A Primer on Equitable Distribution

In Separation & Divorce by Elizabeth Stephenson

Property division is a critical issue that married couples must address when they decide to end their marriage. Beyond receiving a fair share of their hard work and contributions to the marriage, spouses need to address property to preserve their long-term financial interests. If you find yourself considering a divorce, then you should speak with a lawyer to understand and preserve your legal rights.

North Carolina is an Equitable Distribution State

North Carolina handles the division of property through a mechanism called equitable distribution. To determine what each spouse walks away with, courts must conduct a multi-step analysis.

  • Step 1: Classification of Property

The first step that a court must take in an equitable distribution case is to classify property as “separate” or “marital” property. Marital property is all property that has been acquired or earned during the course of a marriage—apart from gift or inheritance specifically left to one spouse. Separate property is all property that a spouse had coming into a marriage or acquired after the date of separation.

The distinction is important because family courts can only divide marital property and cannot touch separate property. Therefore, the spouses are responsible for presenting an inventory of their marital property to the court, and disputed property is resolved by presenting evidence of when property was acquired, who acquired it, and how it was acquired.

Step 2: Valuing Marital Property

Once a court has identified all marital property, the court must determine what everything is worth. This is the fair market value of marital property at the time of the couple’s separation. Some property, like savings accounts, publicly traded stocks, and even cars involve a relatively straightforward appraisal. However, the more complex a marital estate, the more complicated the appraisal. For example, for business interests or venture capital investments, a forensic expert may be required to properly appraise the value of the interest.

In addition to the value of marital property at the time of the separation, courts must also account for changes in value of property or additional property—like dividends—that derived from the marital property after the separation. This is called “divisible property”.

Step 3: Equitable Distribution of Property

Once the value of marital property, divisible property, and marital debt are determined by the court, the court must devise a plan for distributing it between the parties. Generally, there is a presumption that the net fair market value of marital and divisible property should be divided in an equal 50/50 split. However, courts are given the discretion to make an “equitable, but unequal” distribution that strays from this split based on numerous factors, which generally revolve around concepts of fairness.

New Direction Family Law New Direction Family Law is a full service family law firm that helps people navigate the end of their marriage and child custody issues. Our attorneys have decades of combined legal experience, which we use to effectively advocate for our clients’ interests. Let us help you walk confidently into your future. Our office serves Wake, Johnston, Durham, and surrounding counties. Call New Direction Family Law today at (919) 719-3470 to schedule a consultation or reach us online.