In North Carolina, the court ordered or agreed-upon division of assets and debts that occurs when spouses separate is called equitable distribution. All assets and debts that the parties accumulate from the date of their marriage to the date of separation are presumed to be marital property. For purposes of equitable distribution, the marital estate is essentially “frozen” as of the date of separation. Ergo, the assets and debts that the parties own as of the date of separation are those that are subject to equitable distribution between the parties.
Another category of property known as “divisible property,” is also subject to equitable distribution. As more fully discussed in a companion blog article entitled “What Is Divisible Property,” divisible property is, among other things, the passive appreciation and diminution in value of property and debts that occurs between the date of separation and the date of distribution, together with such things as bonuses and commissions that may have been earned during the marriage, but not paid or received until after the date of separation.
“Separate property” refers to property that is owned by one party individually, usually property that was owned prior to the marriage, or acquired by gift or inheritance during the marriage. Separate property is not subject to division as part of the equitable distribution of the marital estate. If a party contends that an asset or debt acquired during the marriage is separate property, then that party has the burden of rebutting the presumption that the asset or debt is not marital property. Assets and debts acquired after date of separation using postseparation income or efforts are considered separate property.
Gifts between spouses during the marriage are usually considered marital property, unless there is evidence that the party conveying the gift intended it to be the separate property of the other party.
It is possible for an asset or debt to be part marital property and part separate property, often the result of co-mingling funds – that is, using both separate and marital funds to acquire an asset. When this occurs, the property is referred to as “mixed property.” The marital component of the asset or debt is subject to division as part of the marital estate while the separate component would remain the separate property of the party to whom it belongs.
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.