Equitable Distribution in North Carolina
What is Equitable Distribution?
Equitable distribution is essentially the legal division of the marital assets. Whenever there is a separation or a divorce, equitable distribution is an item that needs to be addressed. In North Carolina, the steps which are taken to divide up your property are known as equitable distribution. As the name implies, the court address the fact that both parties have an interest in the assets which they have acquired during the course of their marriage, so the court tries to equally distribute the property between the parties.
How Does Equitable Distribution Work in North Carolina?
The process of equitable distribution works by identifying three classes of property: (1) Separate Property, (2) Marital Property, and (3) Divisible Property. North Carolina General Statute § 50-20 covers equitable distribution, and provides definitions for each class of property.
The Court must first, identify all property which is subject to equitable distribution. After all separate property is taken out of the equation, the court assesses the fair market value of each item which is considered marital property in a process known as valuation. Finally, the court distributes the property in a manner which is considers to be equitable.
What Does Each Classification of Property Mean?
Separate Property is any property which is acquired by a spouse before the marriage, after the date of separation, or during the marriage and before separation if the property is acquired by gift, bequest, devise, or descent. Any such property which is acquired during the marriage can only be classified as separate if the gift, devise, bequest or descent was intended for one spouse. Property which is considered separate is not divisible (see below).
Marital Property is any property which acquired by either or both spouses during the course of the marriage, or before the date of separation. There is a presumption that any property which is acquired during the course of the marriage is marital property.
Divisible Property is any property which is earned during the marriage but is acquired after separation. Divisible property factors in any appreciation or depreciation in marital assets which are realized after the date of separation. This includes any passive income earned, or any property rights after the date of separation.
How Does the Court Determine the Classification of Property in Equitable Distribution?
North Carolina courts use the “Source of Funds” rule in determining which assets are separate and which are marital. The source of funds rule allows the court to trace the money which was used to originally acquire the property in order to determine its classification.
Must a Court Decide on Equitable Distribution ?
The answer is no. A court does not have to decide on how the property is split up. The parties are free to decide on how their property is to be divided by creating a separation agreement which fairly divides the property. It may be wise to consult an experienced family law attorney in your area for assistance with drafting a separation agreement.
When Can a Party Request Equitable Distribution?
It is important to note that equitable distribution is not automatically provided by the court. Parties must ask the court for equitable distribution and can do so at any time before the judgment for divorce is entered. It is important to note that, if you do not file for equitable distribution PRIOR to the absolute divorce being granted, you waive your right to equitable distribution. The same rule applies for alimony. After the judgment for divorce is entered, a separate hearing will be conducted on the matter of equitable distribution.
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