Equitable Distribution, or Division of Property

GENERALLY

Court involvement in the process of dividing marital property can be avoided if both parties involved in a separation or divorce agree on how the property will be distributed. The resulting agreement is called a separation agreement. If the parties cannot agree, it may be necessary to seek a court-ordered property distribution by way of filing a complaint for equitable distribution. In order to preserve a claim for equitable distribution, the parties must reserve the right to file a complaint in the divorce decree or have previously filed a claim for ED.

Separation Agreements

A separation agreement is a written contract between a husband and a wife, signed by both parties before a notary when the parties have agreed to separate permanently. The agreement is designed to settle any property, debt, alimony, child custody, visitation, insurance, tax, and child support issues that may lie between them. Each agreement is unique and can address other issues including the incorporation of a parenting agreement or pet custody agreement.

Prior to signing a separation agreement, the entry of a divorce from bed and board, another order of the court dealing with specific marital issues, or the grant of an absolute divorce, the parties to a marriage maintain all rights of a spouse including, but not limited to, insurance benefits, inheritance, and social security benefits. It is important to identify all issues that are or are not effected by separating pending the dissolution of the marital union.

Classification of Property as Marital, Separate and Divisible

Once the property is collected/identified by the parties, it must be classified. This process can get very technical when dealing with family business, vesting retirement and stock accounts, pensions and the like. Generally speaking the property is classified using the following concepts:

(1) "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 Marital property includes all vested and non-vested pension, retirement, and other deferred compensation rights, and vested and non-vested 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.

(2) "Separate property" means all real and personal property acquired by a spouse before marriage or acquired by a spouse by bequest, 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 that would terminate on transfer shall be considered separate property.

(3) "Divisible property" means all real and personal property as set forth below:

a. 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.

b. 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.

c. Passive income from marital property received after the date of separation, including, but not limited to, interest and dividends.

d. Increases and decreases in marital debt and financing charges and interest related to marital debt.

All property is considered marital property unless proven to be separate property. Also note that marital property includes both assets and debts acquired during the marriage by one or both spouses, and owned on the date of separation.

Distribution of Martial and Divisible Property

There shall be an equal division of the marital and divisible property as previously classified unless there are equity factors showing that to divide the marital estate equally would be inequitable. Simply put, absent other evidence or factors, the court will equally divide the marital property. A party may ask the court for an unequal distribution of property.

Martial misconduct including adultery, domestic violence, alcohol and drug abuse does not have a direct impact, that is a punitive impact, on determining whether the distribution between the parties is equitable unless the impact is purely economic. For instance, if a husband is an alcoholic and abandons the family business, then the court could consider the economic impact to the martial estate. However, if a husband is a completely normal functioning individual, the mere fact he is an alcoholic will not be a factor in determining how the martial estate is divided.

In considering whether or not to make an unequal distribution the court will consider the following factors:

The income, property, and liabilities of each party at the time the division of property is to become effective.
Any obligation for support arising out of a prior marriage.
The duration of the marriage and the age and physical and mental health of both parties.
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.
The expectation of pension, retirement, or other deferred compensation rights that are not marital property.
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.
Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse.
Any direct contribution to an increase in value of separate property which occurs during the course of the marriage.
The liquid or non-liquid character of all marital property and divisible property.
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.
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.
- (a) 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.
- (b) 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.
- Any other factor which the court finds to be just and proper.

Family Court Model

North Carolina has adopted a family court model for all domestic cases. That is the same judge will be assigned to hear all the matters within the context of one case, such as ED, alimony, child custody, child support etc. Within that context the court has adopted alternate dispute resolution methods. In the context of ED, it is mandated that the parties have a mandatory mediation to attempt to resolve the disputes over the division of the martial estate. In order to streamline this process the court in Wake County, and in most counties, adopted local rules to address the exchange of information prior to formal discovery. In Wake County the parties are required to file an Initial Disclosure and then an Equitable Distribution Affidavit.

The mediation will include you and your attorney and your spouse and his/her attorney. If the matter can be settled during this conference, an order for equitable distribution will be entered. If not, then matter will continue on to litigation and a judicial award.

If you would like further information about Separation and Equitable Distribution, or have questions regarding your individual situation, please Contact Us today to schedule a consultation with one of our experienced Family Law attorneys.

Prior to your appointment, you may wish to download and complete our Family Law Intake form to bring with you when you come.

Areas We Serve

The attorneys of Hopper Law Firm have practiced law predominantly in Raleigh, North Carolina (Wake County) and the greater Triangle area since 1994. However, depending upon the nature of the case, we often serve clients in the surrounding counties, including: Durham, Chatham, Orange, Johnston, Franklin, Harnett, Guilford, and Cumberland.