North Carolina Family Law Basics (7 Part Series) Part 3 Property Settlement (Equitable Distribution)

In North Carolina, property settlement is legally referred to as "Equitable Distribution" and can be found under section 50-20 of the NC General Statutes.  Equitable Distribution means a presumed equal (50/50) split of all marital assets and debts.

Equitable Distribution (ED) is where spouses can sometimes let their emotions get the best of them over inanimate objects that aren't relevant to their basic or future living conditions.  What I mean by that is sometimes people will argue over the most ridiculous pieces of property in an effort to make the other spouse as miserable as they can be.  For example, some spouses think it's a good idea to hold up the resolution of a case because they don't want to let go of that 12 year old toaster oven that's now worth $25 or a spouse may stop negotiations because the $30 set of Star Wars pint glasses the couple received as a wedding present holds "sentimental value".  

Don't get me wrong, I understand why parties argue over the marital home or a 401(k) that has an entire lives worth of retirement in it, but that doesn't mean a spouse has to shut down all the hard work they and their attorneys have done negotiating an agreement because someone decides they want to be petty.

Okay, off my soap box for now.  

Equitable Distribution takes into account all the marital assets and debts of the parties and classifies the property of the spouses into these categories:

  • Marital Property:  All real and personal property accumulated on or after the date of marriage that still exists on the date of separation with Separate property and Divisible property. Exceptions below.
  • Separate Property:  Is put into the following 5 categories for clarity and convenience sake:
  • 1.  All property acquired before marriage, 2.  Property acquired during the marriage by gift or bequest by a spouse, 3.  All property received during the marriage in exchange for separate property, 4. All passive income earned from separate property during the marriage and all passive increases in the value of separate property during marriage, and Non-transferable professional licenses (Ex. law licenses-thankfully).
    • Divisible Property:  

      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.         Passive increases and passive decreases in marital debt and financing charges and interest related to marital debt.

Divisible Property is going to be split equally between the parties or, at least, there will be a presumption that it should be split equally between the parties.  An example of Divisible Property is the interest on a joint checking or savings account that accumulates from the date of separation to the date of trial (or hopefully settlement) for equitable distribution.

Marital Debt:    Debt accumulated from the date of the marriage that still exists on the date of separation is presumed marital debt.  This presumption can be rebutted upon a showing that one party accumulated the debt for their own use and enjoyment and it was not accumulated for the household or use and enjoyment of both parties or children.

The one main thing I want you to take from this is that there are more important things to worry about when you are going through a separation and subsequent divorce.  Your kids, for example, are hopefully one of those things that are more important than physical possessions or money.  That said, concentrate on the main pieces of property and don't sweat the small stuff and if you can get this worked out prior to the filing of an ED claim then you're on the right track.

Speaking of children, we are on to Child Custody in Part 4.