When North Carolina couples decide to get divorced, they are also making the decision to separate their resources. North Carolina General Statute 50-20 governs the process of dividing assets and debts for divorcing couples in North Carolina. Part of this endeavor involves taking inventory of a couple’s assets and identifying how they should be classified; as marital, separate, or divisible property.
Marital property is defined as real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of separation.
Separate property is real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage.
Divisible property is defined as all appreciation and diminution in value of marital property and divisible property of the parties occurring after the date of separation and prior to the date of distribution, except that appreciation or diminution in value which is the result of post-separation actions or activities of a spouse shall not be treated as divisible property; all property, property rights, or any portion thereof received after the date of separation but before the date of distribution that was acquired as a result of the efforts of either spouse during the marriage and before the date of separation, including, but not limited to, commissions, bonuses, and contractual rights; passive income from marital property received after the date of separation, including, but not limited to, interest and dividends; and passive increases and passive decreases in marital debt and financing charges and interest related to marital debt.
There are two ways that the value of a separate property changes; through active or passive appreciation. Active appreciation results from contributions, either by marital funds or marital efforts. Passive appreciation results when neither party is actively causing the change in value. An example of passive appreciation is inflation or market forces that are commonly found within a retirement account, investment account or other intangible assets.
Contributions made by the marital estate, in addition to the increase in the value of those marital contributions, regardless of whether the increase is the result of passive or active appreciation, will be classified as marital property.
Conversely, if the property is classified as separate, and the marital estate makes no contribution to the separate property during the course of the marriage, the separate property will maintain its separate classification. A common example of this is with a retirement and/or investment account. If the retirement or investment account is owned by a spouse prior to the date of marriage, and the spouse did not contribute to the retirement or investment account during the marriage, any increase in the account due to market gains, or interest earned, would remain that spouse’s separate property.
If you need legal advice or representation in a divorce regarding the distribution of assets, please contact one of our lawyers at Jetton & Meredith. Our family law attorneys are equipped with knowledge and experience to help you maneuver through these difficult times.