How Property is Divided in a North Carolina Divorce

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If you are considering divorce or currently dealing with the divorce process, you know divorce is painful and time-consuming even when both spouses agree on the terms of the divorce. The division of assets is often the most contentious part of the separation and where the most contentious disagreements arise between divorcing spouses. Learn how property is divided in a North Carolina divorce, what factors are considered in a property division, and how a skilled North Carolina divorce lawyer from Melone Hatley, P.C. can help you get your fair share.

How is Property Divided in a North Carolina Divorce?

If you and your spouse do not reach a property settlement, a judge will divide your assets. North Carolina uses a concept known as the equitable division of assets for the distribution of property. Who gets what comes down to two broad types of property: marital property and separate property.

One of the most significant misconceptions about property division in North Carolina divorces is the belief that “equitable” translates to an equal division of assets between spouses. Equitable distribution aims to achieve a fair distribution based on several factors, including the duration of the marriage, each spouse’s contributions to the marriage (financial and non-financial), the value of each spouse’s separate property, and their respective financial situations.

The court considers these factors to determine a just and reasonable distribution of assets, which may result in an unequal division of property. In some cases, one spouse may receive a larger portion of the assets due to economic disparity, differences in the value of separate property, or one spouse’s significant non monetary contributions to the family. Your divorce attorney can provide legal advice on how to assess property for fair division.

Marital Property

Only marital assets are subject to division under North Carolina divorce laws. For the most part, the division of marital property refers to anything the couple has jointly acquired during the marriage. Your house, car, retirement accounts, bank accounts, and anything else you gained after getting married, with very few exceptions, are all part of your marital estate. This includes gifts you gave to your spouse (unless you expressly stated they were separate property) and marital debt.

It is important to understand that it does not generally matter whose name is on a title or deed. In North Carolina, the name on the title or account is not the sole determinant of property ownership during divorce proceedings. Courts consider the origin of the asset, how it was acquired, and whether it was acquired as a joint effort during the marriage. For instance, if one spouse owns a business or property in their name, but the other spouse contributed significantly to its growth or maintenance during the marriage, the value of that asset may be subject to division.

Separate Property

Separate property refers to property that each party owned before marriage. Retirement benefits you accumulated up to your marriage may be separate income, depending on how the retirement plans benefit your spouse after the marriage. A car you purchased before getting married may be separate property depending on its use during the marriage. Some assets acquired after marriage can also count as separate property. For example, anything given as a gift or inheritance to one spouse is considered separate property. Like marital property, separate property can include any assets and debts you accrued before marriage.

Divisible Property

Divisible property is evaluated at the time of the court trial instead of at separation. It refers to any changes in the property value post-separation or assets received post-separation due to marital effort or property before you separated. This is a very narrow category. A good example of divisible property is money one spouse earned during the marriage that was not paid to them until after the separation. Examples include a holiday bonus, crowdfunding proceeds, or quarterly sales commissions.

Can Separate Property Become Marital Property?

Yes, under certain circumstances, separate property can become marital property. It depends on how the property was used during the marriage and whether it provided value to both parties during the marriage. Separate property can become marital property intentionally, such as if a spouse who owned the marital home before marriage later places their partner’s name on the deed. It can also happen organically and unintentionally by mixing separate property with existing marital property. For example, a spouse gets an inheritance and deposits it into the couple’s joint bank account, making it part of the total marital funds.

In North Carolina, the commingling of separate property does not automatically transform it into marital property. To maintain the distinction, you must be able to trace the source of the separate property. For inheritance funds, for example, you must have detailed records tracing the original deposit.

How is Debt Divided in a North Carolina Divorce?

Debt is considered property in North Carolina. This means it will be evaluated either as marital property or separate property depending on its origin and use, and any marital property will be divided equitably by the courts. Once again, equitable does not mean equal. It means that each spouse will get a portion of the debt based on their ability to pay that portion while maintaining what the court deems a reasonable standard of living.

The judge will decide based on factors ranging from each member of the couple’s ability to work, support obligations, the duration of the marriage, the non monetary contributions to the marriage, such as those provided by a homemaker, and other factors.

How Are Retirement Accounts Divided in a North Carolina Divorce?

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As with all other marital assets, retirement accounts are divided equitably in a divorce under North Carolina law. Often, when the spouse is awarded a portion of the retirement benefits, the spouse who holds the account must sign and file a Qualified Domestic Relations Order (QDRO) with their plan administrator. This will allow the retirement plan benefits to be distributed to the ex-spouse.

The courts may award just part of the retirement plan or all of it. The plan can go to either the ex-spouse, a child or dependent, or other parties with the issuance of the QDRO. Once issued, the plan must honor the QDRO. You should seek legal advice from a North Carolina divorce lawyer when dealing with retirement plans.

How is Property Valued in a North Carolina Divorce?

The courts will determine the value of marital property in your divorce based on its current fair market value. Your experienced North Carolina family law attorney can help with this by working to get any property you have valued to argue in your favor. Having qualified valuation services estimate the value of your home, car, family heirlooms, and other property can be valuable when arguing your case before the judge and negotiating with your ex-spouse.

Factors Considered in North Carolina Property Division

The courts take many factors into account when dividing marital assets during a divorce. Some of these factors include, but may not be limited to:

  • The standard of living maintained by the couple
  • Each member of the couple’s ability to work
  • The age and health of each member of the couple
  • The role each member of the couple played during the marriage
  • Economic and noneconomic contributions, such as the primary breadwinner vs. the homemaker
  • The duration of the marriage
  • The value of separate property
  • The liquid or nonliquid nature of the property (cash vs. real estate, for example)
  • The value of business interests
  • The existence of a prenuptial agreement
  • The existence of minor children, including the needs of a parent with child custody, child support obligations, and what is in the child’s best interests

A note about prenuptial agreements: While prenuptial agreements can influence the property division process, they do not always override the equitable distribution principles in North Carolina. Prenuptial agreements must meet specific legal requirements to be valid and enforceable. Even if a prenuptial agreement exists, certain provisions may still be subject to judicial review, especially if they are deemed unfair or were signed under duress.

Factors that do not impact property division include:

  • Who filed for divorce first
  • Future financial needs
  • Personal conduct during the marriage, though factors such as marital misconduct, domestic violence, or criminal activities may be considered
  • Gender bias
  • Income disparity, though it may affect decisions on alimony or spousal support

How Does Property Division Affect Taxes in North Carolina?

The division of property is nontaxable and nondeductible. Tax consequences can, however, arise from the sale of marital property and retirement plan benefits. An example would be if you transfer funds from an IRA or other retirement plan or sell marital assets to third parties. If the property has significantly increased in value, its sale can carry heavy liabilities for the party that takes possession of it during the divorce. Working with your divorce lawyer, tax adviser, or accountant is crucial when making these decisions.

Negotiating a Property Settlement Agreement in North Carolina

You can negotiate with your spouse on how to divide property. If you agree, this can save both of you time, effort, and frustration. However, it is not always easy, and impasses often happen. In addition, the courts will have to approve the agreement, but if it appears fair, they will usually do so. Your North Carolina family law attorney can help you negotiate a settlement agreement with your spouse and their attorney.

Can Property Division Be Modified in North Carolina?

Property division of marital assets, once approved or ordered by the courts, can be modified, but only very rarely upon appeal or other extraordinary circumstances. For example, a judge can modify court orders for alimony or child support if a substantial change in the circumstances of one party occurs (for example, someone gains a substantial increase in income or loses their job). For this reason, it is essential to take property division negotiations seriously. Be sure that the division is indeed fair and equitable.

When to Get a Lawyer for Property Division in a North Carolina Divorce

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Having a divorce lawyer from Melone Hatley in your corner can be very helpful. Our North Carolina law firm can help identify and classify property types for fair distribution. We can help protect separate property from division. If you wish to negotiate, we can mediate the negotiations. We can take over communications with your ex, their lawyer, and other involved parties. We can also represent you at trial if necessary. Ultimately, our North Carolina family law attorneys will argue for your fair share and fight for your right to the property you deserve.

We Fight for Your Fair Share

At Melone Hatley, we deeply value the relationship we build with our clients. We are a compassionate yet dogged ally in your fight to protect your property and all you have worked hard to earn. Divorce is a painful process. You should not have to add to that pain by worrying about getting what you deserve during the split. Let us help you negotiate and fight for your fair share in the divorce. Contact us today at 980-288-8909 or fill out our online contact form to speak with a member of our client services team.

Ben Hefferon

Written By Ben Hefferon

Ben Hefferon is a native of Charlotte and has consistently been rated by his peers as a top divorce and family law attorney. His commitment to his clients and dedication to the field of law make him an invaluable asset in navigating the complexities of your case.
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