Why You Shouldn’t Divorce Before Settling Marital Property
Russell Family Law & Litigation • March 10, 2020
Settling Marital Property During a Divorce
Among the many challenges that come with divorce, property distribution ranks second only to child custody and child support in terms of the emotional toll it takes on everyone involved. To help make things easier for you and your soon-to-be ex, here is a brief overview of the rules on property distribution in North Carolina.
Who Makes the Decisions on Property Distribution?
Oftentimes, the parties to a divorce proceeding agree on property distribution
themselves in the form of a property settlement. Where that is not possible, the court steps in. A judge will guide the parties through a number of steps in a process known as “equitable distribution” (ED).
Equitable Distribution Explained
The parties’ rights to ED arise at the time of their separation. These rights, however, are not automatic. One or both parties must assert them by making a formal application to the court. They can do so at any time after the separation in the form of either:
- A separate ED action;
- Together with another application under Chapter 50; or
- As a motion in the cause.
The court will then determine which property classifies as marital and which doesn’t and will distribute the former in an equitable manner. The final judgment may be rendered either before or after the divorce is finalized, at the discretion of the judge. If the judgment is with the consent of both parties, they may agree for it to enter into force prior to the divorce.
The Courts’ Approach to ED
When distributing marital property, the judge will carry out a three-step analysis. First, they will separate marital from non-marital property. Note that marital property includes not only real estate but also any debts and assets. Then, the judge will issue an order distributing the marital property. The order may or may not include written findings of fact that support the judge’s determination as to why the division of property is equitable.
Defenses Against Equitable Distribution
Divorce
Except for two special provisions, an absolute divorce will ban any ED claim that was not pending at the time the divorce was finalized. That has been interpreted quite strictly in case law.
Property Settlement
Another common defense to ED is the prior execution of a valid and comprehensive property settlement that either divides the property or otherwise releases the parties’ right to ED. That goes for property settlements entered into at the time of separation as well as premarital and postnuptial agreements.
Previously, reconciliation between the parties would void the executory or unperformed property provisions of a separation agreement. Nowadays, however, the courts differentiate between separation agreements proper and standard property distribution contracts. The former have the separation as their primary focus, while the latter are unrelated to whether or not the parties reconcile. As a result, reconciliation only voids the agreement where the intent and language of the contract clearly indicate that property rights depend on separation.
Death of One of the Parties
Depending on when it takes place, the death of one of the parties may significantly affect an ED claim. If the spouse dies prior to the entry into force of an absolute divorce but while an ED claim is pending, that will bar the ED.
However, if the spouse dies while an ED claim is pending but a divorce has already been granted, that will not bar the ED. In that case, any heirs and the executor or administrator of the deceased’s estate become joint parties to the action. Failure to join the heirs shall void any property sale as to those heirs.
Conflicting Federal Law
In some cases, federal law may preempt the state’s right to execute ED of certain types of marital property. For instance, anti-assignment and other provisions in federal social security law bar North Carolina courts from distributing social security benefits. Furthermore, the Supreme Court found that state courts may not distribute retirement pay to servicemen as either marital or community property, where they waived it in favor of veteran disability benefits.
Military Pay Protections
The Court of Appeals recently held that military disability payments do not fall under the federal definition of “disposable retired or retainer pay.” Therefore, such payments do not classify as marital property and may not be distributed by state courts pursuant to ED claims.
In contrast, however, the Court of Appeals found that disposable servicemen retirement pay is subject to equitable distribution under federal law, as per the Uniformed Services Former Spouses’ Protection Act
and GS 50-20(b)(1), which restricts distribution only to “eligible” military pensions. That finding was consistent with an earlier judgment of the Supreme Court.
How to Prevent Property from Disappearing
It is not uncommon for a party to a divorce to try to hide, waste, or convert alleged marital property to avoid its equitable distribution by the court.
Fortunately, there exist special statutory provisions that allow the other party to obtain injunctive relief and temporary orders to prevent marital property from disappearing. Parties can apply for injunctive relief either before or after the filing of the ED action.
Alternatively, a party to a divorce may apply for an order for the partial distribution of marital property. However, parties may do so only after the ED action has been filed.
Collecting Legal Fees in ED Actions
Typically, a party to an ED action may not recover legal fees from the other party. The only exception is where the court allows, at its discretion, the award of reasonable legal fees and costs to a party that:
- Owns separate property; and
- Sues the other party to regain possession of the said property.
The above also applies where the other party removed the property in question from the marital home.
To Conclude
This brief note serves only as a general overview and introduction to the marital property distribution rules in North Carolina. The information contained here is not all-inclusive, and different rules may apply depending on the circumstances of each case. For more details, interested parties should review the relevant property distribution statutes and seek expert legal advice.
A 529 Plan, which owes its name to Section 529 of the Internal Revenue Code, is a tax-advantaged savings account that is designed to be used for the education expenses of the beneficiary. It is very common that parents create such an account to save for their child’s college education. So, what happens to such an account when the parents decide to divorce? 529 Plans , like other savings and investment accounts, are property. As such, in North Carolina, 529 Plans are dealt with during equitable distribution proceedings. During such a proceeding, the court will classify the parties’ property as one of three categories – marital, divisible, and separate – and then distribute the marital and divisible property among the parties. Thus, the treatment of the 529 Plan will depend upon how the plan is classified. N.C. Gen. Stat. 50-20 defines marital, separate, and divisible property as follows: Marital Property : “all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property or divisible property.” Separate Property : “all real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage. However, property acquired by gift from the other spouse during the course of the marriage shall be considered separate property only if such an intention is stated in the conveyance. Property acquired in exchange for separate property shall remain separate property regardless of whether the title is in the name of the husband or wife or both and shall not be considered to be marital property unless a contrary intention is expressly stated in the conveyance. The increase in value of separate property and the income derived from separate property shall be considered separate property. All professional licenses and business licenses which would terminate on transfer shall be considered separate property.” Divisible Property : “all real and personal property as set forth below: 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 postseparation actions or activities of a spouse shall not be treated as divisible property. 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. Passive income from marital property received after the date of separation, including, but not limited to, interest and dividends. Passive increases and passive decreases in marital debt and financing charges and interest related to marital debt.” Given these definitions, the classification and distribution of a 529 Plan will depend upon how and when it is created and funded. What is most important to note is that the court will not award the 529 Plan to the child, as the child is not a party to their parents’ divorce. Further, while the court may consider the purpose of the 529 Plan when making an “equitable” distribution of the parties’ property, the court will not totally disregard the value of the 529 Plan when distributing property among the parties simply because it is intended for the benefit of their child. However, the parties may take such considerations into account when negotiating a potential settlement between one another. If you are considering divorce or engaged in, or anticipate being engaged in, an equitable distribution proceeding, call our office today to schedule a consultation with an experienced family law attorney.
North Carolina is considered to be a “no-fault” divorce state, meaning that a couple need not show cause or some wrongdoing in order to obtain a divorce. However, marital misconduct does play a role with regard to the issue of alimony in North Carolina. In determining the amount, duration, and manner of payment of alimony, the Court must consider a variety of factors as laid out in N.C. Gen. Stat. § 50-16.3A(b). This statute lists 16 factors which the court will consider when determining the issue of alimony . One of the most often discussed and litigated of these factors is marital misconduct. N.C. Gen. Stat. § 50-16.1A defines marital misconduct as follows: ‘Marital misconduct’ means any of the following acts that occur during the marriage and prior to or on the date of separation: Illicit sexual behavior. For the purpose of this section, illicit sexual behavior means acts of sexual or deviate sexual intercourse, deviate sexual acts, or sexual acts defined in G.S. 14-27.20(4), voluntarily engaged in by a spouse with someone other than the other spouse; Involuntary separation of the spouses in consequence of a criminal act committed prior to the proceeding in which alimony is sought; Abandonment of the other spouse; Malicious turning out-of-doors of the other spouse; Cruel or barbarous treatment endangering the life of the other spouse; Indignities rendering the condition of the other spouse intolerable and life burdensome; Reckless spending of the income of either party, or the destruction, waste, diversion, or concealment of assets; Excessive use of alcohol or drugs so as to render the condition of the other spouse intolerable and life burdensome; Willful failure to provide necessary subsistence according to one's means and condition so as to render the condition of the other spouse intolerable and life burdensome.
The holiday season is a time traditionally associated with joy, togetherness, and celebration. However, for families going through a divorce, it can also be a time of heightened stress and emotional challenges. Managing these stressors effectively can help everyone involved – especially children – navigate this season with as much peace and stability as possible. Here are some common holiday stressors families experience during a divorce and practical strategies to address them: 1. Financial Pressures Divorce often brings financial changes that can make the holidays feel especially strained. Gift-giving, travel, and hosting events can add up quickly. Solution: Set a Budget: Be realistic about what you can afford this year. Focus on creating meaningful experiences rather than overextending financially. Free/low-cost experiences could include going to a holiday parade, going for a walk downtown or a drive around town to view the holiday lights, or taking the kids to the local mall or a store to visit Santa (or even the Grinch at some locations, such as the Cotton Exchange). Communicate with Co-Parent: Discuss gift budgets and avoid competitive or extravagant gift-giving, as this can create tension or unrealistic expectations for the children. 2. Emotional Strain on Children Holidays can amplify a child’s sense of loss or confusion about their family dynamics, especially if traditions are changing. Solution: Prioritize Consistency: Whenever possible, maintain familiar traditions to provide a sense of stability. Introduce new traditions as a way to create positive memories in this new chapter. Open Communication: Reassure your children that it’s okay to express their feelings and let them know both parents are committed to making the holidays special for them. 3. Loneliness or Isolation For people going through a divorce, the first holiday following separation can feel especially lonely and isolating. It’s normal to grieve the loss of how things used to be. Solution: Lean on Support Systems: Spend time with friends, family, or community groups that provide comfort and connection. Focus on Self-Care: Use this time to rest, reflect, and engage in activities that bring you joy and relaxation. 4. Co-Parenting Tensions The holidays can sometimes exacerbate underlying tensions between co-parents, particularly if communication is strained or agreements are unclear. Solution: Keep Communication Businesslike: Focus on logistics rather than rehashing old conflicts. Tools like co-parenting apps, such as Our Family Wizard or Talking Parents, can help keep interactions clear and professional. Put the Children First: Decisions should always prioritize what’s best for the children, even if it requires compromise. 5. Managing Extended Family Expectations Extended family members may have their own opinions or pressures about how holidays “should” look, which can complicate matters further and exacerbate holiday stress. Solution: Set Boundaries: Be clear with family members about your plans and priorities. Gently but firmly remind them that the focus is on creating a positive experience for your immediate family and avoiding negative talk about the other party or your current situation. Include Supportive Relatives: If possible, involve family members who can help diffuse stress and provide stability during this transitional time. If you are going through a divorce this holiday season and need legal representation, please contact our office to set a consultation with one of our family law attorneys.
Navigating child custody arrangements can be one of the most challenging aspects of a separation or divorce. In North Carolina, the legal framework for child custody is designed to prioritize the best interests of the child, but understanding the different types of custody arrangements can be complex. This guide aims to shed light on the types of child custody in North Carolina, helping parents make informed decisions.
By: Ashley Pollard
Co-parenting is crucial to ensure that children continue to receive the love, support, and guidance they need from both parents despite the parents’ separation or divorce. By working together, parents can create a stable and nurturing environment that fosters the emotional and psychological well-being of their children. Effective co-parenting helps children adjust to change, reduces feelings of insecurity, and promotes healthy development. It also models positive conflict resolution and cooperation, providing a strong foundation for children’s future relationships. Ultimately, co-parenting prioritizes the best interests of the children, helping them thrive despite the family restructuring. Successful co-parenting after separation or divorce requires open communication, mutual respect, and a focus on the well-being of the parties’ children. To best ensure the success of a co-parenting relationship, it is crucial to keep discussions child-focused, and avoid negative talk about the other parent in front of the children. Flexibility and willingness to compromise are key, as well as seeking professional help if conflicts arise that cannot be resolved independently. Prioritizing the children’s emotional and physical needs will help ensure a positive co-parenting experience. Here is a list of ideas for potential resources that may help co-parents manage and support their children’s well-being while navigating the changing family structure: Books for Children Age-appropriate books explaining separation and divorce Stories that help children understand and cope with their feelings Therapists and Counselors Child psychologists for children’s emotional and mental health Family therapists specializing in co-parenting dynamics Support Groups for Children Peer support groups for children of divorced parents In-person and online groups providing a safe space for children to share their experiences School counselors and social workers providing support and guidance Mobile Apps Apps designed to help children understand and manage their emotions Co-parenting apps with features to ensure both parents stay informed about their child’s activities and needs Books and Guides for Parents Manuals on how to support children through the transition Guides focusing on effective communication with children post-separation Guides focusing on effective communication with your child’s other parent Podcasts and Videos Podcasts offering advice on supporting children’s mental health during divorce YouTube channels with content aimed at helping children cope with family changes
Even if both spouses have each other’s best interests at heart, the separation process is rarely smooth. To avoid conflicts, sign a separation agreement.
Although the parties can choose to settle the child support issue without consulting a lawyer, it’s usually advisable to seek an expert’s assistance to protect the child’s interests.
Pet custody battles can get as heated as the ones for children, and even more so. That’s because the parties often have to come to an agreement on their own.
Divorce rates decline during economic hardships. But why does a recession affect divorce at all? And what does it mean for cases where separation is inevitable?
