Divorce is a challenging and emotional process, often complicated by the division of assets accumulated during the marriage. 

If you’re considering or facing divorce in North Carolina, you may wonder how your property, savings, and debts will be divided. Contrary to popular belief, division doesn’t always mean a 50/50 split. North Carolina follows the principle of equitable distribution, which aims to divide marital property fairly rather than equally. 

Let’s explore what equitable distribution means and how assets are divided following a divorce in North Carolina.

What is Equitable Distribution?

Equitable distribution is a legal framework used in North Carolina to divide marital property during a divorce. Unlike community property states, where assets are typically split down the middle, equitable distribution aims for a fair division based on various factors. 

This doesn’t always necessarily mean an equal 50/50 split; instead, it focuses on what is just and reasonable for both parties. 

Determining Marital vs. Separate vs. Divisible  Property

Not all property is subject to equitable distribution, so the Court’s first step in an action for equitable distribution is to classify property as either marital, separate, or divisible:

• Marital Property: Marital property includes assets and debts acquired by either spouse between the date of marriage and the date of separation, excluding separate property. Debt acquired during a marriage is considered marital property, regardless of whether the debt is in one spouse’s name or both.
  • Examples include the family home, pets, joint bank accounts, retirement accounts, or student loans taken out by one spouse during the marriage.
• Separate Property: Separate property includes assets and debts acquired by either spouse before the marriage or through inheritance or gifts specifically designated for one spouse during the marriage. 
• Divisible Property: Divisible property includes assets and debts acquired after the date of separation but before the final divorce decree, as well as passive increases or decreases in value of marital property occurring after separation.
  • Examples include interest or dividends earned on investments, bonuses received post-separation but earned during the marriage, and increases in property value due to market conditions.

Only marital property and divisible property are subject to equitable distribution; separate property is not. However, the spouse who owns the separate property must prove to the Court that it is separate property otherwise it will be considered marital property.

Factors Considered in Equitable Distribution

North Carolina law presumes that an equal (50/50) division of marital property is “equitable,” or fair. However, the courts consider several factors when determining how to divide marital property equitably, and that sometimes results in a division of property that is fair but not necessarily equal. 

Some of these factors include:

• Duration of the Marriage: Longer marriages may result in a more balanced division of assets.
• Earnings and Earning Capacity: The court considers each spouse’s income and potential future earnings.
• Contributions to the Marriage: This includes financial contributions as well as non-financial contributions like homemaking and raising children.
• Health and Age: The physical and mental health of both spouses can influence the division.
• Custody of Children: The parent who has primary custody may be awarded the family home or other assets to support the children’s stability.
• Debts and Liabilities: Both marital debts and individual liabilities are taken into account.
• Retirement Benefits: Pensions and retirement accounts are evaluated for equitable distribution.

If any of these factors are determined by the court to make a 50/50 division of property “unfair” to either spouse, the court will use its discretion to create a fair split.

Steps in the Equitable Distribution Process

1. Identify Assets: Both spouses must disclose all assets and debts to the Court. 
2. Classify Property: The Court determines which assets are marital or divisible property and which are separate property, as explained above.
3. Value Assets: Each item that falls into either the marital or divisible property categories is then assigned a fair market value. Based on evidence presented, the court decides the net fair market value of the property, or the price a reasonable buyer would pay to purchase the property minus the value of any debts associated with it. 
4. Distribute Property: The court uses the factors mentioned above to divide the marital property fairly.

Prenuptial Agreements and Equitable Distribution

A prenuptial agreement, or prenup, is a legal contract signed before marriage that outlines how assets and debts will be divided in the event of a divorce. In North Carolina, prenuptial agreements can significantly impact the equitable distribution process:

• Enforceability: For a prenup to be enforceable, it must be entered into voluntarily, with full disclosure of assets, and not be unconscionable at the time of enforcement.
• Override Default Rules: A valid prenup can override the default rules of equitable distribution, allowing the couple to decide in advance how their property will be divided.
• Protection of Assets: Prenups can protect certain assets from being classified as marital property, ensuring they remain separate.

The Role of Mediation and Settlement

Many couples prefer to settle asset division outside of court through mediation or negotiation. This approach allows both parties to have more control over the outcome and can be less adversarial and costly than a court trial.

Turn to SeiferFlatow for Legal Guidance

Navigating the complexities of equitable distribution requires a deep understanding of North Carolina’s family law. A knowledgeable attorney can help ensure that your rights are protected and that you receive a fair share of the marital assets. If you’re facing divorce and need legal guidance through the equitable distribution process, the team at SeiferFlatow is here to help. Contact us today to ensure your rights and property are protected.