North Carolina Divorce Laws - Asset & Property Division
There are three types of “property” under North Carolina law:
- Separate property
- Marital property
- Divisible property.
Here’s a brief summary of each:
- Separate property. Separate property includes anything owned by either spouse before the marriage, property acquired during the marriage by one spouse by inheritance or gift from a third party, property acquired after the date of separation with post-separation earnings and possibly income from separate property and property obtained in exchange for separate property.
- Marital property. Marital property includes property presently owned that was acquired by both parties – and debts created – during the marriage. It includes all vested pension and retirement benefits accrued between the date of marriage and the date of separation. A gift from one spouse to the other during the marriage is marital property unless the donor states at the time of the conveyance that it is intended to be separate property.
- Divisible property. Divisible property includes post separation increases and decreases in the value of marital property, property received after the date of separation that was acquired as a result of the marital efforts of either spouse before the date of separation, passive income generated by marital property and received after the date of separation, and post-separation increases in marital debt.
Although similar to marital property in that it is generally divided equally, marital property is valued at the time of separation; divisible property is valued at the time of trial – which in many cases can be years.
It’s important to understand that the above information is merely an overview. The identification, valuation and distribution of assets subject to divorce is a complex process. Anyone with substantial separate, marital and divisible property is encouraged to contact an experienced North Carolina divorce lawyer in order to protect your assets to the fullest extent possible.
What Factors are Weighed When Property Is Divided In Divorce?
Property can be divided in any amount. However, in most North Carolina divorce situations, equitable distribution law presumes an equal 50/50 division – meaning each spouse receives half of the estate. That distribution can take place before or after a final divorce decree is rendered – as long as you have preserved your rights before the judgment.
In many cases, the parties can agree on what constitutes an equitable distribution. When a court must determine the property division, it must look at the following factors under N.C. General Statute Sec. 50-20:
- Income, property and debts of a party (How is “income” defined by spouses – straight salary, commission, stock shares, stock options or a combination of some or all? What types of property are owned – real estate, business goodwill, intellectual property, etc? How much debt is owed, how is it structured and when is it due?);
- Support obligations from prior marriages (Are there obligations to support children from prior marriages. If so, for how long do those obligations last?)
- Length of marriage and age and health of each party;
- Needs of custodial spouse to own or to possess the marital home place and household effects (Is it best, or possible, for the custodial parent to remain in the marital home while the children are young or in school?);
- Expectation of retirement benefits which are separate property (Does one spouse have retirement benefits from a previous marriage?);
- Efforts made by each spouse to acquire property (Did one spouse make more of an effort or sacrifice in acquiring property?);
- Contributions of one spouse to the education of the other (Has one spouse paid for the education of another or did one spouse pursue an education while the other raised the children?);
- Contributions that increase the value of separate property (Have contributions been paying for a business, second home, an investment property, etc.?);
- Liquid or non-liquid nature of property (Can the house be sold in the current real estate market? Are assets – bank accounts, CDs, bonds, etc. – tied up or do you have access to them now?);
- Difficulty in valuing interest in a business; (Have spousal contributions to a business changed over time and, if so, is it possible to put a real value on how that can be divided equitably?);
- Tax consequences (See below);
- Actions taken by either party to preserve or waste marital assets (Has one spouse been acted more responsibly or less responsibly than the other?);
- Other equitable distribution factors which can alter that presumption such as one spouse’s health, income-earning potential, need to reside in the marital home with the children of the marriage, a spouse’s business or unvested pension interests and similar economic factors.
Marital Misconduct / Fault. Marital misconduct such as adultery is not considered in the settlement of property rights, nor is fault – unless there has been misconduct which economically impacted the marital estate.
Tax Consequences. A division of marital and divisible property transferred between spouses is generally not a taxable event. However, funds transferred from retirement plans and Individual Retirement Accounts (IRAs) and selling marital assets to third parties (such as a home which has increased in value) can have significant tax consequences. Make sure to inform your lawyer about any assets which may fall into this category.