Equitable Distribution and Gifts
Can a house be a “gift?” What is Marital Property? Under the family laws for NC Equitable Distribution and Gifts, a Charlotte home (Denver NC residence) was determined to be marital property in Bond v. Manfredo.
Equitable Distribution involves the classification and distrubution of things like homes, bank accounts, personal property, 529 College Savings Plans, and retirement accounts. It is relatively complicated and often involves substantial sums of money – Bill Powers, Charlotte Divorce Attorney
Property distribution as part of a divorce is handled pursuant to North Carolina General Statutes and is not part of Common Law. Under N.C.G.S. Chapter 50, the family law statute, in handling the equitable distribution of what divorce lawyers may refer to as the “marital estate” or “marital property” (marital assets), the judge is required to follow a 3-step process:
- Determine what assets are marital property; and then,
- Figure out the net value of the property (Debts/encumbrances substracted from FMV Fair Market Value; and then,
- In an equitable fashion, distribute the property
Once a party makes an application for Equitable Distribution in Family Court, the Judge is required to determine what property is divisible property and marital property of the parties. North Carolina Family Laws – Distribution of Property
The family laws of North Carolina also require the Judge write a detailed and specific Order, such that the Court of Appeals (the reviewing court) can determine what was done, how Equitable Distribution was handled, and whether the decision was legally correct.
Equitable Distribution – Discretion of the Court
With few exceptions, Divorce in North Carolina is handled in District Court “Family Court.” Unlike other legal matters like a lawsuit in an accident case or contract dispute, the “amount in controversy” is not alleged in a Complaint for Divorce. For example, “small claims” in North Carolina are legal disputes under $10,000. District Court Civil Trials are limited to $25,000 in value and Superior Court Trials involve legal claims in excess of $25,000. See: Rules of Civil Procedure in North Carolina
As such, District Court Judges decide who gets the kids, visitation, support, and property distribution. That means juries in North Carolina do not decide family law issues involving equitable distribution. And those Family Court judges are given broad discretion in making their rulings. Put simply, but for an abuse of discretion, the Court’s Order will not be overturned.
Charlotte Divorce Lawyers may refer to that as the “abuse of discretion” standard, where the Court’s ruling will not be “disturbed” except in instances where the legal ruling and judgment of the court is “unsupported by reason” and “could not have been the result of competent inquiry.” Failure to follow the family laws in North Carolina (failed to comply with statute) can be an abuse of discretion.
Gifts to the Marital Estate – Gift of a Home
The NC Court of Appeals (NCCOA) ruled on August 21, 2018 in Bond v. Manfredo that use of the husband’s personal funds amounting to over $200,000 was a gift to the marriage. The husband and wife were married in 1999 and separated in 2014. In reviewing the legal ruling of the Hon. Sean P. Smith (a Charlotte NC District Court Judge), the NCCOA concurred with finding that the marital home was indeed a marital asset and therefore subject to Equitable Distribution.
The Husband in the case provided evidence, through personal testimony, that he never meant to make the home a gift to his wife and that her name was added to the Deed of Real Property because the closing attorney and real estate agent said her name had to be included.
Judge Smith found, in his Findings of Fact that, “the property was obtained and purchased for the joint benefit of the parties.” He additionally found the husband, “undoubtedly intended to make a gift to the marriage of the marital home.”
What is Marital Property in North Carolina?
Once again, what is and what is not marital property in North Carolina is defined by statute, which states in relevant part, “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.”
Property is considered a gift, under the family laws, “only if such an intention is stated in the conveyance.” The conveyance, which is a transfer of legal ownership, may be inferred when one spouse uses what otherwise may normally be categorized as “separate funds” to purchase property titled to both parties in a marriage as husband and wife (tenancy by entirety).
Bill Powers – Charlotte Divorce Attorney
If you have questions about the financial effects of a separation and divorce, especially given the potential long term consequences of such substantial figures, it makes sense to retain legal representation. Bill Powers is here to help. CALL NOW: 704-342-4357
529 Savings Plans
Equitable Distribution: 529 Savings Plans
In an Equitable Distribution NC proceeding, how does the Family Court judge classify college savings plans? Specifically, are 529 Savings Plans, funded during the marriage and using marital funds, classified as a marital asset, divisible property, or separate property?
In a case of first impression clarifying Equitable Distribution, the North Carolina Court of appeals classified savings pursuant to 529 Savings Plans a marital asset, and therefore subject to distribution – Bill Powers, Charlotte Family Law Attorney
In an August 7, 2018, published opinion written by the Honorable Richard Dietz, the Court decided a Mecklenburg County divorce matter known as: Berens vs Berens
How is Equitable Distribution NC Decided?
Under the Equitable Distribution laws in North Carolina, the trial court is required to “classify” the property into one of 3 categories:
- Separate Property
- Divisible Property
- Marital Property
Thereafter the court must then “distribute” the respective divisible and marital property. See: N.C.G.S. Chapter 50-20. Marital property in North Carolina is:
All real and personal property acquired by either spouse or both spounses during the course of the marriage and before the date of the spearation of the parties, and presently owned, except property determined to be separate property or divisible property
As a general rule, property acquired during the marriage yet given away to another party (not the husband or wife), including gifts to minor children, is not subject to equitable distribution.
Gifts Under the Equitable Distribution Laws
In order to constitute a “gift” under the law, there are two requirements:
- Present intent to make a gift, also known as donative intent; and,
- Delivery of the gift or actual or constructive delivery
That “delivery” must remove from the gift-giver all control, right, and title over the property.
As they relate to the Equitable Distribution Laws, 529 Savings Plans are NOT gifts. Unless specifically divested of an ownership interest, plan participants normally retain control over and ownership of the Savings Accounts. The children deemed beneficiaries of 529 Savings Plans do not control the assets under the Account.
Furthermore, pursuant to North Carolina 529 Savings Plans, the parents are not required to spend the funds on college or educational expenses for the benefit of their children (the plan beneficiaries). Technically parents have the legal right to withdraw all the funs associated with the 529 Plan, although there would be a hefty tax penalty.
Therefore, without some additional action undertaken by the parents to fully “gift” the 529 funds or restrict the use of the 529 Savings Plan, any savings accrued remain “solely the property of parents.” And as such, 529 Savings Plans are marital property and subject to Equitable Distribution as a marital asset.
Findings of Fact and “Unequal Distribution”
Chapter 50-20 authorizes the Family Court to Order an unequal distribution of marital property, subject to the Court’s proper consideration of the factors as listed within the “statutory factors” including things like:
- Property, income, and Liabilities of the parties
- The amount of time the parties were married
- The mental health and physical health of the parties
- Pensions, retirement accounts, and future deferred compensation not considered marital property
Any time the Family Court orders a division of marital property on an unequal basis, the court must make findings of fact as to each factor presented in evidence.” Many disputes regarding the distribution factors involve the findings of the court and how specific the court must be in specifying those findings of fact.
Divorce Lawyer Charlotte NC – Bill Powers
If you have questions about property distribution of marital assets, we are here to help. As Berens vs Berens makes clear, the process can be extremely complicated and have long-term financial consequences. Even in divorce cases that are generally amicable, disputes can arise over whether the property (both personal property and real property) is a marital asset.
Call Charlotte Divorce Attorney Bill Powers to schedule an in-person consultation: 704-342-4357
Property Distribution in Divorce Proceedings
In the United States, divorcing parties, depending on their state of residence, are subject to equitable distribution or community property rules as it relates to the division of their property. Most states adhere to equitable distribution standards while a minority of states observes community property rules.
Community Property States
Community property encompasses assets that were acquired during the marriage, but excluding gifts and inheritances. Community property does not consider the named owner on the title of the property. It only takes into consideration that the property was acquired during the marriage thus included in the “marital community.” A minority of states adheres to community property rules during divorce proceedings including Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, Arizona, California and Alaska (by agreement).
Equitable Distribution States
In an equitable distribution state, assets and earnings that are acquired during the marriage are divided equally at divorce. This mechanism is termed “equitable” because the means by which property division occurs is deemed “fair.” Under equitable distribution, the property acquired by both parties during the marriage is likely separated between the two parties, while property acquired before marriage or acquired by one party is usually distributed to the party with ownership. Therefore, a house bought by both parties during the marriage, a joint bank account and a jointly owned small business can be classified as marital property for the purposes of property distribution. Property owned by the parties is presumed as marital property unless it falls under the definition of separate property. In addition, if the court finds one party guilty of fault (i.e., adultery, abandonment, cruelty), the court may order one party to receive less than the equal share of the marital property. Even in this instance, although not equal, the distribution is deemed fair. North Carolina is an equitable distribution state.
Equitable Distribution in North Carolina
North Carolina adheres to equitable distribution rules of property distribution. In North Carolina, once marital property is classified, the court divides the property between both parties. However, the inquiry does not stop at identifying the marital property. North Carolina has promulgated twelve factors for which the court must analyze to determine the most equitable division. The factors include (§ 50-20):
- Income, property, liabilities of each party
- Any obligation of support from a prior marriage
- Duration of the marriage and the age and physical health of both parties
- Need for custodial parent to occupy or own marital residence
- Any expectation of pension, retirement rights that are not marital property
- Direct or indirect contributions made by one spouse for the education or development of the other
- Any direct contribution to an increase of value in separate property during the marriage
- Tax consequences of transferring property
North Carolina Divorce Attorneys
The attorneys at Powers Landreth PLLC have represented and advised clients on equitable distribution matters for many years. We have substantial knowledge in transactional and court processes as it relates to marital property distribution and we will aggressively represent you in your case. Contact us now for a consultation.