This area of family law is often the most complex and time consuming.  In this action the Court will endeavor to “equitably” divide your marital property.

“Marital property means all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property or divisible property in accordance with subdivision (2) or (4) of this subsection. Marital property includes all vested and nonvested pension, retirement, and other deferred compensation rights, and vested and nonvested military pensions eligible under the federal Uniformed Services Former Spouses' Protection Act. It is presumed that all property acquired after the date of marriage and before the date of separation is marital property except property which is separate property under subdivision (2) of this subsection. It is presumed that all real property creating a tenancy by the entirety acquired after the date of marriage and before the date of separation is marital property. Either presumption may be rebutted by the greater weight of the evidence.  N.C.G.S. 50-20(b)(1)

To try to put it in more of a layman’s terms, it is any and all property, tangible and intangible, regardless of whose name it is in, that was:

1.     acquired by either or both parties after the date of marriage and before the date of separation,

2.     that still exists on the date of separation,

3.     that was purchased with funds earned during the marriage, or that was acquired with work/effort of a party during the marriage,

4.     that was not inherited by one party,

5.     that was not gifted individually to one party by a third party (rather than gifted to the couple, or a gift between spouses, both of which are marital property

‘Separate property’ means all 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. However, property acquired by gift from the other spouse during the course of the marriage shall be considered separate property only if such an intention is stated in the conveyance. Property acquired in exchange for separate property shall remain separate property regardless of whether the title is in the name of the husband or wife or both and shall not be considered to be marital property unless a contrary intention is expressly stated in the conveyance. The increase in value of separate property and the income derived from separate property shall be considered separate property. All professional licenses and business licenses which would terminate on transfer shall be considered separate property.  N.C.G.S. 50-20(b)(1)

If you owned something before you got married, it remains your separate property unless you transferred it to your spouse without specifically designating in the conveyance that the transfer was not a gift in the conveyance.  There are some nuances to this; specifically, when you and/or your spouse actively work to improve the value of your separate property during the marriage, at which time your separate property acquire a marital component.  We can discuss these types of circumstances in your consultation.

The Court is required to presume that a 50/50 split of all marital property is “equitable.”  But a judge does not have to do a 50/50 split if the judge finds that such a split is not equitable.  However, this will be based solely on economic factors, and not on marital fault.  The factors are as follows:

1.     The income, property, and liabilities of each party at the time the division of property is to become effective.

2.     Any obligation for support arising out of a prior marriage.

3.     The duration of the marriage and the age and physical and mental health of both parties.

4.     The need of a parent with custody of a child or children of the marriage to occupy or own the marital residence and to use or own its household effects.

5.     The expectation of pension, retirement, or other deferred compensation rights that are not marital property.

6.     Any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services, or lack thereof, as a spouse, parent, wage earner or homemaker.

7.     Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse.

8.     Any direct contribution to an increase in value of separate property which occurs during the course of the marriage.

9.     The liquid or nonliquid character of all marital property and divisible property.

10.  The difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest, intact and free from any claim or interference by the other party.

11.  The tax consequences to each party, including those federal and State tax consequences that would have been incurred if the marital and divisible property had been sold or liquidated on the date of valuation. The trial court may, however, in its discretion, consider whether or when such tax consequences are reasonably likely to occur in determining the equitable value deemed appropriate for this factor.

12.  Acts of either party to maintain, preserve, develop, or expand; or to waste, neglect, devalue or convert the marital property or divisible property, or both, during the period after separation of the parties and before the time of distribution.

13.  In the event of the death of either party prior to the entry of any order for the distribution of property made pursuant to this subsection:

a.     Property passing to the surviving spouse by will or through intestacy due to the death of a spouse.

b.     Property held as tenants by the entirety or as joint tenants with rights of survivorship passing to the surviving spouse due to the death of a spouse.

c.     Property passing to the surviving spouse from life insurance, individual retirement accounts, pension or profit-sharing plans, any private or governmental retirement plan or annuity of which the decedent controlled the designation of beneficiary (excluding any benefits under the federal social security system), or any other retirement accounts or contracts, due to the death of a spouse.

d.     The surviving spouse's right to claim an "elective share" pursuant to G.S. 30-3.1 through G.S. 30-33, unless otherwise waived.

14.  Any other factor which the court finds to be just and proper.

The judge cannot split all assets in half.  You are not going to cut your cars or house in half. Rather, the judge is going to inventory all items of marital property and debts that you own and determine the “fair market value” of each. Fair market value in most contexts is what a willing buyer would pay a willing seller for the item that you owned, in the condition that you owned it on the date of your separation.  It is not replacement value.  For most furniture items this is the price you might get at a garage sale or on Ebay, Facebook Market Place or Craigslist.  So, before you ask the court to consider an equitable distribution of all kinds of furniture items, consider the wisdom behind paying at attorney hundreds of dollars per hour to argue over pots, pans and twenty year-old couches.  The wisest strategy usually is focus on the major assets of significant value.

Once all items of marital property have been inventoried and their fair market value determined, the judge will generally allocate to each party those assets and debts in the manner that makes the most sense.  If you have primary custody of the kids, you will probably get the minivan or SUV.  You are probably going to get the debt that is already in your individual name, as will your spouse.  If one spouse is distributed the marital home, they will also likely be distributed the mortgage that goes along with it.  The judge is supposed to try to give both of you assets and debts in a manner that results in you each getting the same net value (assets minus debts).  However, this is often not possible because houses and cars cannot be chopped in half.  So, in the case where one party will receive a greater net value than the other, the Court will usually order that party to pay a tax-free payment to the other party called a “Distributive Award,” in order to balance out the relative marital estates of the parties “equitably.”

“Distributive award’ means payments that are payable either in a lump sum or over a period of time in fixed amounts, but shall not include alimony payments or other similar payments for support and maintenance which are treated as ordinary income to the recipient under the Internal Revenue Code.” N.C.G.S. 50-20(b)(3)

The equitable distribution system can raise innumerable question in your mind.  What if a spouse wants the marital home, but can’t pay for or refinance it?  What if you don’t know what assets you own because your spouse has always been in control of all the assets?  How will the Court treat your assets that have gone up or down in value substantially since you separated?  What if your spouse owns a business or has an interest in a pension that will be paid in the future?  What if your spouse has a bunch of cash and you don’t know where it’s buried? What if all you own is debt?  Who makes the payments on the debts while the case is pending?  What happens if either of you file for bankruptcy?

These are all common questions in this area of law and we can discuss the answers to all of these in your consultation.  It is important that you, to the best of your ability, bring to the table the knowledge of the assets and debts you and your spouse own, as well as your best estimate of the values of those assets and debts.  Obviously, I understand if you are in a situation where you do not know some or all of what is owned.  But, the more complete of a picture you can provide me of your marital estate in advance of or during your consultation, the better I can forecast for you the most likely outcomes and issues and the best strategy for preserving as much of your hard earned assets as possible.