Equitable Distribution is the process by which the law in North Carolina instructs judges to distribute equitably upon divorce, all property, legally and beneficially acquired during marriage by spouses, or individuals, whether legal titles lies in their joint or separate names. When deciding how to distribute property, the court must follow a three-step process: (1) classify, (2) value, and (3) distribute.
As a part of step one, the court must determine whether the property should be classified as marital or separate. Separate property is real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage. In North Carolina, based on the above definition, property which is inherited by a spouse, regardless of whether the property was received by the spouse before the date of marriage, during the marriage, or after the date of separation, the property will be classified as separate property.
In distributing the marital estate, the court must determine whether an equal division of the marital estate is equitable. In making this determination, the Court may consider the below factors:
(1) The income, property, and liabilities of each party at the time the division of property is to become effective.
(2) Any obligation for support arising out of a prior marriage.
(3) The duration of the marriage and the age and physical and mental health of both parties.
(4) The need of a parent with custody of a child or children of the marriage to occupy or own the marital residence and to use or own its household effects.
(5) The expectation of pension, retirement, or other deferred compensation rights that are not marital property.
(6) Any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services, or lack thereof, as a spouse, parent, wage earner or homemaker.
(7) Any direct or indirect contribution made by one spouse to help educate or develop the career potential of the other spouse.
(8) Any direct contribution to an increase in value of separate property which occurs during the course of the marriage.
(9) The liquid or nonliquid character of all marital property and divisible property.
(10) The difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest, intact and free from any claim or interference by the other party.
(11) The tax consequences to each party, including those federal and State tax consequences that would have been incurred if the marital and divisible property had been sold or liquidated on the date of valuation. The trial court may, however, in its discretion, consider whether or when such tax consequences are reasonably likely to occur in determining the equitable value deemed appropriate for this factor.
(11a) Acts of either party to maintain, preserve, develop, or expand; or to waste, neglect, devalue or convert the marital property or divisible property, or both, during the period after separation of the parties and before the time of distribution.
(11b) In the event of the death of either party prior to the entry of any order for the distribution of property made pursuant to this subsection: property passing to the surviving spouse by will or through intestacy due to the death of the spouse. Property held as tenants by the entirety or as joint tenants with rights of survivorship passing to the surviving spouse due to the death of a spouse. Property passing to the surviving spouse from life insurance, individual retirement accounts, pension or profit-sharing plans, any private or governmental retirement plan or annuity of which the decedent controlled the designation of beneficiary (excluding any benefits under the federal social security system), or any other retirement accounts or contracts, due to the death of a spouse. The surviving spouse’s right to claim an “elective share” pursuant to G.S. 30-3.1 through G.S. 30-33, unless otherwise waived.
(12) Any other factor which the court finds to be just and proper.
Whether a spouse has inherited property, and the value of the spouse’s separate estate, is a distributional factor that the Court may consider. It is important to note that in order for the court to consider an inheritance, there must be evidence presented at trial regarding the value of the inheritance. If evidence of the value is not presented, the court cannot consider the inheritance as a distributional factor.
If you need legal advice or representation in a divorce regarding the distribution of assets, please contact one of our lawyers at Jetton & Meredith. Our attorneys are equipped with knowledge and experience to help you maneuver through these difficult times.