No one gets married expecting to later divorce, which means that they usually don’t give much thought to who owns what property in the marriage unless a divorce becomes inevitable. When the unfortunate happens and the prospect of separation begins to loom, the process of sorting out the tangle of shared property can suddenly seem frustrating and even overwhelming.
In these situations, learning about the legal principles courts use to divide marital property during a divorce can clear up some of the confusion and help you understand what to expect. To help, we’ve composed a quick guide to the legal logic behind property division during a divorce.
Two Sets of Rules for Marital Property
Depending on where you live, the courts in your state will use one of two very different legal standards when deciding how to divide property during a divorce.
- The vast majority of states follow a set of rules called equitable distribution. In following these rules, the court attempts to divide the couple’s assets fairly in light of their current circumstances.
- Nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) follow another set of rules called community property. Courts in these states simply divide the couple’s assets in half during a divorce without any attempt to evaluate the fairness of this split. In Alaska and Tennessee, spouses are allowed to opt in to the community property system by signing an agreement.
North Carolina is an equitable distribution state, which means that the courts here have significant leeway to alter the “standard” fifty-fifty split of assets if one or the other spouse can make a compelling case that it’s fair to do so. This is one of the reasons why it’s especially important to work with an experienced family law attorney if you’re going through a divorce in North Carolina — having a knowledgeable advocate on your side can make a big impact on the outcome of your property division.
Sorting It All Out: Three Classifications for Property
The actual process of property division can take some time, as the court has to identify all of the property owned by both parties, classify it into one of the three categories, and then assess the property’s value before it can be divided. Below are the three categories that courts in North Carolina use to classify property during a divorce.
- Marital property includes all the presently-owned property that the couple acquired during marriage, except that which the court deems to be “separate property.”
- Separate property comprises a few subcategories of assets:
- Any property owned by either spouse before the marriage
- Property that one spouse acquired during the marriage by gift or inheritance from a third party
- Divisible property also includes several smaller categories of assets:
- The changes in value — either positive or negative — that any of the couple’s marital assets or debts experience after the date of separation (for example, a property or stock rising or falling in value)
- Income from marital property that either spouse received after separation
The court treats divisible property more or less the same as marital property — that is, it starts with the presumption that the spouses should receive an equal split of divisible property. However, the divisible property allows the court to “lock in” the value of assets at the date of separation and treat any changes in asset value or new income as separate assets and consider them based on their value at the time of the trial.
To see why this matters, consider a couple that owns a $250,000 home together and then separates and divorces. After the separation but before the trial on equitable distribution, the property increases in value because homes in the area have increased. Under the definition of marital property, which calculates values as of the date of separation, divisible property allows for the increase in value to be considered by the court as well.
To learn more about these three categories and the steps leading up to the actual division of property, you can visit our property division page, where we’ve provided some additional details about these different classifications and how the courts apply them in North Carolina.
The Property Division Process
Once the court classifies all property into one of the three categories above, the property is then valued and divided. The court starts with the presumption that an equal (fifty-fifty) split between the parties is fair and then allows either party to submit evidence to rebut that assertion.
The North Carolina General Statutes establish 13 factors that the court can consider when deciding whether to alter the standard fifty-fifty split during property division. These factors are:
- The Income, property, and debts of each party
- Support obligations from past marriages
- The length of the marriage as well as the age and health of each party
- The need of a parent with custody of a child or children to own, occupy, and/or make use of the marital home
- Expectation of pension and retirement benefits that are separate property
- The efforts that each spouse contributed to acquiring marital property
- Contributions that one spouse made to the other’s education or career development
- Contributions that increased the value of any separate property
- Whether marital and divisible property are liquid (easy to sell, like stocks and bonds) or non-liquid (harder to sell, like property)
- The difficulty of evaluating any interest in a business or any assets the business owns
- The tax consequences to each party
- Actions by either party that either preserved and increased or wasted and devalued assets
- “Any other factor which the court finds to be just and proper”
As you might guess, the addition of that thirteenth consideration — “any other factor” — means that the court has latitude to decide what’s fair and who should get what property during a divorce. This is why you should always consult with an experienced family law attorney who has knowledge of the local courts in your area if you’re going through or facing a divorce.
Myers Law Firm Is Here to Help You with Divorce
At Myers Law Firm, we know that divorce is hard on everyone involved. That’s why we approach each family law case with compassion. We try and work out solutions that serve our clients’ best interests and resolve cases efficiently. However, we put our clients’ needs before any other concern, and we’ll never hesitate to stand up and fight for you in court if necessary.
The attorneys at Myers Law Firm have experience handling all of the major family law issues that surround the end of a marriage, including alimony, child custody, child support, property division, and divorce, and our years of family law experience have given us extensive knowledge of the local court system in Charlotte, North Carolina and Mecklenburg County. To get in touch with us, call our offices at (888) 376-2889 or fill out the contact form on our website.
Distribution by court of marital and divisible property. NC G.S. § 50-20. Retrieved from http://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_50/GS_50-20.html