Chapel Hill Family Law

Divorce, Child Custody, Child Support

Serving Orange, Chatham & Durham Counties

Contact us at 919.419.1244

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Property Division, Equitable Distribution

When a marriage ends, property and finances that have long been intertwined must be divided between the spouses, a process known in North Carolina as equitable distribution.

Through equitable distribution, property owned by the parties is first classified as marital property or separate property (there is a third classification known as divisible property, which is treated similar to marital property). In general, any property acquired by either spouse after the date of marriage and prior to the date of separation is classified as marital property, unless the property was acquired by only one of the spouses through direct inheritance or gift. If property was acquired during the spouses’ marriage, such property may be classified as marital property regardless of how the property is titled or which spouse is the owner of the property. Marital property may, for example, include houses, vehicles, furniture and household effects, bank accounts, investment accounts, retirement accounts, business interests, and pension benefits. In general, any property acquired by one spouse prior to the date of marriage, during the marriage through direct inheritance or gift, or after the date of separation is classified as the separate property of that spouse. In North Carolina, gifts exchanged between spouses during their marriage are generally classified as marital property. Notably, separate property generally remains separate property even if it is comingled with marital property or titled in the joint names of the spouses so long as the property can be traced to a separate source. There is, however, one significant exception to the aforementioned rule. In North Carolina, if a spouse invests his or her separate property in a piece of real property owned by the spouses and titled as tenants by the entirety, a form of concurrent ownership available only to a married couple and the default form of concurrent ownership for real property owned by a married couple, such separate property is presumed to be a gift to the marriage and, therefore, becomes marital property.

Once the property has been classified as marital or separate property, it is then valued as of both the date of separation and as of the date it is distributed between the spouses.

After the property has been classified and valued, it is distributed between the spouses. Equitable distribution law in North Carolina presumes that an equal division of marital property between spouses is equitable, although either spouse may argue that he or she should receive more than half of the value of the marital estate based upon certain factors, including the respective earnings and/or earning capacities of the spouses, the separate estates of the spouses, the ages and physical and mental health of both spouses, and/or the desirability of one spouse to maintain ownership of a closely held business. Of note, in North Carolina, non-economic marital misconduct, such as adultery, cannot be a factor upon which to base an unequal division of the marital estate in favor of the innocent spouse; rather, only economic factors may be considered when deciding whether a spouse should receive more than half of the value of a marital estate.

Debt acquired by spouses during their marriage is also factored into the equitable distribution equation. Unlike property, however, debt acquired by either spouse after the date of marriage and prior to the date of separation is not necessarily marital debt. For debt to be classified as marital debt, the debt must have been incurred during the parties’ marriage for a marital purpose or for the joint benefit of the spouses.

To learn more about property division and equitable distribution, contact Chapel Hill Family Law by phone at (919) 419-1244 or by e-mail at info@chapelhillfamilylaw.com.

Johnston & Joines PLLC

107 Conner Drive, Suite 210
Chapel Hill, NC 27514
919.419.1244 · info@chapelhillfamilylaw.com

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