Equitable Distribution

Equitable distribution is the legal term for dividing your marital property. Property is considered “marital” if was obtained during the marriage and before the date of separation.  Marital property also includes marital debt, and that debt will need to be distributed just as an asset would be. There are a few exceptions to the general rule that property obtained during the marriage is marital, including property that was inherited by one spouse or gifted to one spouse. Those are considered the separate property of that spouse and are not subject to equitable distribution. Likewise, any property obtained prior to the marriage or after the date of separation is that spouse’s separate property. 

Tracing Separate Property

In some states, separate property can “transmute” into marital property when it is “commingled.” In other words, if you mix marital money with separate money, the separate money becomes marital. North Carolina is not a transmutation state, which can good or bad news depending on how much “commingling” has happened during your marriage. In North Carolina, if you want to prove that a certain asset is partially your separate property, you have to “trace” the separate property component of that asset. For example, if you deposit income earned during the marriage (marital property) into an account that contains income earned prior to the marriage (separate property), you must use your bank statements to show exactly what went in and out of that account during the marriage and how much you contend is your separate property. It can be a very complicated process and, depending on the length of your marriage, you may not have access to the documents you need for tracing purposes. This issue often arises with bank accounts and retirement accounts, but nearly any piece of property can be considered a “mixed asset” with a separate property and a marital property component.  No matter the asset, if you contend that it is partially your separate property, you will need documents to trace the separate property component. 

Business Interests

Marital property can be real or personal property, liquid or nonliquid property, and even intellectual property. If one or both spouses own an interest in a business, that business may need to be valued in order to be equitably distributed. In complicated equitable distribution cases, you may need the help of different experts such as real estate appraisers, business valuators or forensic accountants. Both spouses can hire a neutral expert to help value specific marital property, or each spouse can hire his or her own expert. It is important that you provide your attorney with honest and complete information so that you can discuss the best course of action in your case. 

Effect of Title

In North Carolina, title does not control whether an asset or debt is considered marital or separate. So, it does not matter if your name is not on loan or mortgage – if it was obtained during the marriage, it is presumed to be a marital debt. The same is true for marital property – it does not matter whose name is on the car title if it was obtained during the marriage. One instance where title will make is a difference is when you own real property as tenants by the entirety. This is a special way of holding title that is reserved for married couples. It can be beneficial during the marriage but can also create issues during divorce. When real estate is held this way, it is presumed that it was a gift to the marriage, no matter what funds may have gone into it. While you can normally trace your separate funds out of real property that was purchased with separate and marital funds, there is a presumption that real property titled as tenants by the entirety is entirely marital property. The deed does not need to specify that the property is held as tenants by the entirety, so you may own real estate as tenants by the entirety and not know it. This can come as a shock, especially when one spouse paid for the entire down payment out of separate funds and expects to get reimbursed. 

Dividing Marital Property

North Carolina law presumes that you will divide marital property “equitably,” which does not necessarily mean equally. There are numerous factors a judge will consider when deciding how to divide the marital property, including the duration of the marriage, each spouse’s age, health, separate property, income earning ability, and many more. While a 50/50 split is usually considered to be equitable, these factors can make a difference in front of the judge. North Carolina equitable distribution law is quite nuanced, which is why it is important to hire an experienced family law attorney to guide you through it.


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