value in taking on the debt in question.
For example, if you charged a family vacation to a credit card in your name, then you might be able to prove that it’s a marital debt since the entire family enjoyed something of value. Likewise, if you wanted to prove that debt sustained during the marriage is the separate party of your spouse, then you would need to prove that a joint benefit was not in place.
Reach Out to Myers Law Firm For Help Protecting Your Assets
The family law attorneys at Myers Law Firm are ready to act as your advocates and protect your rights when dividing property during a divorce. We have years of experience handling every aspect of property division cases and an thorough knowledge of local courts, and we won’t hesitate to pursue your case aggressively and fight on your behalf in court if necessary.
To schedule your initial consultation, please call our Charlotte office toll-free at 1-888-376-ATTY (2889) or contact us using our online contact form.
Howell, C. (2017, September 8). Equitable Distribution: The Marital Property Presumption. University of North Carolina School of Government. Retrieved from https://civil.sog.unc.edu/equitable-distribution-the-marital-property-presumption/
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.