Asset Division and Marital Property
The divorce process is designed to fairly value and distribute marital assets, and address other financial implications including child support and alimony. Many matters are resolved through effective negotiation and agreements between husbands and wives. However, when matters cannot be amicably resolved, litigation becomes a necessary part of divorce. Divorce has many personal and financial challenges, but with a clear understanding of the law and your options, you will be able to make informed decisions that address your needs – now and in the future.
Marital property is defined as all assets acquired during the marriage and prior to separation (with certain exceptions). Debt can also be marital property and subject to division. All marital property is subject to distribution between the marital partners. Many couples resolve asset division without court intervention by developing a property settlement agreement. However, if spouses cannot agree on the issue of property distribution, then it becomes necessary for the court to intervene. North Carolina’s “Equitable Distribution of Marital Assets” statutes empower the court to divide all marital assets (including real and personal property) and debts. It is important to note that the rights to equitable distribution are not automatic and must be specifically claimed by one or both spouses.
Equitable distribution is basically a three step process that can take place prior to the final divorce decree or after (if you have preserved your rights by filing your claim before the the divorce judgment):
- Identification and Classification recognizes and categorizes property as marital and or separate. Separate property is owned prior to marriage, or inherited property or gifts. In a number of situations, a dual classification of a property item may occur.
- Valuation assigns a fair market value to each property item. Fair market value is the amount that a willing buyer would pay a willing seller.
- Distribution of the marital property is equally divided between parties, unless facts demonstrate that equal distribution would be unfair.
There are several factors that the court considers in equitable distribution of assets, including: income, debt, property of each spouse; prior marital support obligations; duration of the marriage; age and health of each partner; needs of the custodial parent; contributions of one spouse to the education of another; and retirement and pensions. To ensure the preservation of assets until equitable distribution, the court may enter an injunction to prevent the transfer, depletion or hiding of assets.
Divorce is an emotionally draining process where spouses are sometimes competing for financial resources. A number of spouses agree to the division of their assets and are divorced without ever understanding what they’ve given up. Many partners accept financial terms in the hopes of expediting the divorce process, only to find themselves in financial crisis sometime in the future. It is important to understand there may be hidden assets and assess the “real” value of the marital estate and business interests. Divorcing spouses are typically unprepared to objectively consider settlement offers, counter offers and other complexities associated with different types of investments.
You can protect yourself by collecting as much financial information as possible, including bank accounts, stock options, deferred compensation plans, real estate, brokerage accounts, foreign accounts, offshore trusts and deferred tax planning devices that can be difficult to sort out and assess. If you and your spouse are in litigation over equitable distribution, your attorney has the ability to discover your spouse’s assets.
Understanding the comprehensive picture of your marital finances is critical to negotiating the best possible financial terms and standard of living. If you believe that your spouse may be transferring joint assets out of your name, hiding assets, or if your spouse has hired a lawyer, it is especially important that you have expert legal representation.