Concord Divorce Attorneys Discuss Equitable Distribution in North Carolina (Part 1 – Identification)

By Jim DeMay

While the parties must remain separate and apart for one (1) year before they can be granted an absolute divorce, the parties’ right to equitable distribution (often referred to as “ED”) of marital property vests immediately upon separation.  When one or both of the parties make a claim for equitable distribution, the court is tasked with “equitably” dividing all marital property.

The first step for the court is to identify all the “marital property” of the parties.  “Marital property” is defined by N.C. Gen. Stat. § 50-20(b)(1) as “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…”.  Simply put, marital property includes all property acquired by the parties from the date of marriage until the date of separation expect for “separate property” and “divisible property.”  “Separate property” includes property owned by either party before marriage, property acquired by either party during the marriage by inheritance or a gift from a third party, and property acquired after the date of separation with funds acquired post-separation.  “Divisible property” means property received by either party after the date of separation acquired as a result of the marital efforts of either spouse prior to separation, passive income generated by marital property and received after the date of separation, and post-separation increases in marital debt.

Whether an item of property is “marital” or “separate” can often be in dispute.  For example, the father of the husband “gifts” a vehicle which the husband drives and which is titled in the husband’s name.  Upon separation, the husband may contend that the tractor was a gift to him from a third-party (and thus his separate property), while the wife may contend that the tractor was a gift to the marriage from a third-party (and thus marital property).

Property may also have both a “marital” and “separate” component.  For example, the wife begins contributing to a 401(k) retirement plans 5 years prior to marriage, and continues contribution during 10 years of marriage before the parties separate.  The contributions to the 401(k) made prior to marriage (and the earnings on those contributions) would be the wife’s separate property, while the contributions made during marriage (and the earnings on those contributions) would be marital property.  As you can imagine, such matters often involve complicated math to segregate out the marital and separate components of such property.

After the court properly identifies all the marital property, the next step is for the property to be valued.  The valuation of marital property will be considered in the next segment of this blog.  Call to learn more from a Concord divorce attorney.