Equitable distribution is a legal claim for property division where a spouse can ask the court to divide assets and debts acquired during the marriage between both spouses.
Equitable distribution can be fixed by court order or through a private agreement between the spouses, such as a separation agreement. Only marital and divisible property are subject to equitable distribution.
Marital property is any property, real or personal, that was acquired during the marriage up until the date of separation. Marital property includes separate property that increased in value during the marriage and any debts or obligations incurred during the marriage. Marital funds are also subject to equitable distribution, meaning that any money earned by either spouse during the marriage can be divided. Marital property also includes any property purchased with those marital funds. This is true even if only one spouse used the property, such as clothing. Inheritance and gifts received from third parties during the marriage are not marital property and thus, are not subject to equitable distribution. However, if a spouse uses inheritance to improve marital property, such as a home, a court may find that he or she “gifted” that inheritance to the marriage, subjecting it to distribution.
Divisible Property is property obtained between the date of separation and the divorce decree. This includes any property, money, or obligation that was incurred during the marriage but did not materialize until after the date of separation. For example, if your spouse earned a bonus during your marriage but did not receive the money until after the separation, that payment is divisible property subject to distribution. Divisible property commonly includes stocks, dividends, retirement funds, and debt.
Separate property is any property, real or personal, that was acquired or owned before the marriage. It includes property that was intended solely for you such as inheritance, a gift, or property gained in exchange for your separate property. For example, if you own a car before marriage and exchange that car for a new one, the new car remains your separate property even if you acquired it during the marriage.
To understand how the court will divide your property, it’s important to understand what “equitable distribution” is. In the United States, there are two ways for the states to divide marital property: Community Property Distribution and Equitable Distribution. A minority of the states follow community property distribution and divide all marital property 50/50, regardless of who acquired it. The majority of states, including North Carolina, use equitable distribution to divide marital property. Under this model, courts divide property justly, or in a way that is fair to both parties.
Judges consider a variety of factors in deciding how to divide property, including
Unlike in a child custody or alimony award, marital misconduct is not a factor considered for equitable distribution.
Before the court can divide marital property, each party must list everything they own in a special affidavit form. This includes anything you can think of, such as your home, real estate, cars, bank accounts, furniture, clothing, airline miles, and businesses. The court will also require a list of all your debts and obligations, such as your mortgage, car loans, student loans, or credit card balances.
Once the court has notice of all the property you own, it will attempt to value your assets and distribute the property in a “fair” manner. While courts typically favor a 50/50 split, dividing the property “equitably” does not require the court to give you and your spouse equal shares.
It is important to note that unlike a child custody, child support, or alimony award, once an award of equitable distribution is final, it cannot be modified.
North Carolina laws are very clear that property division does not affect child support or alimony. However, if the parties enter into a separation agreement or other agreement without the court first making a property determination, parties can sometimes leverage property against alimony or child support. For example, you may offer your spouse a rental property and car in exchange for a reduced alimony obligation.
The court also does not consider “marital fault” in dividing marital property. For example, where an act of adultery may affect alimony or child custody, it has no effect on the distribution of your property.
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