Dividing property during a divorce can be challenging. State laws differ on how assets are divided. This article explains North Carolina’s property division approach and how it differs from community property systems.
Equitable Distribution in North Carolina
North Carolina uses an equitable distribution system to divide marital assets and debts in a divorce. This differs from community property states, which presume a 50/50 split of property acquired during marriage. North Carolina’s system, outlined in General Statutes Section 50-20, aims for fairness, which doesn’t always mean an equal division.1North Carolina General Assembly. G.S. 50-20 Distribution by Court of Marital and Divisible Property
An equal (50/50) division of marital property is presumed fair, but courts can order an unequal distribution if an even split is unjust. This allows judges to consider various factors based on each spouse’s contributions and needs, seeking a just outcome. A claim for equitable distribution, filed during divorce proceedings, starts this process.
Types of Property in Equitable Distribution
The equitable distribution process requires identifying and classifying property. North Carolina law distinguishes between marital, separate, and divisible property to determine what is subject to division.
Marital
Marital property includes assets acquired by either spouse during the marriage and before their separation date. Examples include the marital home, vehicles, bank accounts funded by marital income, investments, and retirement benefits accrued during marriage. Property acquired during this time is presumed marital, regardless of whose name is on the title, unless proven otherwise. This includes various retirement benefits like pensions and military pensions.
Separate
Separate property includes assets a spouse acquired before marriage, or received as an individual gift or inheritance during marriage. Property acquired after separation is also separate. Income from separate property and its passive increase in value remain separate, provided marital efforts or funds did not contribute to this growth.
Mixed
Mixed property has both marital and separate characteristics. This can happen if separate property increases in value due to marital contributions, or if marital funds are used to pay a mortgage on a separately owned home.
Divisible Property
Divisible property is another category. It includes specific changes in asset value or new assets acquired after separation but before property distribution. Divisible property includes:
- Changes (appreciation or decrease) in the value of marital and divisible property after separation.
- Property or rights received after separation that came from either spouse’s efforts during the marriage.
- Passive income from marital property received after separation.
- Passive changes (increases or decreases) in marital debt, including related financing charges and interest, after separation.
Court Considerations for Division
Although an equal division of marital and divisible property is presumed equitable, North Carolina courts consider many factors that can justify an unequal split for fairness. If a court orders an unequal division, it must provide written reasons.
Factors courts consider include:
- Each party’s income, property, and liabilities at the time of division.
- Any support obligations from a prior marriage.
- The duration of the marriage, and the age and health of both spouses.
- The needs of a custodial parent to occupy or own the marital home.
- The expectation of receiving separate property, such as nonvested pension rights.
- Each spouse’s contributions to acquiring marital property, including financial input and contributions as a homemaker or parent.
- Contributions one spouse made to the other’s education or career development.
- Any marital contribution to the increase in value of separate property.
- The tax consequences of the division.
- Actions taken after separation to preserve, waste, or devalue marital or divisible property.
- A general provision: “Any other factor which the court finds to be just and proper.”
Distribution Process
The property division process starts when either spouse files a claim for equitable distribution, often as part of the divorce complaint or answer. Under North Carolina General Statutes Section 50-21, this claim can be filed any time after separation but before the divorce is final.2North Carolina General Assembly. G.S. 50-21 Procedures in Actions for Equitable Distribution of Property If a divorce is finalized without a pending claim, a separate action for equitable distribution can be filed within six months of the divorce judgment.
Parties identify, classify, and value their assets and debts, which involves financial disclosures. They exchange detailed property inventories, including values and proposed classifications. Disagreements may require appraisals, expert testimony, negotiation, or mediation (which courts often require).
If no settlement is reached, a judge holds a hearing or trial. The court then issues a binding order detailing the property division. Distribution can be an in-kind award of specific assets, sale of an asset with proceeds divided, or a distributive award. A distributive award is a monetary payment from one spouse to the other if physical division is impractical. The order specifies how and when transfers or payments must occur.
Enforcement of Court Orders
An equitable distribution order from a North Carolina court is a final, legally binding judgment. If a party doesn’t comply, several enforcement methods exist.
One primary tool is a motion for contempt of court. A party willfully disobeying the order can be held in civil contempt under state law (G.S. Chapter 5A), which aims to force compliance.3North Carolina General Assembly. Chapter 5A – Contempt Penalties for contempt can include imprisonment until compliance, fines, or property sequestration (G.S. Section 5A-21).4North Carolina General Assembly. G.S. 5A-21 Civil Contempt; Imprisonment to Compel Compliance
Other remedies include converting unpaid distributive awards into money judgments, enforceable by levying bank accounts or property (G.S. Chapter 1, Article 28).5North Carolina General Assembly. G.S. Chapter 1, Article 28 – Execution Rule of Civil Procedure 70 allows courts to enforce specific acts, like signing a deed, by appointing someone or issuing a judgment to transfer title.6North Carolina General Assembly. G.S. 1A-1, Rule 70 – Judgment for Specific Acts; Vesting Title A writ of possession can be issued if someone refuses to give up property.7North Carolina Judicial Branch. Writ of Possession Personal Property Form AOC-CV-103
Courts also enforce Qualified Domestic Relations Orders (QDROs) for dividing retirement assets.8NC Retirement Systems. Guide to Drafting Domestic Relations Orders for NC Retirement Systems Equitable distribution orders are usually not modifiable once final. If noncompliance leads to court action, the non-compliant party might have to pay the other party’s attorney’s fees. Enforcement actions for these judgments have a ten-year statute of limitations (G.S. Section 1-47).9North Carolina General Assembly. G.S. 1-47 Ten Years (Statute of Limitations)