Over the course of a marriage, a couple, both individually and together, acquires property. In legal terms, “property” essentially means anything of value.
The following are some common examples of property:
- family home
- investments (bonds, dividends, stocks)
- retirement accounts
- investment and bank accounts
- business interests
In North Carolina, when a couple decides to divorce, they must divide their property. Dividing property is one of the most challenging steps in a divorce. Some couples can agree on how to divide everything, while others can’t. Because divorce is painful and seldom easy, it’s a difficult process. It can often raise complicated, personal matters and deciding who gets what can sometimes turn hostile.
When a couple can’t agree, they can ask the court to divide the property for them and apply the principle of Equitable Distribution. There are currently 41 ‘Equitable Distribution’ states (as opposed to the 9 ‘Community Property’ states) in the United States. North Carolina is considered an “Equitable Distribution” state.
Equitable Distribution focuses on fairness, not equality
This means that the court will evaluate each spouse’s previous actions and future needs and then divide the property equitably.
Classification of Marital Assets
Before the court can divide or determine anything really, it must classify all of the marital property. There are three kinds of classifications:
- Separate Property: this is property obtained prior to the marriage, as well as inheritances and gifts outside parties gave to a spouse during the marriage.
- Divisible Property: this is property obtained after a couple separated, but, in reality, was earned during the marriage (commissions, dividends).
- Marital Property: this is property acquired during the marriage, including gifts the spouses gave to one another.
Marital and Divisible Property are subject to Equitable Distribution. Separate Property is not.
Debts are also considered property and will be classified in the same manner (as either separate, divisible, or marital) and divided just like property.
Valuation & Division of Property
After the property is classified, the court will then estimate its value or worth. Ways to establish value include appraisals, expert testimony, sale prices, and market studies. The date the couple separated is the value date. Now that property has been classified and valued, the court can now proceed with dividing it (and, here is where the principle of Equitable Distribution is actually applied).
North Carolina law directs the court to divide the property equally. If, however, the court determines that equal division is not fair, it must divide the property in an equitable or fair manner. The state provides thirteen factors for the courts to consider when deciding whether or not equal division is fair. Those factors are:
- the duration of the marriage, the age of the spouses, and their well-being;
- whether the custodial spouse needs to reside in and/or own the marital home for the good of the couple’s children;
- support responsibilities from prior marriages;
- the affect upon a spouse’s financial status;
- the overall cash value of the marital estate;
- anticipation of non-vested pension rights;
- tax consequences;
- a spouse’s contributions toward buying property;
- a spouse’s contributions toward the other spouse’s career advancement or education;
- a spouse’s direct contribution to the increase in worth to the other spouse’s separate property;
- business interests that really only one spouse operates and which would be economically harmed if the other spouse interfered with or placed a claim upon it;
- actions to preserve or lessen marital property subsequent to the separation date;
- any other factor deemed by the court to be just and proper;
Equitable Distribution Does Not Always Mean Equal
After considering the thirteen factors, the courts can decide to divide the property in favor of one of the spouses. Here are six examples of how the property could get divided unequally:
- Intentional Depletion of Assets – This is when one spouse drains a joint bank account during the divorce proceedings. The court deems that the spouse improperly squandered the money and committed financial misconduct. The court orders a more equitable division of the property that favors the other spouse to compensate them for the lost money.
- Career Advancement – For example – during the marriage, one spouse stayed at home and cared for the children while the other spouse went to law school. The spouse that went to law school now has a high paying position with a law firm. The court orders a more equitable division of the property that favors the spouse that stayed home because they contributed toward the other spouse’s career advancement.
- Certain Medical Conditions – This is when one spouse has several chronic medical conditions that prevents them from working and earning a living. The other spouse is fully able to work and earns a high wage. Considering the non-working spouse’s age, health, and that the divorce will seriously impact their financial status, the court awards a higher percentage of the property for them.
- Custodial Care – This is when one of the spouses will be remaining in the marital home to care for the couple’s young children. It’s in the children’s best interests to remain in the home and attend the local schools. To compensate the custodial parent for the extra expenses, the court distributes to them a higher percentage of the property.
- Mortgage Payments – This is when one spouse continues to make mortgage payments on the family home during the divorce process. The other spouse does not. The court decides that the spouse who continued to pay the mortgage is entitled to compensation through a higher portion of the property.
- Custodial Parent – One of the couple’s children is disabled. The custodial parent cannot both work a full-time job and take care of the child. The custodial parent can only work part-time. The court distributes a more equitable amount to the custodial parent to help them care for the disabled child.
Equitable Distribution Is Not Automatic
Remember that the court only intervenes and makes decisions about how to divide the property when the couple cannot agree on how to divide the property on their own. In other words, neither spouse has an automatic right to an equitable or unequal property distribution.
Unless both spouses agree to unequally divide the property, one or both must assert their belief that they deserve an equitable division prior to the granting of the divorce.
Consult An Experienced Family Law Attorney
Equitable Distribution and property division are just some of the issues an individual might have to deal with when going through a divorce. If you are considering divorce or have recently separated from your spouse, you probably have many questions and concerns. It’s no doubt a difficult and overwhelming time.
Consult with an experienced family law attorney and figure out your next steps and legal rights. Call or email us today.