North Carolina Property Division Law
also known as Equitable Distribution
Property that is acquired during marriage by one or both spouses, and owned on the date of separation, may be defined as marital property subject to the equitable distribution law of North Carolina.
Excluded, however, from the definition of marital property are gifts and inheritances, received by one spouse only, from third parties, whether such property is acquired during the marriage or not. Such gifts and inheritances are that spouse’s separate property and do not get divided with the other spouse. Gifts from one spouse to the other spouse during the marriage, on the other hand, are presumed to be gifts to the marital unit. Property owned by either party prior to marriage is that party’s separate property, provided that it is not gifted to the marital unit.
Equitable distribution law presumes, further, that an equal (50/50) division of the marital property will be equitable. Most judges in this state favor awarding each party fifty percent of the marital property, unless certain factors make a good case for an unequal distribution.
Unequal distributions come in all percentages, from 51.2% / 48.8 % to 95% / 5%, for example. The standard court case, however, results in an even 50/50 split of the property. The typical negotiated settlement on marital property also tends to be quite close to a 50/50 division, unless the spouses can agree to a different allocation. In a negotiated settlement, any ratio is permitted. The real question is what percentages the parties can agree to.
What defines Marital Property?
“Property” includes both assets and debts. All assets and debts acquired during the marriage, and owned on the date of separation, are valued as of the date of separation in North Carolina for purposes of calculating the net value of the marital estate. If the net value of the marital property is $100,000, applying the 50/50 presumption leads to each spouse’s receiving property worth a total of $50,000. If, on the other hand, the marital property has a negative net value of, say, minus $20,000 because of large debts that outweigh the spouses’ positive assets, then applying the presumption leads to each spouse’s receiving property worth a total of negative $10,000.
Equitable Distribution Factors
There are a number of so-called “equitable distribution factors” in North Carolina’s equitable distribution statute that can justify a judge’s unequal (non-50/50) distribution of marital property. Such factors include:
- one spouse’s health
- income-earning potential
- need to reside in the marital home with the children of the marriage
- a spouse’s business or unvested pension interests
- and similar economic factors.
Fault is not relevant in an equitable distribution proceeding, except to the extent that marital misconduct has had an economic impact on the marital estate.
Where the equitable distribution factors make it fair for one spouse to receive more (or less) than 50% of the net marital estate, a court’s award would be unequal, that is other than 50/50. Because, however, the vast majority of cases lack facts that weigh in favor of an unequal distribution, many litigated cases and most equitable distribution cases that settle result in each partner’s receiving half of the property.
The Bigger Picture
Property Division is only one aspect of divorce in North Carolina. Before you legally end your marriage, consider researching the below topics. Once a divorce is finalized, you may not be able to revisit issues related to retirement division, child custody, alimony, or child support.