In North Carolina, Equitable Distribution (ED) is the law of the land. What does this mean for you and your spouse if you plan to get divorced?
Equitable Distribution of marital assets means that property deemed part of the “marital estate” will be divided in a way that’s fair, just, and thereby “equitable.” But what does “fair,” “just” and “equitable” mean, exactly?
To determine what is equitable in your case, the Judge will consider a number of factors. Equitable distribution of marital property does not always mean ‘equal’ – Bill Powers, Charlotte Family Law Attorney
Equitable Distribution under the NC Divorce Laws
Equitable distribution is the formalized system of dividing property in North Carolina. It’s based on the idea that marriage is an equal partnership, with the purpose of ensuring both spouses leave a divorce with their fair share of what they’ve built together over time.
Our position as family law attorneys, considering the emotional and financial costs of divorce in Charlotte, is that it is a good idea for the parties to work together, in good faith, in negotiating the identification, classification, valuation, and distribution of marital assets. While litigation is an option, having a District Court Judge ultimately decide a dispute tends to be expensive.
It also may not end with the result you hope for.
That’s because family law disputes in North Carolina are decided by a district court judge in “Family Court.” Jury trials are not part of family court litigation and are generally reserved for lawsuits in Superior Court involving “heart balm” claims for Alienation of Affections and those alleging Criminal Conversation.
Our divorce lawyers often refer to such matters as “AACC” tort claims.
As such, if the parties cannot come to an agreement, a Family Court Judge in Charlotte will decide issues involving custody of children, and child support, alimony, Post Separation Support (PSS), and Equitable Distribution in Mecklenburg County.
Equitable distribution of property and division of marital property disputes are frequently litigated in Mecklenburg County Family Court. Unfortunately, when it comes to ending a marriage, people sometimes allow emotions, rather than good economic sense, to rule.
People will spend money they don’t have to inflict emotional pain on their spouse. While reasonable minds can disagree, working together in good faith to resolve differences, in our humble opinion, is the better way to go – Bill Powers, Divorce Lawyer Charlotte NC
Determining what is marital property vs. what is separate property can in fact be quite complicated.
Legal disputes are common when marital assets involve ownership interests in a business and a complex marital estate, which may include real estate and personal property, college savings funds, retirement accounts, vacation properties, and the like.
The equitable division of marital property, in the context of litigation, may necessitate employing forensic experts to value businesses and property. To assume that is an inexpensive process would be a mistake.
In addition to contentious child custody issues, Equitable Distribution tends to be one of the most hotly disputed legal issues in Charlotte Family Court – Bill Powers, Charlotte Divorce Lawyer
What does the Court consider in determining what distribution of marital property is equitable? (Equitable Distribution)
In making its ruling on Equitable Distribution, the judge may consider things such as:
- The contributions each spouse made to the marriage (both financially and otherwise) during its existence
- The age and health of both spouses
- All income or assets that are expected to be available at divorce or through retirement plans
- Cash on hand
- Prior marriages and financial commitments
- Marital Debt
Here’s what you need to know about equitable distribution of assets in North Carolina:
The law applies to any and all types of assets acquired during marriage. This includes pensions, 401(k)s, savings accounts, homes (including mobile homes), vehicles, businesses, and professional practices – just to name a few examples.
ED – Equitable Distribution involves marital assets and marital debts. It is generally thought of separate and apart from financial considerations associated with child support and alimony.
Each case is different. That’s why it is so important to consult legal counsel before signing any agreement that results in a waiver of your right to equitable distribution.
What type of property is covered by Equitable Distribution?
In general terms, equitable distribution applies to all marital property acquired during your marriage no matter which spouse’s name it is titled in. It is frankly a rather complicated and therefore often litigated aspect of divorce in North Carolina.
Equitable Distribution may include things like:
- Real estate you own together (including any improvements or additions)
- Your household items
- Any retirement benefits from either spouse’s job
- If one spouse has a business, his/her interest in the business
- Cars, jewelry, savings accounts, credit cards, and cash on hand
What isn’t covered by Equitable Distribution?
Separate property doesn’t count under equitable distribution simply because it, by its very definition, is not part of the marital estate. It is separate; it is therefore not a “marital asset” and is the separate, individually owned property by one of the parties to the marriage.
Separate property in North Carolina, relative to claims for “ED” or Equitable Distribution may include Real Property (real estate) and other forms of personal property acquired prior to the marriage of the parties or by gift and/or inheritance prior to or during the marriage.
It’s important to note that separate property can become marital if it is “transmuted” into a marital asset. In other words, this means that something like individual bank accounts owned prior to your marriage (including checking and savings) can be considered as part of equitable distribution proceedings in North Carolina depending on the way they are used or managed by you both during your marriage.
This could also apply to real estate owned before the marriage; however, there must be sufficient evidence that the pre-marriage home was intended to remain an individual asset throughout your union together – not simply because one spouse chose to live there alone for years prior to getting married.
What is the difference between Marital Property And Separate Property?
Marital property includes assets acquired during the course of the marriage. This is generally considered to be all property acquired during your union together, regardless of whose name it’s in or how much was paid for it. There are exceptions. For example, inheritances during the marriage that are given exclusively to one spouse are ordinary deemed separate property unless comingled.
Separate property refers to any and all assets owned by one spouse prior to his/her current marriage. It can also include gifts and inheritances given exclusively to just one person within the marriage, so long as they are not mixed with marital funds.
It is a notoriously complex area of divorce law in North Carolina.
What is Separate Property?
Separate property can be a bit complicated. In general terms, separate property may include both real property (real estate) and personal property that one spouse owned before the marriage or received as a gift during the marriage (like an inheritance).
This doesn’t mean it’s off-limits in your settlement negotiations. If you acquired this separate property with marital funds-maybe by refinancing your house to pay for school, then using those loan proceeds to help start up a business-you’ll likely have to account for how much of its value was accumulated while you were married.
Why is the classification of property so important?
When you’re negotiating equitable distribution-which means dividing up the value of all of the assets you acquired throughout your relationship as well as debts accrued by either spouse after separation- maintaining separate property can help prevent one party from being awarded more than what’s fair under North Carolina law.
The main reason people want to claim the property as their own, separate asset is because they don’t want it subjecting them to the Court’s division of marital assets if a divorce should occur.
In other words, you might be okay with your spouse getting 50% of everything from the marriage during equitable distribution proceedings.
On the other hand, you might not want to include something very valuable – like an investment account or real estate purchased before you were married or a family heirloom. Maintaining property as “separate” can have a huge impact on your financial future and quality of life post-divorce.
What Is Transmutation?
Transmutation is a legal term for converting property from separate to marital. The process usually involves changing the title on an asset like real estate, or taking something that would otherwise be considered separate and mixing it with marital assets (e.g., making deposits into joint accounts; using money earned during marriage to improve your home).
Most people don’t want their separate property subjecting them to equitable distribution proceedings because this could result in an unfavorable outcome where the Court ends up awarding a percentage of it to the other spouse.
How does the Court decide what is fair when it comes to Assets and Debts?
Property acquired during the marriage is generally divided equally between spouses. At the same time, the Court in appropriate circumstances may order an unequal division, resulting in an unequal distribution. Again, Equitable Distribution does not in every circumstance mean equal.
There are instances when an unequal distribution may, in fact, be deemed “equitable” by the Court if appropriately set forth in the Findings of Fact and Conclusions of Law.
The Court is given a substantial amount of discretion to award one spouse more of the marital assets than the other if it finds that doing so would be equitable under the given fact pattern and individual circumstances.
In North Carolina, a demand for equitable distribution must be specifically pled in a Complaint for Divorce. If a final Decree of Divorce is entered without proper filing for Equitable Distribution pursuant to N.C.G.S. 50-20, the matter cannot thereafter be brought or considered.
Failure to property plead Equitable Distribution, therefore, serves as a waiver of the right to Equitable Distribution in North Carolina.
What you need to know about Equitable Distribution in North Carolina: A Family Lawyer Can Help!
The rules governing equitable distribution proceedings in NC can be complicated, so we strongly recommend consulting with an experienced family law attorney if you need help understanding how they might apply to your particular circumstances or whether you should consider filing for divorce before moving forward with any large purchases (such as real estate).
A good thing about working with our team at Powers Law Firm P.A. is that we will always take the time to explain your options and how they might affect you, regardless of whether or not you decide to hire us for legal representation.
Equitable Distribution Lawyers in Charlotte, North Carolina
If you have questions or need assistance working through this process, contact our experienced family law attorneys today to schedule a private, confidential consultation.
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The information contained in this blog is provided for general educational purposes only; it does not constitute the provision of legal advice nor establish an attorney-client relationship between our firm and any reader or website visitor.