Property Division in North Carolina Divorce - Protecting What’s Yours

If you are going through a separation or divorce and beginning this process, don’t worry. We are here to help. This blog post will provide you with a broad guide on how to move forward, step by step, so that you can understand what’s at stake and how to set yourself up for success in your next chapter of life.

How is Property Divided?

In North Carolina, the process of dividing marital property is called “equitable distribution.” It is important to note that dividing the assets fairly does not necessarily mean dividing them equally. Equitable distribution generally aims to divide your assets in a way that is fair. In some cases, the Court may determine that an unequal distribution is more equitable. This allows for flexibility to help ensure the most just outcome possible.

Types Of Property

First, it is important to understand the two types of property that we will be looking at during this process:

• Marital Property is all of the property that you or your spouse acquired while you were married. This includes but is not limited to joint bank accounts, your home, and personal possessions ranging from furniture to even your pets.

• Separate Property is all of the property that each party to the divorce owned before getting married. This can also include some things that you acquired individually, such as gifts and inheritances.

Understanding these categories is key to knowing what’s up for division—and what’s not.

So, first, we need to determine what is considered “marital property” and what property belongs to each party individually.

Step 1: Review Your Prenuptial Agreement (if you have one)

The first step in the equitable distribution process is to determine whether you or your spouse have a prenuptial agreement. A valid prenuptial agreement can establish clear guidelines for dividing property, saving time and reducing potential conflicts.

Why Start with a Prenup?

Prenuptial agreements can:

• Clarify Ownership: Specify which assets and debts are considered separate property and not subject to division.

• Define Marital Property Rules: Outline how specific marital assets will be divided, such as bank accounts, real estate, or retirement funds.

• Simplify the Process: Remove certain assets or debts from the equitable distribution process altogether.

What Happens If There’s No Prenup?

If no prenuptial agreement exists—or if the agreement doesn’t address all areas of property division—North Carolina’s equitable distribution laws will guide the process. This means the court will step in to ensure a fair division of marital property and debts, following a structured process that begins with identifying and categorizing assets.

Step 2: Identify and Separate Property

If your prenuptial agreement doesn’t cover all assets—or if you don’t have one—the next step in equitable distribution is determining what property is marital and what is separate. This distinction is crucial because only marital property is subject to division under North Carolina law.

What Is Marital Property?

Marital property includes assets and debts acquired by either spouse during the marriage, such as:

• Real estate purchased together.

• Joint bank accounts or investments.

• Retirement accounts that grew during the marriage.

• Personal property, including vehicles, furniture, and even pets.

What Is Separate Property?

Separate property generally refers to assets owned by one spouse before the marriage or acquired individually during the marriage, such as:

• Inheritances or gifts given exclusively to one spouse.

• Items explicitly protected by a prenuptial agreement.

• Property kept separate from marital funds (e.g., an inheritance deposited in an individual account).

How to Classify Property

Determining whether an asset is marital or separate often requires a detailed review of:

• Acquisition Date: When was the property obtained? Anything acquired before the marriage is likely separate property.

• Source of Funds: Was the property purchased with marital income or separate funds?

• Commingling: Were separate assets combined with marital funds, making them harder to classify as separate?

If you’re unsure about how to classify specific assets, schedule a consultation and we’ll have one of our family law attorneys help you through this process. Misclassifying property can lead to costly disputes and even litigation, so it is best to get things right from the beginning.

Next Steps

Once your assets are categorized, the process moves to assigning values and dividing marital property equitably. Even if you and your spouse disagree on the classification of some items, understanding the basics of marital and separate property is a key step in moving forward.

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Step 3: Evaluate the Value of Marital Properties

After identifying and categorizing all property, the next step in the equitable distribution process is to assign a value to each marital asset.

How to Value Property

1. Identify All Property: Now that you have identified all of your marital property in Step 2, make a comprehensive list of everything you and your spouse own together, including assets and debts such as:

• Real estate.

• Bank accounts.

• Retirement funds.

• Personal property (e.g., vehicles, furniture, or collectibles).

• Debts like mortgages, credit card balances, or car loans.

3. Appraise Assets: Each item must be assigned a fair market value. This can be done a few different ways, depending upon the type of asset:

• Professional Appraisals: For real estate, businesses, or unique items like jewelry.

• Account Balances: For bank and retirement accounts, use statements from the date of separation.

• Market Comparisons: For personal property like vehicles, check resale values through reliable sources.

5. Categorize Debts: Assign values to marital debts as well, using their outstanding balances at the date of separation.

Why Accurate Valuation Matters

Valuing property correctly ensures a fair division of assets. Inaccurate or incomplete valuations can lead to costly and time consuming litigation if a dispute arises..

What Comes Next?

Once all marital property is valued, the focus shifts to dividing these assets equitably. The court or both parties will evaluate several factors to determine what’s fair.

Step 4: Protect Your Property in Divorce

Going through a divorce can feel like a tug-of-war, but there are steps you can take to protect your interests:

Understanding Your Rights Before and After Filing

If you are in the process of separating or have recently been notified that your spouse has filed for divorce, it’s essential to know that you must file for equitable distribution (ED) if you want to divide marital assets. Filing for divorce alone does not automatically trigger the division of property.

If you file for divorce first, be sure to request equitable distribution early in the process. If you’ve been notified that your spouse has already filed, it’s important to act quickly and file your request for ED to protect your rights. Once the divorce is finalized, your ability to claim property distribution is generally lost, so timely action is crucial.

Document Everything

Before filing for divorce, create a detailed list of all your assets and debts. Include:

• Bank statements.

• Tax returns.

• Deeds or titles to property.

• Receipts for valuable items like jewelry or electronics.

Avoid Making Serious Mistakes

Hiding assets or running up debts before the divorce is finalized can backfire. North Carolina courts take economic misconduct seriously and may penalize anyone who tries to cheat the system.

What Happens If You and Your Spouse Can’t Agree?

Any divorce is difficult. Disagreements are natural, but your financial future is at stake. It is important to get things right, including how to divide. You don’t have to do this alone. At North Carolina Legal Services, we’ll help you protect your rights, avoid costly mistakes, and set yourself up for success in the next chapter of your life.

Contact us today to schedule a consultation and start moving forward with your case. Let us handle the complexities, so you can focus on what matters most.