Equitable Distribution in North Carolina
When a couple decides to get divorced, they need to divide their property, assets, and debts from one household into two. It’s best if the two people can reach an agreement of what to do with their property. If not, the court will divide up your property if you cannot come to an agreement with your spouse. In these cases, it is critical that all the assets of the marriage be properly accounted for and valued. You divorce attorney will walk you through this process and protect your interests.
Under North Carolina Law there is a strong presumption that dividing the marital assets equally (50/50) is equitable. But, in many situations, there is a reason for the court to divide them unequally to make the situation equitable. You can do this with a voluntary agreement or through a claim for Equitable Distribution.
Types of Properties
In property division, there are three separate types of property the court will consider:
Separate property includes all property owned by either spouse before the parties’ marriage. It includes property acquired during the marriage by one spouse through an inheritance or gift from a third party. And, it includes property acquired after the date of separation with non-marital funds.
A gift from one spouse to the other during the marriage is marital property, unless the donor states at the time of the conveyance that it is intended to be separate property. Separate property also includes income from separate property and property obtained in exchange for separate property.
Marital property includes property presently owned that was acquired during the marriage except property found to be “separate property.” Marital property also includes all vested pension and retirement benefits accrued between the date of marriage and the date of separation.
Divisible property includes post-separation increases and decreases in the value of marital property. It includes property received after the date of separation that was acquired as a result of the marital efforts of either spouse before the date of separation. It also includes passive income generated by marital property and received after the date of separation. And, post-separation increases in marital debt.
In many ways, “divisible property” is treated the same as marital property, as both are presumed to be divided equally.
However, one difference is that divisible property is valued by the court at the time of trial, where marital property is valued at the date of separation. Divisible property is subject to an “interim distribution” by the Court, which may be one way to deal with anticipated changes in the value of assets or changes in your debts incurred during the marriage.
Factors that Affect Equitable Distribution in NC
Equitable distribution can take place before or after a final divorce judgment, so long as your rights to equitable distribution are preserved before the judgment is entered. Although there is no precise formula for dividing the property, there is a strong tendency in North Carolina to divide the property or its equivalent value equally.
There are thirteen (13) factors that a Court may consider in deciding whether an unequal division is appropriate in your case, including:
Income, property and debts of either party
Support obligations from prior marriages
Length of marriage
Age and health of both parties
Needs of the custodial spouse to own or possess the marital home place and household effects for the use and benefit of that spouse and minor children
Expectation of retirement benefits which are separate property
Efforts made by each spouse to acquire property
Contributions of one spouse to the education of the other
Contributions that increase the value of separate property
Liquid or non-liquid nature of property
Difficulty in valuing interest in a business
Actions taken by either party to preserve or waste marital assets
Protecting Your Property
If you have any assets (bank accounts, cash, etc.) that your spouse might take, remove or otherwise conceal, you should tell us immediately so that protective actions can be taken. The Court has the power to enter an injunction to prevent the removal or disappearance of any assets, by both parties. Additionally, you should point out any significant changes in the value of possible divisible property that you expect could occur before the time of trial, to ensure accurate calculation of your marital estate.
Marital misconduct, such as adultery, is not a factor in your property settlement. If you and your spouse can agree on property division and if your agreement is reasonable, it will be approved by the Court. If you cannot reach an agreement, the Court will divide the property.
Property Division and Taxes
A division of marital property and divisible property is a non-taxable event. Generally, if property is transferred between spouses under an agreement or court order, it will neither be taxed as income nor allowed as a deduction.
There may be tax consequences, however, when funds are transferred from retirement plans and Individual Retirement Accounts (IRA) and when marital assets are sold to third parties. Timing on a sale of a marital residence can have significant tax consequences affecting your non-recognition of gain on the sale. Property that has increased in value significantly since it was acquired may carry heavy tax liabilities for the party who takes it by settlement or court order. All property distribution matters should be analyzed for tax consequences by your accountant or tax advisor before you sign a separation agreement or go to court.
Need help in Winston-Salem, Greensboro or High Point? Contact us today.
Our North Carolina family law attorneys at Dummit Fradin are experienced with all matters resulting from the breakdown of a marriage and can help you through the process with sympathy and professionalism. We recognize the importance of these matters to your family and use our experience to ensure that your rights are protected.
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