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October 18th, 2017
When a married couple decides to separate and proceed with divorce in North Carolina, the property owned by the couple is often divided in a separation and property settlement agreement. However, if the spouses cannot agree how to divide the property, North Carolina has a statute that enables either person to file a court action requesting equitable distribution of the property.
What Does “Equitable Distribution” Mean?
The concept underlying North Carolina’s equitable distribution law is that a marriage is an economic partnership. During any marriage, assets are acquired and debts are incurred. The property may include a home, household furnishings, savings, motor vehicles, and even pension or retirement accounts. Debts can include a home mortgage, car loans, credit card debt, and other borrowing. When the marriage ends, the property and debts need to be divided between the two spouses.
If the couple cannot agree how to divide the property and debts, the statute for equitable distribution comes into play. The law provides a process through which a court will determine fair or equitable division of property between the two spouses. Hence, the name of this process is equitable distribution.
When Can Equitable Distribution Be Used?
There are several requirements for using the equitable distribution process, all of which must be met:
The couple must be married but separated and living apart.The claim for equitable distribution must be filed before the divorce is final.There cannot be a valid separation or property settlement agreement that divides the marital assets, including a prenuptial or postnuptial agreement.
If a couple has not separated or if the divorce is final, the statutory process for equitable distribution is not available. In addition, if there is an enforceable legal agreement in place that divides the marital property, the statutory process cannot be used. When all requirements are met, either spouse may file a claim for equitable distribution with the court.
How Does the Court Process Work?
There are three steps in the equitable distribution process that will be conducted by the court at trial:
Identification of marital and separate propertyValuation of marital propertyDistribution of the property
Identification
During the identification stage, the court determines which property is marital and which property is separate. Generally, separate property is property owned before the marriage, inherited property, or gifts received individually by a spouse. The remaining property is considered to be marital property. That includes property acquired during the marriage by either or both spouses (other than gifts and
inheritances of a single spouse) and owned by both spouses on the date of separation. All marital property is subject to the equitable distribution process.
There is a presumption under the statute that all property acquired after the marriage is marital property unless it qualifies under the definition of separate property. In some cases, the presumption can be overcome by introducing evidence in court during the proceeding.
Valuation
The valuation step involves assigning a fair market value to each item of marital property. Often, appraisers and other experts are used to determine the value. Under the law, “fair market value” means the amount that a willing buyer would pay a willing seller for the asset.
Distribution
In the final stage, the court determines division and distribution of the property in an equitable manner. Under the statute, equal distribution is required unless the court determines that an equal distribution would be inequitable after consideration of various factors, some of which are:
Income and liabilities of each spouseDuration of marriageAge and physical/mental condition of both spousesParental needs relating to custody of childrenExpectation of retirement or other deferred compensation right that is not marital propertyDirect or indirect contributions to education or career developmentDirect contributions to increases in property value that occurred during the marriage
A distribution of property under the statute is not subject to reversal by an appeals court unless an abuse of discretion by the court can be established.
How Can You Decide If Equitable Distribution by a Court Is the Right Option?
The North Carolina statute has many complex provisions that may affect how a court will determine distribution if you decide to file an equitable distribution claim. A North Carolina attorney experienced in family law will be able to help you assess whether proceeding with an equitable distribution claim is the right choice for you.