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North Carolina Property Division
Property Distribution Laws in North Carolina

In North Carolina the courts generally accept a fair and reasonable property division the parties agree to, but if the parties cannot agree, the General Court divides the property within the Judgment of Divorce. An equitable distribution state, North Carolina follows a dual classification regime. When the parties are unable to reach a settlement, the General Court of Justice distributes the marital assets between the two parties in an equitable fashion. Equitable does not mean equal, but rather what is deemed by the General Court of Justice to be fair.

The appreciation of separate property is separate.

Other than any economic misconduct, the behavior of the spouses is unrelated to the division of property.

Factors in Equitable Distribution

According to the North Carolina Statutes - Chapter 50 - 50-20, the court considers all of the following factors in dividing marital property:

Marital Property vs. Separate Property

Separate property includes:

  • property owned before marriage,
  • inherited property and
  • gifts from someone other than the spouse.

The court will allow the party claiming separate property to trace the property from one asset to another. For instance, if the wife had $10,000 in cash before marriage and used the funds, during the marriage, to buy a car, then the car would be separate property. Separate property used to purchase a house in both names, however, becomes marital property. This rule related to real property is the one exception to the tracing provisions.

Valuing and Dividing Property

Equitable Distribution is a three-step process including:

  • classification, in which the court separates marital and separate property;
  • valuation, in which the court assigns a fair market value to each piece of marital property;
  • distribution, which the court distributes the property equally.

The court may deviate from this if the factors present indicate that an equal division would not be equitable.

The Marital Home

If the marital home is titled jointly then it is marital property and gets divided, even if one party made a substantial separate property contribution to the purchase of the home. The court has the authority, however, to divide the residence in any way it wishes so an equal division of the home is not required.

In North Carolina as in many jurisdictions, the equity in the marital home is often one of the biggest assets the spouses divide. The equity is the market value of the house, less any debts or liens against it. Equity is established by determining what the current market value of the home is at the time of separation. Once the spouses agree to a current market value, any debts associated with the property (mortgage, taxes, home equity loans, etc.) are deducted from the market value to arrive at the equity to be divided. Normally, making this calculation requires a paid real estate appraisal or a real estate agent can prepare a market analysis for free.

From there, couples choose one of three options to divide the equity:

  • The spouses sell the home and divide the proceeds.
  • One of the parties may refinance the home and buy out the other party.
  • One spouse (usually the custodial parent) remains in the home with the exclusive use and possession for a certain period of time (for example, until the youngest child graduates from high school), then either buys out the other spouse or sells the home and divides the proceeds.

Pensions and Retirement Accounts

North Carolina values and divides pension plans like all other property. In North Carolina vested pensions are marital property. A pension vests when all the requirements to receive the pension have been met. Unvested pensions are also marital property. Until the pension has vested, the person under whom the pension is maintained has only an expectancy of interest in the pension.

Several different methods of valuation are used in determining how much a marital asset is worth, depending upon the asset to be valued and the level of agreement between the parties. Courts generally accept the value when the spouses mutually agree on a value of a particular asset. Experts may be retained by the parties or by the courts to determine the value of marital assets if the parties cannot agree. Such experts may include accountants, real estate or business appraisers, or pension valuators. The use of experts adds to the cost of the divorce.

In North Carolina the court may include the retirement benefits and plans earned by both spouses as marital assets available for division. Retirement benefits vary greatly but can generally be divided into two groups:

  • Defined Contribution Plans: A defined amount of money belonging to the employee. The employee and/or the employer make defined contributions. The balance of the plan is constantly changing, but its value is definable at any given point. 401(k)s, 403(b)s and profit sharing plans fall into this category.
  • Defined Benefit Plans: A retirement benefit where an employer promises to pay a benefit to an employee sometime in the future, based upon some type of formula. Normally, this formula is based on the employees salary near the end of his or her career and the number of years he or she worked for the employer before retirement. Defined benefit plans are much more complicated to value and often require the professional evaluation of an actuary to determine exact values.

In North Carolina if spouses share in each others retirement or pension plan, a Qualified Domestic Relations Order must be completed. A QDRO is a written set of instructions that explains to a plan administrator that two parties are dividing pension benefits. The instructions set forth the terms and conditions of the distribution - how much of the benefits are to be paid to each party, when such benefits can be paid, how such benefits should be paid, etc.

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