Equitable Distribution in NC

In North Carolina, if you (or your spouse), has property that you feel you are entitled to as part of your divorce, you must file a claim for equitable distribution in the courts.  (You can also negotiate this as part of your separation agreement – something I highly recommend to avoid court involvement).  However, whichever way you go, a thorough understanding of the equitable distribution statute is a must.

I have included the full statute here, but to help simplify things, I have included some quick definitions that you need to know here:

Marital Property – Essentially, any property you acquire during your marriage up until the date of separation is marital property.  There are some exceptions, such as if you or your spouse inherited something in your name only, or if you used money that you had acquired before the marriage to purchase property while you are married.  But for the most part, anything you acquired during your marriage is marital property (the same goes for debts that were acquired during the marriage).

Separate Property – This is any property that you still own that you acquired before you were married.

Divisible Property – This is where it gets confusing for most people.  For the courts, you must value all of your marital property as of the date of separation.  The problem is, property can increase or decrease in value between the time that you separate from your spouse, and the time that you ultimately divide all the marital property.  Any increases or decreases in value during that time is considered divisible property.

Any property that you acquire, or debts you take on, during the period of separation prior to the date the property is distributed, are generally considered your separate property.  (An exception to this is when the property was earned prior to the date of separation – such as a year-end bonus from your job – but not paid out until after you separate.  This is still considered marital property.

Generally speaking, the courts will divide the property 50/50 unless there is some reason not to.  There are a number of factors that would affect this decision by the courts, which include:

(1)        The income, property, and liabilities of each party at the time the division of property is to become effective.

(2)        Any obligation for support arising out of a prior marriage.

(3)        The duration of the marriage and the age and physical and mental health of both parties.

(4)        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.

(5)        The expectation of pension, retirement, or other deferred compensation rights that are not marital property.

(6)        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.

(7)        Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse.

(8)        Any direct contribution to an increase in value of separate property which occurs during the course of the marriage.

(9)        The liquid or nonliquid character of all marital property and divisible property.

(10)      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.

(11)      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.

(11a)    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.

(11b)    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.

(12)      Any other factor which the court finds to be just and proper.

  • sue

    Is a separation agreement binding if at the time of signing one of the parties was suffering from a mental illness?

    • jameshartlaw

      Hi Sue,

      That’s a great question. Thank you for your comment. I’ve decided to use this question on an upcoming episode of the NC Divorce Podcast. For now, mental illness may be a defense to enforcement of a separation agreement – but this will be a highly fact intensive analysis. Unfortunately, you are probably going to need a good family law attorney to give you a good answer one way or the other.

      Thanks again for your question.

      Jim Hart