Are school loans marital debt?
Family court judges are charged with the responsibility of categorizing assets and debts, determining their value, and distributing them in a fair, equitable manner.
That’s how Equitable Distribution works in North Carolina.
And while that may seem rather straightforward or even obvious, such matters can be deceptively complex.
Married couples going through a divorce regularly dispute the value of houses, retirement accounts, and other assets as of the date of separation.
The other side of the coin involves the apportionment of debt, which may include things bank loans, mortgages, and even student loans.
And like real estate and other things of value that may be subject to repayment of a debt, assuming such debt was encumbered during the period of marriage, the Court must consider the “joint benefit” of the degree to the parties.
What is an education worth?
There are some general rules regarding Marital Debt in North Carolina and who bears the Burden of Proof to prove what is marital debt vs. separate (individual) debt.
The NC Divorce Laws, both under the Equitable Distribution statute and appellate court case law require:
- The party alleging debt is “marital” bears the Burden of Proof
- That includes proving the amount of the debt and debt value as of the date of legal separation
- AND that any such debt was undertaken for the joint benefit of the respective parties
There is also a balancing process of sorts.
If the Family Court Judge is to classify debts associated with student loans, there must be evidence the marriage lasted long enough for the parties to the marriage to “substantially enjoy” the benefit of obtaining the degree, which normally would be associated with improved earning capacity.
That may seem a bit nebulous if not downright confusing. Calculations regarding the value of an asset or debt may be relatively straightforward, based on hard numbers on bank statements and student loan records.
Figuring out how that could serve as a future benefit to either or both parties, while subject to the rules of production of evidence, is a bit more discretionary. That’s not unusual. In family court and legal issues involving Equitable Distribution, there are many, many issues left to the sound discretion of the court.
Are gifts Marital Property?
As long as the Court (the District Court Judges) does not abuse her or his discretion in making legal rulings, they will not be overruled. The Appellate Courts will not overturn ED rulings unless the Judge abuses their discretion or otherwise rules inconsistent with their Findings of Fact.
The Judge’s ruling on ED (Equitable Distribution) is followed, unless there is an obvious, clear abuse of discretion – Bill Powers, Charlotte Divorce Lawyer
Reversing the Court’s ruling is an incredibly difficult thing to do. The appellate court would have to find the entry of judgment (the legal ruling) is not supported by reason. It would also have to be shown that the Judge’s decision was not the natural consequence of or the result of a “competent inquiry.”
Otherwise, it would have to be shown that the Judge did not comply with the NC Family Law statutes, thus resulting in an abuse of discretion.
What is considered as part of Equitable Distribution?
There is a three-step process mandated under the Family Law statutes. The Judge is required to:
That applies to both assets and debts of the parties. Classification involves determining who owns what. That means answering the question, “What is a marital asset (or debt) and what is separate property (property owned by the individual people involved)?”
There actually is another type of property to consider, which is referred to as divisible property.
Debt associated with the marriage, which is also known as “marital debt” involves debts that are incurred during the period of the marriage and prior to the date of separation. Such taking on of debt must have been for the “joint benefit” of the spouses.
The moving party (the party trying to prove the debt is “marital”) has the legal duty to prove first the value of the debt at the date of separation and that the debt was incurred for the benefit of both parties, jointly.
Are school loans “Marital Debt?”
Additional education and degrees are not technically property that can be divided. At the same time, loans incurred for education during the period of marriage may be considered marital debt. The court must also consider whether both parties to the marriage are expected to share in the rewards of a degree or education.
Student loans may be deemed marital, even if the funds are not specifically used for education alone. As such, traditional education expenses regarding tuition, books, lab fees, etc., may be deemed marital debt.
Furthermore, student loans used to pay bills, buy groceries, and even pay for the costs of childcare may also be deemed a marital debt. That’s true also for expenses associated with travel and maintenance of the household to the benefit of the marriage overall.
The moving party (the spouse seeking to have debts classified as “marital”) must present evidence regarding the marriage and whether it lasted long enough both parties to “enjoy the benefits of the degree or higher earnings.”
Does it matter whether money is kept is separate accounts?
Maintaining separate bank or savings accounts while married is not necessarily determinative of the debt/asset classification. It is relevant for the court to consider.
Whether the debt or asset is kept in the name of both or even just one of the spouses is not the sole, determinative factor. The Court, in its Findings of Fact and Conclusions of Law, is required to consider in the totality of circumstances the evidence presented.
It frankly can be a complicated process. Figuring out how long means “long enough” to “enjoy the benefits” of education is not necessarily formulaic or an exact science.
If you have questions about this or how the Equitable Distribution laws in North Carolina work, please call NOW: 704-342-4357
Amazon Bezos World’s Richest Man After Divorce?
Will Jeff Bezos still be the “worlds richest man” after getting divorced? Maybe. A lot depends on whether Bezos and his wife executed a contract that is often referred to as a Prenup or Pre-Nuptial agreement.
Of course, Jeff Bezos may not have been the world’s richest man in the first place. It’s likely he was a part of the world’s richest couple.
All the money earned at Amazon probably isn’t “his.” Instead, it’s reasonable to assume the billions from Amazon is theirs.
That’s because wealth accumulated during the period of marriage is often considered part of the marital estate, at least that would be the case under the NC divorce laws.
Without some form of agreement to the contrary, Bezos likely only ever owned 1/2 of the reported 137+ billion dollars – Bill Powers, Divorce Lawyer Charlotte NC
Indeed, some might say the term “world’s richest man” engenders a hint of sexism. President Trump purportedly said of Bezos, “I wish him luck, it’s going to be a beauty.”
It assumes wealth earned by the man is his and anything “given” to the wife, as part of a divorce or Equitable Distribution, was his to lose.
If marriage is truly a union where “two become one,” it’s a good idea to consider the fact that if you own a 1/2 interest in an asset, you are only ever entitled to 1/2 the value of that asset, if that.
Marital estates with substantial value (real property, bank accounts, and income), where those assets were obtained during the period of marriage and not treated as separate or individual property, are often divvied up straight down the middle.
Yet, under the NC divorce laws, you’d remiss in assuming “equitable” means “equal” in every instance.
In fact, an equitable distribution may very well result in one party to the marriage getting a larger percentage of the marital assets after careful consideration of a series of different factors.
What is Equitable Distribution in NC?
The etymology of the word “equity” comes from the Latin term aequitatem, which means “equal, impartial, and fair.” Under the laws setting forth the manner of determining equitable distribution in NC, equity does not necessarily mean 1/2.
In fact, what a Family Court Judge determines to be equitable could be anything but uniformity, equality, or symmetry. The Court must consider big picture things such as:
- Amount of money at hand
- Bank Accounts
- Checking / Savings
- Liquid Assets
- Prior marital estates
- Settlements and support requirements
- Relative infirmity of one spouse
- Housing needs
- Deferred income
- Income Due
- Profit Plans / Vested Interests
- Retirement Accounts
The specifics of Equitable Distribution are set forth in the NC General Statutes in N.C.G.S 50-20. The process includes three general steps or CVD: Classification, Valuation, and Distribution.
What is Marital Property?
If an asset is classified as “separate” or an individual asset belonging only to one spouse in the marriage, its value often isn’t quite as contentious. That’s because assets determined to be separate property are not Marital Property and therefore not subject to equitable distribution.
While Courts must consider individual separate property in determining things like Alimony in North Carolina, if found to be the possession of one party and not the marital estate, ED simply does not apply – Bill Powers, Divorce Attorney Charlotte NC
The process of figuring out what is marital property vs a separate or individual asset falls within the duty of the Court to classify property. Part of that may also include an assessment of what is divisible property.
NC Equitable Distribution Laws
Divisible property is a way to work through fluctuations in the value of marital property, both good and bad. Divisible property involves increases (and decreases) in the value of the marital property that occur after the date of formal separation but prior to the formal distribution of assets.
“Property” may or may not specifically relate to real estate. Divisible property may involve increases and decreases in value to houses and real estate, retirement accounts, and even things like precious metals or jewelry.
Once the asset is “classified,” the next step is to determine the value of that asset. Thereafter, the Court Orders the distribution of the asset. That may involve writing a check or transferring title to cars and houses or handing over personal items.
It sounds simple enough, that is until you disagree whether you intended something of value to remain yours, and yours alone, and not part of the marital estate. And as you might understand, the value of things commonly is a source of disagreement.
Powers Law Firm PA – Divorce Lawyers Charlotte NC
If you have questions about how the divorce laws may affect you or whether Equitable Distribution in NC includes gifts from family or an inheritance, give us a ring. We’re here to help.
You may reach Bill Powers by email: Bill@CarolinaAttorneys.com
**Unlike criminal defense matters and/or those involving DVPO Domestic Violence Protective Orders, consultation fees may apply. Our law firm charges hourly rates for divorce and family law legal representation.Learn More
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