In North Carolina, the assets and debts that couples accumulate from date of marriage to date of separation are presumed to be marital property that is subject to equitable distribution. For purposes of valuing the assets and debts, the marital estate is essentially “frozen” as of the date of separation. In order to take into account such things as passive changes in value of marital property that occurs between date of separation and date of distribution, or to reflect other property that was earned during the marriage, but not paid or received until after the date of separation, North Carolina law recognizes another category of property known as “divisible property.” Divisible property is subject to equitable distribution as part of the marital estate.
North Carolina General Statute §50-20 (b) (4) defines “divisible property” as follows:
- All appreciation and diminution in value of marital property and divisible property of the parties occurring after the date of separation and prior to the date of distribution, except that appreciation or diminution in value which is the result of postseparation actions or activities of a spouse shall not be treated as divisible property.
- All property, property rights, or any portion thereof received after the date of separation but before the date of distribution that was acquired as a result of the efforts of either spouse during the marriage and before the date of separation, including, but not limited to, commissions, bonuses, and contractual rights.
- Passive income from marital property received after the date of separation, including, but not limited to, interest and dividends.
- Passive increases and passive decreases in marital debt and financing charges and interest related to marital debt.
Appreciation or diminution in value of marital and divisible property is presumed to be divisible property unless it is shown that such appreciation or diminution was the result of one spouse’s postseparation actions.
An example of active diminution in value that would be considered separate property can be illustrated in the following scenario. Following separation, one party takes cash advances against a home equity line of credit (“HELOC”) that is secured by the former marital home and uses said cash advances for his/her personal use and benefit. For purposes of equitable distribution, the increased indebtedness on the HELOC that is attributable to the postseparation cash advances would be considered the separate property of the party who obtained the cash advances, regardless of whether the HELOC was held in the joint names of the parties.
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.