Equitable Distribution & Property Settlement

If you are separated or contemplating separation, you may wonder how you will ever divide your property and debts with your spouse. It’s unlikely while the marriage is harmonious that a couple will consider the issues property ownership can cause in a divorce. But the splitting and distribution of the assets you own and the debts you owe can become points of difficulty and contention during a divorce. Consulting with an experienced and knowledgeable family law attorney can go a long way toward helping you understand how the laws in North Carolina handle property division. Our attorneys will evaluate your marital estate in light of this framework to develop attainable goals and consider creative options for a successful process and outcome.

What is Equitable Distribution?

North Carolina uses a method called “equitable distribution” to divide marital property and debts during a divorce. Under this method property and debts are divided equitably between spouses. Equitably does not necessarily mean equally, but it does mean fair. If the parties are unable to settle issues surrounding division of marital property, the court will divide property based upon what it considers fair while taking into consideration various factors such as:

• the earning ability of each spouse;
• the duration of the marriage;
• any custodial considerations for children;
• the financial accounts and deferred compensation plans of each spouse;
• the contributions each spouse made to the other’s estate;
• the tax considerations;
• the separate estate of each spouse; and
• the complexity of valuing or dividing an asset

The Equitable Distribution Process

The process of dividing a marital estate can become complex and daunting even if you are only engaged in negotiations. The 4 essential steps in the equitable distribution process that ensure property is effectively distributed are:

• identifying all assets and debts at the time of separation
• classifying assets and debts as marital, separate, or divisible property
• valuing all property identified, and
• distributing all assets and debts

All property of the marriage should be taken into consideration, not just homes and automobiles. Property should include banking and financial accounts, investments, insurance policies, retirement accounts, and pensions as well as mortgages, lines of credit, credit card debts, student loans, and amounts borrowed against retirement plans, or insurance policies.

Marital Property vs. Separate Property

Classifying your property accurately is critical because the court is only able to distribute marital and divisible property. It is assumed that marital property is all property acquired during the marriage that is still owned on the date of separation regardless of how it is titled. Separate property is generally property that was owned before marriage or was obtained during marriage by inheritance or as an individual gift from a third party. Divisible property includes the passive appreciation and diminution of property after the date of separation as well as certain other types of post-separation passive gains and losses.