Property Division

Property Division & Equitable Distribution
in North Carolina

The Basics of Equitable Distribution Property Divistion FAQ

When a marriage ends, one of the key concerns is often how to divide the assets accumulated during the course of the relationship. In North Carolina, divorce is governed by the principles of property division and equitable distribution, as stipulated by state law.

Property division involves allocating the assets and debts between spouses during a divorce or separation. It can be a complicated task, as it requires distinguishing between marital property and separate property, and in some cases, divisible property.

On the other hand, equitable distribution is the method by which North Carolina courts distribute marital and divisible property between spouses.

Understanding these concepts is crucial for anyone undergoing separation or divorce in North Carolina. Not only will it provide clarity on what to expect, but it will also prepare you to make informed decisions that protect your best interests. This becomes particularly important when navigating disputes over who gets what.

In this blog post, we will delve into the intricacies of property division and equitable distribution in North Carolina.

Join us as we navigate this important and often complex aspect of North Carolina family law.

Equitable Distribution Basics

The right of both parties to the equitable distribution of marital property may be granted at the time of the parties' separation. However, one of the two parties or both must assert their right to Equitable Distribution.

Once one or both parties assert their right to Equitable Distribution, the court will look at the marital assets (all property acquired or earned during the marriage) in question and fairly distribute them. To learn more about how that process works read "Learn How Property Division Works."

After the parties' separation, either party can, at any moment, make a claim to Equitable Distribution. A claim can come either as part of a separate action or a motion in the cause.

A judge can render his/her decision on the distribution of the parties' marital and divisible property when he/she desires. It can be before the parties' divorce or after. If it is an order rendered by consent, then the parties can ask for it to be rendered before the divorce.

Either party may ask for a temporary order or injunction to prevent the disappearance, waste, or conversion of marital property. Waste, in this instance, refers to the destruction of property that may or may not be your own. Conversion is when a party unlawfully claims property that they don't own.

Temporary orders and injunctions can give both parties a chance to stake their claims in court. Parties may ask for them before or after they make a claim to Equitable Distribution. However, an order for partial property division cannot be made before a claim to ED is made.

In most cases, the law does not allow one party to recover their legal fees from the other party as part of an equitable distribution. However, there is an exception to this rule. If the property's owner sues their spouse to regain possession of the said property, then the court may offer a discretionary award to pay for the owner's attorney fees.

Defenses against Equitable Distribution Claims in Court

There are a number of defenses that a party can use in court against a claim to equitable distribution.

The law strictly bars either party from staking a claim for Equitable Distribution in the case of an absolute divorce, unless one was already pending at the time of the divorce.

Don't Hesitate to Take Action?

Get Started

Past Separation Agreements

Aside from cases of absolute divorce, another instance in which neither party may stake a claim to ED is if the parties agreed on a property settlement and a court executed it. A settlement can either specify how the parties will divide their property or otherwise bar future claims to Equitable Distribution.

As long as the settlement is executed lawfully, it may or may not bar future Equitable Distribution altogether. A bar may also arise from the terms of a pre-or postnuptial agreement.

In the past, if the parties reconciled, the court would deem any terms in their separation agreement related to property division null and void. However, today, most courts distinguish between separation agreements that don't have any terms for property division and settlements to which both parties have agreed to. Whether the parties reconcile or not afterward is irrelevant.

Property settlements must be written with the parties' intent in mind. The only way a reconciliation can void an agreement on property division is if one party's release of property rights depended on the two parties living apart.

Death of a Party

One party's passing can greatly affect how a court will deal with the other party's claim to equitable distribution. The time at which a party has passed is a key detail, as it affects the court's decision.

If one party passes away before a court has granted an absolute divorce, but while a claim to equitable distribution is still pending, then the court may bar the claim. However, if a court has granted the divorce, then they will not bar the pending claim. In those cases, the executor of the deceased's estate, as well as the deceased's heirs, must join the action. If the deceased's heirs do not join the action, then any orders relating to the sale of property are void.

Federal Law Can Overrule State Law on Equitable Distribution

In certain cases, federal law may prevent a state court from making a party's property part of an equitable distribution. An example is a case in which a North Carolina court ruled that social security benefits are not distributable. Federal social security laws and provisions preclude courts from distributing social security benefits in EDs.

Furthermore, the U.S. Supreme Court has also ruled that state courts cannot distribute a veteran's disability or retirement benefits. The North Carolina Court of Appeals also recently ruled that disability benefits for veterans do not fall under the purview of disposable income or retainer pay.

As a result, they are not marital assets and cannot be distributed as part of an Equitable Distribution.

Prior to the Supreme Court ruling, a serviceman's disability/retirement income was, in fact, distributable, if we went by the Uniformed Services Former Spouses' Protection Act.

Today, a court may only distribute the parties' marital property. Marital property, in this instance, includes both assets and marital debt. A court order that distributes marital property must include written reasons for why the court feels its arrangement is a fair division of that property. It's important to know that "equitible distribution" does not mean 50/50 like you would find in a community property state.

The court can take many things into account before making its decision including child custody.

Final Thoughts

Navigating the complex terrain of property division and equitable distribution under North Carolina law can seem daunting, but it is crucial to your financial future following a divorce or separation. The marital estate, built over the course of a relationship, consists of shared assets and debts which need to be fairly divided - a task made more complex when the interests of one spouse diverge from those of the other.

Remember, while this guide provides an overview, every situation is unique. To navigate these waters successfully, it's important to enlist the support of an experienced family law attorney who understands North Carolina law and can provide guidance tailored to your unique circumstances.

Always arm yourself with knowledge and competent legal advice when facing property division and equitable distribution. It can make all the difference to your financial future post-divorce.

Want to learn more? Learn how Property Division works in North Carolina.

Learn How Property Division Works

Property Division in North Carolina FAQ

What is property division in North Carolina?

Property division is the process of dividing up the assets and debts of a couple after they divorce. In North Carolina, property division is governed by the law of equitable distribution.

This means that the court will divide the property in a way that is fair to both parties, taking into account all of the relevant factors, such as the length of the marriage, the contributions of each party to the marriage, and the needs of any dependent children.

What does marital property mean?

Property acquired by either spouse during the course of a marriage is considered marital property.

What does separate property mean?

Separate property is any property owned before they get married or inherits or receives as a gift during the marriage.

What are the factors that the court considers when dividing property in North Carolina?

The duration of the marriage and the age and physical and mental health of both parties: The length of the marriage and the age and health of the spouses can influence how assets are divided. Longer marriages, for instance, often lead to more intertwined finances.
The income, property, and liabilities of each party: The court will consider the current and potential earnings of each spouse, their separate assets, and their respective debts.
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 court may grant the custodial parent the right to stay in the family home to minimize disruption to the children's lives.
Any equitable claim, interest, direct or indirect contribution, or inheritance by a spouse in the acquisition of marital property by the couple or the other spouse: The court can consider whether one spouse made significant contributions to acquiring assets.
The liquidity of all marital property: The court may consider how easily an asset can be converted into cash or the tax consequences of liquidating an asset. Some assets, like a home, can't be divided equally without being sold.
Actions taken by either party to maintain, preserve, develop, or expand; or to waste, neglect, devalue or convert the marital property or divisible property, during the period after separation of the parties and before the time of distribution: If one spouse squandered assets after separation, the court can take that into account.

What are some of the ways that property can be divided in North Carolina?

Property can be divided in a number of ways in North Carolina, including:

Equal division: The property can be divided equally between the parties.
Unequal division: The property can be divided unequally between the parties if the court finds that an equal division would be unfair.
Sale of property: The property can be sold and the proceeds divided between the parties.
Waiver of property rights: One party can waive their right to property in the divorce.

Do I have to liquidate my retirement accounts if retirement assets are divided among spouses?

No, most likely you will be given a QDRO or "Qualified Domestic Relations Order" which will give the plan administrator instructions on how the funds should be disbursed. This avoids liquidation in an equitable property division.

Does marital misconduct play a role in the equal division of property?

No. Actions considered "marital misconduct" including infidelity or domestic abuse are not factors when the judges divide marital property.

Want to learn more? Learn how Property Division works in North Carolina.

Learn How Property Division Works

Getting Started

If you are wondering how long the divorce process is going to take or how much the trial will cost you, please do not hesitate to schedule a consultation at our Wilmington Office. Our office is located at 1015 Ashes Drive, Suite 104. We can help you map out the details of your divorce, giving you a powerful defense. Please call to schedule a consultation.

Take Action