Edited by Clare Poston | Published on October 7, 2024
When a marriage ends, dividing marital assets can be one of the most complex and emotionally taxing aspects of the separation process. In North Carolina, the division of property acquired during the marriage is governed by North Carolina General Statutes § 50-20, which outlines the principles of equitable distribution. But what exactly does “equitable distribution” mean and how are marital assets divided upon separation?
What is Equitable Distribution in North Carolina?
Equitable distribution refers to the “equitable,” but not necessarily equal, division of marital property between spouses during a North Carolina separation or divorce. North Carolina law requires a court to divide property equitably, meaning the court aims to achieve fairness in the division of assets based on each couple’s specific circumstances and the categorization of the assets. While some states follow a “community property” approach and divide property exactly 50/50, North Carolina takes a more flexible approach, considering multiple factors to determine what is equitable under the circumstances.
Marital Property vs Separate Property NC
Before a court can distribute marital property, it first classifies the property into two categories: marital property and separate property.
- Marital Property: Any property acquired by either spouse during the marriage is generally considered marital property. This includes, among other things, real property, transportation, bank accounts, investments, retirement, and debts. For the purposes of equitable distribution, marital property is all property acquired from the date of marriage until the date of separation. Marital property does not generally include any gifts or inheritance that have not been comingled with marital assets. All property that is classified as “marital” is subject to equitable distribution in a North Carolina divorce and will be divided amongst the couple
- Separate Property: Property acquired before the marriage, after the date of separation or through inheritance or gifts specifically given to one spouse during the marriage is considered the individual’s separate property. Separate property is not divided between the spouses during their separation but rather it remains with the original owner. However, complications can arise when separate property becomes mixed with marital property-this is called the commingling of assets.
Example: A Case of Commingling
Let’s say one spouse owned a vacation home before the marriage, but the couple used marital funds to remodel it, making it significantly more valuable. In this case, while the home might have been one spouse’s separate property at the time of the couple’s marriage, the use of marital income to improve the property could make the vacation partially subject to equitable distribution.
Similarly, if one spouse had a retirement account that grew substantially during the marriage, the increased value attributable to marital contributions might be divided between both spouses, even if the account originally belonged to only one of the parties and thus started as separate property. This illustrates how property division in a North Carolina divorce can involve nuanced considerations as well as financial tracing.
How Does the Court Decide What’s “Fair” in a North Carolina Divorce?
Although a 50/50 split may be a starting point in North Carolina, it is within the power and discretion of a court to make an unequal distribution to one spouse. Likewise, parties coming to a private agreement may decide to split their assets however they please and are not required to follow a 50/50 approach. North Carolina courts consider a variety of factors affecting property division to determine how to divide marital property. Some of these factors include:
- The income, property, and liabilities of each spouse
- The duration of the marriage
- The physical and mental health of both parties
- The contributions of each spouse to the marriage, including the contribution of a spouse as a homemaker. The custodial parent’s need for the marital residence or household goods if the couple has children
- Any direct or indirect contributions to the other spouse’s education, career or earning potential
It is important to note that marital misconduct-such as adultery-typically does not affect the division of property in the same way it may affect other areas of a North Carolina separation. However, financial misconduct, such as hiding assets, has the potential to impact a court’s decision.
Example: Hidden Assets
In some cases, one spouse may attempt to hide assets as they prepare for separation by transferring marital funds to undisclosed accounts. For instance, if one spouse moves money into an offshore account, a court may assign a larger portion of the remaining assets to the other spouse to compensate and attempt to achieve an equitable distribution. In such cases, forensic accountants may be involved to trace hidden assets, ensuring that the NC divorce property settlement is equitable
NC Divorce: Can I Keep My Inheritance?
Inheritances are generally considered separate property in North Carolina and thus not subject to equitable distribution. However, if a party commingles their inheritance with marital assets, it may become subject to division. If you’re concerned about protecting your inheritance, consult a Tharrington Smith divorce lawyer for specific advice regarding keeping the asset your separate property.
Avoiding Court through Negotiation and Mediation
While a court can decide how to divide property through an equitable distribution hearing, many couples prefer to handle the division of their property through negotiation or mediation. A mutually agreed upon separation agreement allows couples to settle the division of their property outside of court, often saving time, money, and emotional stress. These agreements are legally binding and can be customized to fit your family’s needs or desires when it comes to dividing your property. One way a couple can come to a private settlement is through mediation.
In North Carolina, mediation is required prior to calendaring an equitable distribution issue for trial. Mediation can be completed privately, where each party is placed in a room with their respective attorney and a neutral third-party mediator goes back and forth exchanging offers in an effort to help them resolve their dispute. A mediator is not able to impose an agreement between the parties, but rather North Carolina family law mediators are equipped with the skills to aid in negotiations that will lead to a settlement that both parties are agreeable to.
Conclusion
Equitable distribution in a North Carolina divorce can be complex, particularly when significant assets or debts are involved. Whether through negotiation, mediation, or in court, it’s essential to understand your rights and how the law applies to your specific separation. Working with an experienced North Carolina family law attorney or mediator can help ensure that your property is divided fairly and that your interests are protected.
If you’re facing a divorce and need guidance on property division, contact a family law attorney at Tharrington Smith for expert advice and support.
Disclaimer: The information provided in this blog post is intended for general informational purposes only and should not be construed as legal advice. For specific advice about your divorce or equitable distribution case, contact one of our experienced Tharrington Smith family law attorneys.
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