The Basics of Equitable Distribution in North Carolina

Q: What is Equitable Distribution?

A: Among other things, equitable distribution is the distribution of property, including assets, and debt accumulated during the course of a marriage.

Q: How does North Carolina law Define Marital Property, Separate and Divisible Property, and Distributive Award?

A: Pursuant to § 50-20 of the North Carolina General Statutes, the following definitions apply:

  • Marital property” is defined as all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date the parties separated. Marital property also includes all vested and non-vested pension, retirement, and other deferred compensation rights, and vested and non-vested military pensions eligible under the federal Uniformed Services Former Spouses’ Protection Act.
  • Separate property” is defined 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 the marriage. However, property acquired by gift from the other spouse during the course of the marriage shall be considered separate property only if such an intention is stated in the conveyance. Property acquired in exchange for separate property shall remain separate property regardless of whether the title is in the name of the husband or wife or both and shall not be considered to be marital property unless a contrary intention is expressly stated in the conveyance. All professional licenses and business licenses which would terminate on transfer shall be considered separate property.
  • Divisible property” is defined as all real and personal property as set forth below: a. All appreciation and diminution in value of marital property and divisible property of the parties occurring after the date of separation and prior to the date of distribution, except that appreciation or diminution in value which is the result of post-separation actions or activities of a spouse shall not be treated as divisible property; b. All property, property rights, or any portion thereof 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 and before the date of separation, including, but not limited to, commissions, bonuses, and contractual rights. c. Passive income from marital property received after the date of separation, including, but not limited to, interest and dividends. d. Increases and decreases in marital debt and financing charges and interest related to marital debt.
  • Distributive award” means payments that are payable either in a lump sum or over a period of time in fixed amounts, but shall not include alimony payments or other similar payments for support and maintenance which are treated as ordinary income to the recipient under the Internal Revenue Code.

Q: May I File My Claim for Equitable Distribution Even Though I’m Still Living With My Spouse?

A: No. A claim for Equitable Distribution may be filed at any time after a husband and wife start living separately and apart from each other. And the party who files the equitable distribution claim must prepare and serve upon their spouse an equitable distribution inventory affidavit listing all property claimed he or she claims is marital property and all property claimed by the party to be separate property within 90 days after said claim is served upon the other spouse. Within 30 days after service of the inventory affidavit, the other spouse must prepare and serve an inventory affidavit upon the other party.

Q: How Does the Court Divide a Marital Estate?

A: As a general matter a marital estate will be divided equally between the parties by using net value of marital property and net value of divisible property unless the court finds that an equal division is not fair If the court finds that an unequal division of the marital estate is equitable, the court will divide the marital and divisible property in a manner that is fair.

Q: What Are Some of the Factors that the Court Considers in Determining an Equitable Distribution Claim?

A: The court consider all relevant factors including: 1) The income and liabilities of each spouse; 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 their child to possess the marital residence; 5) The expectation of retirement, or other deferred compensation rights that are not marital property; 6) Any equitable claim to marital property by the party not having title; 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 marriage; 9) The liquid or non-liquid character of all marital and divisible property; 10) The difficulty of evaluating any asset or any interest in a business; 11) The tax consequences to each party that would have been incurred if the marital and divisible property had been sold or liquidated on the date of valuation; and the 12) Acts of either party to maintain, preserve, develop, or expand; or to waste, neglect, devalue or convert the marital or divisible property during the period after the parties’ separation but before the time of distribution; and any other factor which the court finds to be just and proper.

Q: Am I Entitled to An Interim Distribution of Marital Property?

A: Maybe. Good cause must be shown in order for the court to grant the moving spouse an interim distribution award of marital assets prior to the final judgment of equitable distribution. The partial distribution may provide for a distributive award and may also provide for a distribution of marital property, marital debt, divisible property, or divisible debt. The Court must take into consideration at trial any the appropriate spouse proper credit for such partial award.

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