Types of Property Involved in Property Distribution: Marital, Divisible, and Separate

When the court divides property from a marriage pursuant to an equitable distribution claim, the court must first classify the property as either marital or separate property.

Marital property is defined in North Carolina General Statute Section 50-20(b)(1) as all real and personal property (including debt) acquired by either spouse or both spouses during the course of the marriage and before the date of separation. The property must also have been owned as of the date of separation (or shortly before this date if a spouse wrongfully transfers the property in anticipation of separation).

Divisible property is closely related to marital property and is defined in North Carolina General Statute Section 50-20(b)(4) as all real and personal property that falls into one of the following categories:

1.All passive appreciation and diminution in value of marital property that occurs after the date of separation and before the date of distribution.

2.All property and property rights received after the date of separation but before the date of distribution that were acquired due to efforts of either spouse during the marriage and before the date of separation (i.e., commissions, bonuses, contractual rights).

3.Passive income from marital property received after the date of separation (i.e., interest, dividends).

4.Passive increases and decreases in marital debt related to marital debt (i.e., finance charges, interest).

Separate property is defined in North Carolina General Statute Section 50-20(b)(2) as all real and personal property (including debt) acquired by a spouse:

1.Before marriage;

2.By inheritance during the marriage; or

3.By gift during the marriage.

Any property falling into one of these three categories is that spouse’s separate property; however, gifts between spouses are treated as marital property by the court, unless a contrary intention is expressly stated when the gift was conveyed. For example, if you give your spouse a necklace for her birthday, the necklace is marital property, unless you tell your spouse when you give her the necklace, “This is your sole and separate property.” As you can imagine, this rarely happens. Any increase in the value of separate property is likewise considered separate property. All professional licenses and business licenses that would terminate if transferred to another person are also considered separate property.

These matters can be very detailed and complicated and it is wise to consult with an attorney who focuses primarily on family law to ensure that you are treated fairly during the divorce process.