Equitable Distribution

Equitable Distribution (also referred to as “ED” for short) is the process of distributing property between husband and wife. Generally, there are three types of property. The first type, marital property, is typically going to be any and all property that was obtained by the parties during the marriage. This includes pensions (vested and non-vested), retirement accounts, deferred compensation rights, and military pensions (vests and non-vested).

The second, separate property, is typically any and all property that was brought to the marriage by one party, as well as that received through inheritance or as a gift. Unless a contrary intent is found, property that is acquired in exchange for separate property will also remain separate property. This remains true as well for any increase in the value of separate property.

The third, divisible property, is the property that is obtained from the separation date until the property is divided. This includes all property that may have been received after the date of separation but before the date of distribution so long as the property was acquired as a result of the “efforts of either spouse during the marriage and before the date of separation.” An example of this would be a bonus that is received after the date of separation but which came from a job that the spouse had during the course of the marriage.

Only the parties’ marital property, as stated above, is to be distributed. There is a presumption that marital assets and debts should be divided equally between the parties, although this is not always the case. North Carolina courts distribute property according to fairness principles, and there are several factors that may affect this distribution. According to N.G.G.S. § 50-20, the following factors can be considered if a court finds that an equal division is not, in fact, equitable:

  1. The income, property, and liabilities of each party at the time the division of property is to become effective.
  2. Any obligation for support arising out of a prior marriage.
  3. The duration of the marriage and the age and physical and mental health of both parties.
  4. The need of a parent with custody of a child or children of the marriage to occupy or own the marital residence and to use or own its household effects.
  5. The expectation of pension, retirement, or other deferred compensation rights that are not marital property.
  6. Any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services, or lack thereof, as a spouse, parent, wage earner or homemaker.
  7. Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse.
  8. Any direct contribution to an increase in value of separate property which occurs during the course of the marriage.
  9. The liquid or nonliquid character of all marital property and divisible property.
  10. The difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest, intact and free from any claim or interference by the other party.
  11. The tax consequences to each party, including those federal and State tax consequences that would have been incurred if the marital and divisible property had been sold or liquidated on the date of valuation. The trial court may, however, in its discretion, consider whether or when such tax consequences are reasonably likely to occur in determining the equitable value deemed appropriate for this factor.
    1. Acts of either party to maintain, preserve, develop, or expand; or to waste, neglect, devalue or convert the marital property or divisible property, or both, during the period after separation of the parties and before the time of distribution.
    2. In the event of the death of either party prior to the entry of any order for the distribution of property made pursuant to this subsection:
      • Property passing to the surviving spouse by will or through intestacy due to the death of a spouse.
      • Property held as tenants by the entirety or as joint tenants with rights of survivorship passing to the surviving spouse due to the death of a spouse.
      • Property passing to the surviving spouse from life insurance, individual retirement accounts, pension or profit-sharing plans, any private or governmental retirement plan or annuity of which the decedent controlled the designation of beneficiary (excluding any benefits under the federal social security system), or any other retirement accounts or contracts, due to the death of a spouse.
      • The surviving spouse’s right to claim an “elective share” pursuant to G.S. 30-3.1 through G.S. 30-33, unless otherwise waived.
  12. Any other factor which the court finds to be just and proper.

One thing that is very important to note, as it relates to ED, is that an absolute divorce bars a party from asserting a claim for ED that is not pending at the time the absolute divorce is granted. This is strictly followed and adhered to in North Carolina and can certainly affect a parties’ rights if not done properly.

At Rech Law, P.C., we can help you understand how your property should be divided and how the process works from start to finish.