When going through a divorce, many people are concerned with how their property will be divided. It is the Court’s task to determine what is the marital and divisible property and to provide for the equitable distribution of the marital and divisible property between the parties.
There are four different types of property classifications in North Carolina and each are described briefly below:
1. Marital Property- includes all the presently owned property that the couple acquired during the marriage, except that which the court deems to be “separate property.” There is a rebuttable presumption in North Carolina that property obtained during the marriage is marital property. This presumption does not apply to debts, however. To prove a debt should have a marital classification, the party seeking this classification has the burden to show the debt was incurred by one or both spouses during the marriage and before the date of separation and that there is still a debt owed on the date of separation. Finally, the party must prove that the debt was incurred for the joint benefit of the parties.
2. Separate Property- any property owned by either spouse before the marriage, or property that one spouse acquired during the marriage by gift or inheritance from a third party. The increase of value of separate property during the marriage is still considered separate property, but an increase in value that occurs as a result of a marital effort is marital property.
3. Divisible Property- this category includes the changes in value that any of the couple’s marital assets or debts experience after the date of separation. This category also includes property received after the date of separation that was acquired as a result of the marital efforts of either spouse before the date of separation and passive income generated by marital property and received after the date of separation.
4. Mixed Property- assets that have some amount of both marital and separate property. An example of this would be a bank account that had separate property funds earned before the marriage and income earned during the marriage. Once a party shows that an asset was acquired by one party or both parties during the marriage and before the date of separation and owned on the date of separation, the entire value of the asset is presumed marital. The burden then shifts to the party seeking a partial separate classification to trace the separate component of the asset. Tracing can be extremely difficult and sometimes impossible due to the commingling of assets. If the separate property portion of the asset cannot be traced, the presumption often means that such assets will be classified as entirely marital property.
The characterization of property in North Carolina is a very complex concept and the summary above is a simple synopsis of an intricate process. If you are curious as to how your property will be classified and divided in an equitable distribution action in North Carolina, please do not hesitate to contact our firm and arrange a confidential consultation.