North Carolina is an equitable distribution State. That means that spouses’ interests in assets and debts are determined as of the date of separation. Equitable distribution allows assets and debts to be classified, valued, and distributed between the parties. All assets and debts fit into one of three classifications: separate, marital, or divisible. Separate property, generally, is a property that was acquired by a spouse prior to the date of marriage. Marital property, generally, is the property that is acquired by one or both spouses during the marriage. Divisible property, generally, is the change in the value of marital property that occurs between the date of the parties’ separation and the date that property is divided between the parties. North Carolina’s equitable distribution statutes include a presumption that an equal division of marital and divisible property is equitable. There are factors that weigh in favor of a division that is not equal, but the starting point for any court is to determine what an equal division of assets and debts would look like.
Our statutes allow either party to apply to the trial court for an equitable distribution at any time after the parties begin to live separately and apart from each other. This claim, however, must be brought before the parties are divorced. If there is no claim for equitable distribution pending at the time of the parties’ divorce, then the trial court does not have jurisdiction to divide the party’s marital and divisible assets and debts. So, what happens to those assets and debts if there is no equitable distribution claim pending as of the date of a divorce judgment? If no claim is pending when the divorce is entered, then ownership defaults to the party in whose name the asset or debt is held. That means, for example, without an equitable distribution claim pending at the time of divorce, retirement accounts, bank accounts, cars, and real property will automatically belong to the party whose name is on the account, title, or deed.
Assets and Debts in North Carolina
If you do not want assets and debts to be distributed pursuant to title, it is essential that you address equitable distribution prior to the date that a divorce judgment is entered. You can do this by having a claim pending in the trial court or by entering into a separation and property settlement agreement, which is a contract between the parties addressing the division of assets and debts. Whether you choose the court option or the contract option, it is essential that you know all of the assets and debts, how they are owned, and what they are worth. If you are engaged in a court action for equitable distribution, there are official mechanisms for the discovery and exchange of information, but there are no official or mandatory information exchange requirements involved if you are resolving property issues with a contract. Therefore, if you are going with the contract option, it is essential that you have a good understanding of your assets and debts before you sign a contract.
If you are currently separated or are contemplating a separation, you should gather as much information as you can about marital assets and debts. Make sure you have access to essential documents and online information, such as bank account statements and mortgage information. If there are hard copies of documents, make sure you have a copy. Copies of documents such as paystubs and bank account statements are especially helpful for identifying and locating other assets. A pay stub may show funds being deposited into an account you did not know about. A bank account statement may show funds being transferred elsewhere or being invested. The more information you have, the better positioned you will be to present your position to the court or to negotiate a division of assets and debts.