Huntersville Equitable Distribution Attorneys
Huntersville Equitable Distribution Lawyers - Guiding You Through the Process of Dividing Marital Assets and Debts
Huntersville Equitable Distribution Lawyers - Guiding You Through the Process of Dividing Marital Assets and Debts
When a married couple separates and plans to divorce, their property must be divided. North Carolina follows the majority doctrine of equitable distribution, not community property. Under equitable distribution, commonly referred to simply as "ED," to distribute property, the district court must take the following steps:
(1) Identify the property and debts of the parties,
(2) Classify the property as: (i) Marital Property, (ii) Separate Property,or (iii) Divisible Property,
(3) Determine the net market value of the property, AND
(4) Make an equitable distribution of the marital and divisible property.
(1) Identify the property and debts of the parties,
(2) Classify the property as: (i) Marital Property, (ii) Separate Property,or (iii) Divisible Property,
(3) Determine the net market value of the property, AND
(4) Make an equitable distribution of the marital and divisible property.
The date of separation determines the marital estate for classification purposes. In other words, the right to equitable distribution vests once the parties separate. The right to equitable distribution is not, however, automatic. A party must specifically assert the claim. A claim must be filed any time after separation but before the divorce is granted. Once the divorce is granted, a party is permanently barred from claiming equitable distribution. This is because absolute divorce ends all rights arising from the marriage, which are not pending at the time of divorce.
I. Identification:
Upon making a claim for equitable distribution, the court will first identify all the parties' assets and liabilities. The parties will present evidence of all property and all debts.
II. Classification:
After the property and debts have been identified, the court must classify each. All property and debts will be classified as either: (i) Marital, (ii) Separate, or (iii) Divisible. Classification is important in determining how the property will be distributed.
Marital Property
N.C.G.S. 50-20(b)(1) defines marital property as 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. In North Carolina, marital property also includes:
(i) Income derived from, and the increase in value of, marital property;
(ii) Interspousal gifts made during the marriage - unless the gift is made with the express purpose of being separate property;
(iii) Gifts made from a third party jointly to both spouses;
(iv) The value of vested and unvested pension plans, military pension plans, retirement accounts, and deferred compensation rights, which accrued during the period of marriage; AND
(v) Any recovery from a lawsuit related to actions that occurred during the marriage.
Marital property is subject to equitable distribution.
Separate Property
N.C.G.S. 50-20(b)(2) defines separate property as 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 marriage. Thus, any property one party brings into the marriage, or any property one party inherits separately during the marriage, will remain separate property.
Separate property is not subject to equitable distribution.
Divisible Property
Divisible property is property that is obtained after the date of separation and before the date of distribution. Divisible property includes:
(i) Passive appreciation and diminution of marital and divisible property;
(ii) Property 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;
(iii) Passive income from marital property; AND
(iv) Passive increases and passive decreases in marital debt.
Examples of divisible property include: (i) the increase in value of a 401(k) that was funded during the marriage, (ii) a commission or bonus earned on a sale made during the marriage, or (iii) income made from a rental house after separation but before distribution.
Divisible property is subject to equitable distribution.
Dual Classification
Some property may have a dual classification: part of the property is marital and part of the property is separate. If a husband, for example, uses $10,000 of cash that he brought into the marriage to make a down payment on a car for his wife, and the wife uses income she has earned during the marriage to make the monthly car payment, if the couple later separates, part of the car is separate property belonging to the husband, and part of the car is marital property to be divided equally.
In these cases, the determination of what qualifies as marital and separate property is not always easy. In North Carolina, courts apply theSource of Funds approach in determining how the property should be classified. Under the source of funds approach, the court will trace the funds used to acquire certain property and classify the property accordingly. If a husband, for example, inherits $30,000 separately during the marriage, and combines those funds with $30,000 of marital funds to purchase a speedboat titled in his name only, the speedboat is part marital property and part separate property based on the source of the funds. A court will trace the source of the funds back and determine that half of the speedboat is the husband's separate property, and the other half of the speedboat is marital property to be divided equally.
A marital gift will, however, prevail over the source of funds approach. If one party uses separate property to purchase property, which the married couple takes as tenants by the entirety, an interspousal gift is presumed and the property will be marital. A party may overcome this presumption with clear and convincing evidence that the property was meant to remain separate. Consider, for example, a wife who has $350,000 of cash that she brought into the marriage. The wife uses this $350,000 to purchase a home, taking title with her husband as tenants by the entirety. The home is understood to be marital property because it will be presumed that she intended it to be a gift to the marriage. Unless the wife is able to provide clear and convincing evidence that she intended for the home to remain her separate property, if the wife and husband later separate, the home will be considered marital property, and the value of the home will be divided equally.
III. Valuation:
The third step in making an equitable distribution concerns valuation. Each piece of marital and divisible property must be assigned a fair market value. Fair market value may be defined as the price a willing buyer would pay to a willing seller. Determining the fair market value requires each party to present property value evidence, which often requires the assistance of experts and appraisers. This process may, occasionally, get technical and problematic when a business, or something of subjective value, is being considered.
The date of valuation differs depending on the property classification. Marital property is valued at the date of separation, while divisible property is valued at the date of distribution. Post-separation property appreciation or depreciation may, however, be considered if a substantial amount of time has passed between the date of separation and distribution.
The trial court must make findings of fact on property valuation. This requires the parties to present credible evidence of value. If neither party presents reliable valuation evidence, the trial court has no authority to make a distribution.
IV. Distribution:
The final step in equitable distribution is actually distributing the marital and divisible property. In North Carolina, there is a strong presumption that the property will be divided and distributed equally. To overcome this presumption, a court must make findings that an equal division would be inequitable. According to N.C.G.S. 50-20(c), in making distribution determinations, a court must consider the following factors:
(i) The income, property, and liabilities of each party at the time the division of the property is to become effective.
(ii) Any obligation for support arising out of a prior marriage.
(iii) The duration of the marriage and the age, physical, and mental health of the parties.
(iv) The need of a parent with custody to occupy or own the marital residence and to use or own its household effects.
(v) The expectation of pension, retirement, or other deferred compensation that are not marital property.
(vi) Direct or indirect contribution made to the acquisition of marital property as a spouse, parent, wage earner, or homemaker.
(vii) Direct or indirect contribution by one spouse to help educate or develop the career potential of the other spouse.
(viii) Direct contribution to an increase in value of separate property, which occurs during the course of marriage.
(ix) The liquidity of marital and divisible property.
(x) The difficulty in valuing assets or interests.
(xi) Tax consequences.
(xii) The acts of either party to maintain, preserve, develop, expand, waste, neglect, devalue, or convert marital or divisible property.
(xiii) In the event of death by a party prior to distribution, the effects of the death on the property acquired by the survivor.
(xiv) Any other factor which the court finds to be just and proper.
Consider, for example, the wife who brought $300,000 of separate funds into the marriage. The wife and husband own a home as tenants by the entirety. She uses $20,000 of her separate money to make improvements to the marital home, which increases the value of the home by $30,000. The wife also pays $150,000 for her husband to go to medical school. The wife is the sole source of financial support while the husband is in medical school. Upon graduation, the husband obtains employment as a doctor earning $200,000 per year. This is $125,000 more than the wife makes and $150,000 more than the husband used to make. The wife discovers the husband has been having an affair and leaves him.
In determining equitable distribution, the court is required to hear evidence and make findings of fact. While the home will be considered marital property, her contribution to its increase in value will be considered separate. Additionally, the separate funds that she brought into the marriage will be considered separate as well. The court will also consider the wife's contribution to the husband's medical school education, her earning capacity, and the husband's new earning capacity as factors in determining equitable distribution. The husband's infidelity, however, will not be considered in determining equitable distribution.
Although relevant in determining alimony, marital fault is NOT relevant in equitable distribution. Economic fault, however, is relevant. If a spouse, for example, has been using marital funds to pay for an apartment for his mistress, this will be considered in making an equitable distribution.
Pensions and Retirement Benefits:
North Carolina holds that pensions and retirement benefits that are earned during the marriage are marital property. Conversely, pensions and retirement benefits that were earned before marriage are separate property. In determining how to divide a pension, North Carolina divides the years of marriage that the spouse was employed by the total years of employment. Thus, for example, if a husband has been working for an employer for 8 years prior to marrying his wife, and continues to work for the employer for 12 years while married to his wife, the court would divide the 12 years the husband worked for the employer while married by the 20 total years of employment. 60% of the husband's pension, therefore, would be marital property and divided equally. The other 40% would be separate property.
Generally, to establish an ex-spouse's right to a portion of their former spouse's pension, a court must enter a Qualified Domestic Relations Order (QDRO). A QDRO instructs a pension plan administrator to distribute benefits as stated in the court order. The ex-spouse becomes a co-beneficiary of the pension and also becomes liable for taxes on the received benefits. Without a QDRO, the spouse who earned the pension would be liable for all taxes on the pension, even if he were to pay out benefits to his ex-spouse from the pension.
Adkins Law is able to provide you with assistance in a variety of family law issues, including equitable distribution. Contact Adkins Law if you wish to speak with an experienced Huntersville divorce attorney or Huntersville divorce lawyer.
I. Identification:
Upon making a claim for equitable distribution, the court will first identify all the parties' assets and liabilities. The parties will present evidence of all property and all debts.
II. Classification:
After the property and debts have been identified, the court must classify each. All property and debts will be classified as either: (i) Marital, (ii) Separate, or (iii) Divisible. Classification is important in determining how the property will be distributed.
Marital Property
N.C.G.S. 50-20(b)(1) defines marital property as 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. In North Carolina, marital property also includes:
(i) Income derived from, and the increase in value of, marital property;
(ii) Interspousal gifts made during the marriage - unless the gift is made with the express purpose of being separate property;
(iii) Gifts made from a third party jointly to both spouses;
(iv) The value of vested and unvested pension plans, military pension plans, retirement accounts, and deferred compensation rights, which accrued during the period of marriage; AND
(v) Any recovery from a lawsuit related to actions that occurred during the marriage.
Marital property is subject to equitable distribution.
Separate Property
N.C.G.S. 50-20(b)(2) defines separate property as 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 marriage. Thus, any property one party brings into the marriage, or any property one party inherits separately during the marriage, will remain separate property.
Separate property is not subject to equitable distribution.
Divisible Property
Divisible property is property that is obtained after the date of separation and before the date of distribution. Divisible property includes:
(i) Passive appreciation and diminution of marital and divisible property;
(ii) Property 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;
(iii) Passive income from marital property; AND
(iv) Passive increases and passive decreases in marital debt.
Examples of divisible property include: (i) the increase in value of a 401(k) that was funded during the marriage, (ii) a commission or bonus earned on a sale made during the marriage, or (iii) income made from a rental house after separation but before distribution.
Divisible property is subject to equitable distribution.
Dual Classification
Some property may have a dual classification: part of the property is marital and part of the property is separate. If a husband, for example, uses $10,000 of cash that he brought into the marriage to make a down payment on a car for his wife, and the wife uses income she has earned during the marriage to make the monthly car payment, if the couple later separates, part of the car is separate property belonging to the husband, and part of the car is marital property to be divided equally.
In these cases, the determination of what qualifies as marital and separate property is not always easy. In North Carolina, courts apply theSource of Funds approach in determining how the property should be classified. Under the source of funds approach, the court will trace the funds used to acquire certain property and classify the property accordingly. If a husband, for example, inherits $30,000 separately during the marriage, and combines those funds with $30,000 of marital funds to purchase a speedboat titled in his name only, the speedboat is part marital property and part separate property based on the source of the funds. A court will trace the source of the funds back and determine that half of the speedboat is the husband's separate property, and the other half of the speedboat is marital property to be divided equally.
A marital gift will, however, prevail over the source of funds approach. If one party uses separate property to purchase property, which the married couple takes as tenants by the entirety, an interspousal gift is presumed and the property will be marital. A party may overcome this presumption with clear and convincing evidence that the property was meant to remain separate. Consider, for example, a wife who has $350,000 of cash that she brought into the marriage. The wife uses this $350,000 to purchase a home, taking title with her husband as tenants by the entirety. The home is understood to be marital property because it will be presumed that she intended it to be a gift to the marriage. Unless the wife is able to provide clear and convincing evidence that she intended for the home to remain her separate property, if the wife and husband later separate, the home will be considered marital property, and the value of the home will be divided equally.
III. Valuation:
The third step in making an equitable distribution concerns valuation. Each piece of marital and divisible property must be assigned a fair market value. Fair market value may be defined as the price a willing buyer would pay to a willing seller. Determining the fair market value requires each party to present property value evidence, which often requires the assistance of experts and appraisers. This process may, occasionally, get technical and problematic when a business, or something of subjective value, is being considered.
The date of valuation differs depending on the property classification. Marital property is valued at the date of separation, while divisible property is valued at the date of distribution. Post-separation property appreciation or depreciation may, however, be considered if a substantial amount of time has passed between the date of separation and distribution.
The trial court must make findings of fact on property valuation. This requires the parties to present credible evidence of value. If neither party presents reliable valuation evidence, the trial court has no authority to make a distribution.
IV. Distribution:
The final step in equitable distribution is actually distributing the marital and divisible property. In North Carolina, there is a strong presumption that the property will be divided and distributed equally. To overcome this presumption, a court must make findings that an equal division would be inequitable. According to N.C.G.S. 50-20(c), in making distribution determinations, a court must consider the following factors:
(i) The income, property, and liabilities of each party at the time the division of the property is to become effective.
(ii) Any obligation for support arising out of a prior marriage.
(iii) The duration of the marriage and the age, physical, and mental health of the parties.
(iv) The need of a parent with custody to occupy or own the marital residence and to use or own its household effects.
(v) The expectation of pension, retirement, or other deferred compensation that are not marital property.
(vi) Direct or indirect contribution made to the acquisition of marital property as a spouse, parent, wage earner, or homemaker.
(vii) Direct or indirect contribution by one spouse to help educate or develop the career potential of the other spouse.
(viii) Direct contribution to an increase in value of separate property, which occurs during the course of marriage.
(ix) The liquidity of marital and divisible property.
(x) The difficulty in valuing assets or interests.
(xi) Tax consequences.
(xii) The acts of either party to maintain, preserve, develop, expand, waste, neglect, devalue, or convert marital or divisible property.
(xiii) In the event of death by a party prior to distribution, the effects of the death on the property acquired by the survivor.
(xiv) Any other factor which the court finds to be just and proper.
Consider, for example, the wife who brought $300,000 of separate funds into the marriage. The wife and husband own a home as tenants by the entirety. She uses $20,000 of her separate money to make improvements to the marital home, which increases the value of the home by $30,000. The wife also pays $150,000 for her husband to go to medical school. The wife is the sole source of financial support while the husband is in medical school. Upon graduation, the husband obtains employment as a doctor earning $200,000 per year. This is $125,000 more than the wife makes and $150,000 more than the husband used to make. The wife discovers the husband has been having an affair and leaves him.
In determining equitable distribution, the court is required to hear evidence and make findings of fact. While the home will be considered marital property, her contribution to its increase in value will be considered separate. Additionally, the separate funds that she brought into the marriage will be considered separate as well. The court will also consider the wife's contribution to the husband's medical school education, her earning capacity, and the husband's new earning capacity as factors in determining equitable distribution. The husband's infidelity, however, will not be considered in determining equitable distribution.
Although relevant in determining alimony, marital fault is NOT relevant in equitable distribution. Economic fault, however, is relevant. If a spouse, for example, has been using marital funds to pay for an apartment for his mistress, this will be considered in making an equitable distribution.
Pensions and Retirement Benefits:
North Carolina holds that pensions and retirement benefits that are earned during the marriage are marital property. Conversely, pensions and retirement benefits that were earned before marriage are separate property. In determining how to divide a pension, North Carolina divides the years of marriage that the spouse was employed by the total years of employment. Thus, for example, if a husband has been working for an employer for 8 years prior to marrying his wife, and continues to work for the employer for 12 years while married to his wife, the court would divide the 12 years the husband worked for the employer while married by the 20 total years of employment. 60% of the husband's pension, therefore, would be marital property and divided equally. The other 40% would be separate property.
Generally, to establish an ex-spouse's right to a portion of their former spouse's pension, a court must enter a Qualified Domestic Relations Order (QDRO). A QDRO instructs a pension plan administrator to distribute benefits as stated in the court order. The ex-spouse becomes a co-beneficiary of the pension and also becomes liable for taxes on the received benefits. Without a QDRO, the spouse who earned the pension would be liable for all taxes on the pension, even if he were to pay out benefits to his ex-spouse from the pension.
Adkins Law is able to provide you with assistance in a variety of family law issues, including equitable distribution. Contact Adkins Law if you wish to speak with an experienced Huntersville divorce attorney or Huntersville divorce lawyer.