Equitable Distribution in North Carolina Divorces

What is Equitable Distribution Law in North Carolina?

The purpose of equitable distribution is to decide how to divide a divorcing couple’s property and debts in a just and fair way. It isn’t an automatic process; one or both spouses must request it during the separation period. Additionally, in North Carolina, equitable distribution must be requested prior to the finalization of the divorce. You may lose your ability to have court involvement for property division if you do not have a pending claim for equitable distribution at the time the divorce is granted.

North Carolina General Statute § 50-20 outlines the distribution of marital and divisible property, including the definitions of marital, separate, and divisible property. These terms will be important during the equitable distribution process and hearing because not all property can be divided.

Assets and Debts in a North Carolina Divorce

Assets and debts are divided into one of three categories: marital property, separate property, or divisible property. Marital property is any real or personal property bought or acquired by either or both spouses during the marriage and before separation using funds earned during the marriage. Marital assets and debts can be divided prior to divorce or after the divorce is final SO LONG AS there is a properly-filed pending claim for equitable distribution. The default in North Carolina is to assume that any asset or debt acquired during this timeframe is marital property unless it meets the criteria for separate property.

Separate property can be acquired prior to the marriage or during the marriage if by inheritance or gift. It is important to note that gifts from one spouse to the other only count as separate property if there was a clear intention for the property to be separate. Otherwise, the gift from one spouse to another is considered marital property. Other classification requirements for separate property:

• Assets acquired in exchange for separate property will remain separate so long as the initial separate property is traceable. For instance, an inheritance deposited into the joint bank account with no way to separate the inheritance portion from the marital portion will become marital property. One spouse using an inheritance to buy a piece of specific property such as an automobile continues to own the new property as separate property. Beware that an inheritance paid toward a marital residence owned by both parties is considered a gift to the marriage unless there is a specific directive otherwise at the time the inheritance is paid toward the marital residence.

• Income derived from separate property is also considered separate property unless the spouse owning the separate property is using his marital time and efforts to acquire the income. Any passive income derived from separate property remains separate property unless an action is taken which purposely or inadvertently changes it to marital property.

• Professional and business licenses that terminate on transfer are separate property

Separate property is not eligible for division in North Carolina equitable distribution because it is considered to belong to only one spouse, however, the court can distribute the separate property directly to the spouse owning the separate property. The spouses may, and often do, disagree with how property is classified and whether it should be subject to equitable distribution.

Lastly, divisible property may be subject to equitable distribution. This type of property consists of increases or decreases in the value of assets and debts which are marital property. Passive changes in value, i.e., the value of the marital residence or other marital property increases or decreases in value due simply to the fluctuation in the market, are considered to be marital so that each party is entitled to receive the value of one-half of such increase or decrease. t If the increase or decrease was directly caused by a spouse’s efforts, i.e., one spouse used his separate funds and efforts to remodel the marital home or the spouse’s actions which decrease the value by not caring for the property, such change in value belongs solely to the spouse using his efforts or neglect. Some types of passive income and passive changes to marital debt could also qualify as divisible property.

Marital Property Division in North Carolina

North Carolina law states that marital property and the net value of divisible property shall be equally divided unless that solution is not equitable. Equitable distribution does not mean a 50/50 split will go to each spouse. Either spouse is entitled to request more than 50 percent of the marital estate but, oftentimes, the spouses’ reasons are not sufficient to cause the court to distribute the property other than 50/50. When deciding on marital property division in North Carolina, a court will consider the following factors:

• Income, assets, and liabilities of each spouse

• The duration of the marriage

• The age and health of both spouses

• Pension and retirement accounts

This list does not include each factor listed in North Carolina General Statute § 50-20. The judge will consider a wide range of issues before deciding on how to divide assets and debts between the parties.

North Carolina Equitable Distribution Process

Remember that at least one spouse must request equitable distribution in a properly-filed claim prior to a final divorce. Beware that an equitable distribution claim pending by one spouse at the time of divorce may be dismissed by this spouse after the divorce is final. If this happens and the other spouse does not also have a properly filed claim pending for equitable distribution, this spouse will have lost the right to equitable distribution. It is not enough for only one spouse to have a properly-filed claim for equitable distribution prior to the divorce becoming final if the one spouse dismisses it after the divorce. To initiate this process, a complaint must be drafted and filed with the court. This legal document should include the request for equitable distribution, as well as various other details, including both spouses’ names , designation of plaintiff and defendant, the date of marriage, and the date of separation. You or your attorney must sign this document before submitting it to the court but not as a verification which is sworn to in front of a notary.

Once that complaint is filed, the spouse that initiated the claim has 90 days to prepare an equitable distribution inventory affidavit and serve the other party, although these deadlines vary from county to county. Thirty days later, the other spouse who was served must also complete an affidavit outlining the inventory of property for equitable distribution. It can be challenging to create an accurate inventory of years or decades of accumulated property, so courts are lenient with the contents of the initially-filed affidavit as long as a good faith effort was made to complete it. These affidavits can be amended.

Alternately, divorces that involve simple or few assets and debts may be better served using an equitable distribution worksheet instead of an affidavit.

Equitable Distribution Lawyer in North Carolina

Marital property division in North Carolina is a complex process that can be difficult to navigate, especially when emotions are running high. If you have questions about the North Carolina divorce property settlement process or how a court may handle your assets and debts in a North Carolina divorce, contact North Carolina Legal Services.