In North Carolina, “separate property” refers to assets or debts owned by one spouse individually. Separate property is considered all property (real estate or personal property) acquired by a spouse prior to marriage, or acquired by gift or inheritance during the marriage. Separate property includes debts acquired prior to marriage such as student loans or credit card debt.
Separate property can include assets and debts that do not fit so neatly into the above referenced definition. Income derived from separate property remains separate property. If a spouse uses a separate asset to acquire another asset, the exchanged asset does not lose its classification as separate property. There is, however, a presumption that property acquired during the marriage is marital property, and equitable distribution proceedings can quickly become more complicated when a spouse challenges the classification of the exchanged asset (or any other asset) as the separate property of the other spouse. Moreover, when an asset has components of both separate property and marital property, it is considered “mixed property.”
In some circumstances, “separate debt” can include debt incurred during the marriage if such debt was not incurred for the benefit of the marriage. An example of debt incurred during the marriage that could be found to be a spouse’s separate debt would be credit card debt incurred as the result of gifts purchased for a paramour.
Gifts between spouses are considered marital property unless there is an express intention stated in the conveyance that the gift shall be separate property.
Separate property is not subject to equitable distribution as part of the marital estate, but a spouse’s separate property may be considered as a distributional factor that might support an award of an unequal division of the marital estate.
This article is for information purposes only and is not to be considered or substituted as legal advice. The information in this article is based on North Carolina state laws in effect at the time of posting.