Q2. Can I file for property division (equitable distribution) at any time?

Q3. What are the different categories of property?

Q4. In classifying the property, will the court just look at how the property is titled and who currently has possession of it?

Q5. How is property valued?

Q6. Does the court divide the property equally (half and half)?

Q7. What are the factors the court considers in an equitable distribution case?

1. How is property division handled in North Carolina?

ANSWER: As with other domestic issues such as child custody, child support, and alimony, parties can determine the distribution of their property in writing through a Separation Agreement and Property Settlement or other type of settlement agreement. This method is often cheaper and quicker than pursuing the same through court and the parties are able to decide how to divide everything how they want, even if contrary to how a judge would have decided.

However, parties do not always agree, especially when it comes to dividing expensive assets such as houses, businesses, stocks, retirement accounts, etc. In this case, either party can file a lawsuit for what is called equitable distribution of the marital property. The court will conduct a three-step process regarding all assets and debts of the marriage: (1) identification and classification, (2) valuation, and (3) distribution which is equitable.

2. Can I file for property division (equitable distribution) at any time?

ANSWER: You cannot file for equitable distribution until you and your spouse have separated. Further, unless a claim for equitable distribution has been filed and is pending prior to entry of a divorce decree, then after such divorce decree is entered, you are barred from filing for equitable distribution, subject to some narrow exceptions.

3. What are the different categories of property?

ANSWER: Pursuant to North Carolina General Statutes § 50-20(b): Marital property means all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of separation of the parties and presently owned, except property determined to be separate property or divisible property. Marital property also includes all vested and non-vested pension, retirement, and other deferred compensation rights;

Separate property means all real and personal property acquired by a spouse before marriage or acquired by a spouse by bequest, devise, descent or gift during the course of the marriage;

Divisible property includes marital property which has increased or decreased in value between the date of separation and the date the court enters the order for equitable distribution and includes increases and decreases in marital debt.

4. In classifying the property, will the court just look at how the property is titled and who currently has possession of it?

 ANSWER: Unlike other states, North Carolina courts look beyond who the title holder of a property is or present possession. Rather, our courts use what is called the source of funds rule. The source of funds rule allows a party to argue that property which might otherwise be deemed as marital (because it was acquired during the marriage and/or is titled in both parties’ names) is in fact separate, or at least party separate, by tracing back to a separate source of funds which ultimately helped acquire said property.

5. How is property valued?

ANSWER: For each item identified as marital property, the court will calculate its net value as of the date of separation, where net value means the fair market value minus any encumbrances, liens, or amount owed on it. Because divisible property, which is also distributed by the court, involves changes in value of marital property after the date of separation, the court may also need to look at the value of property after the date of distribution up until the date of distribution (the date the court enters the order for equitable distribution).

6. Does the court divide the property equally (half and half)?

ANSWER: The North Carolina General Statutes require the court to issue an equitable distribution and an equal distribution is presumed to be equitable unless a party asks for an unequal distribution and after reviewing the numerous factors in the statute, the court agrees that an unequal distribution would be equitable.

7. What are the factors the court considers in an equitable distribution case?

ANSWER: Pursuant to North Carolina General Statutes § 50-20(c), the court shall consider all of the following factors: (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 non-liquid 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. (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.