What Constitutes Separate Property?

In Separation & Divorce by Sarah Hink

In North Carolina divorce proceedings, one of hardest fought battles is over the classification of property. Both sides want their piece of the pie. Unfortunately, answering this question can be a complex one even for the most experienced attorney. The reason for this is that North Carolina law puts property into two categories at the time of a couple’s separation: “marital property” and “separate property”. Why is this an important distinction? Because a court can only consider and divide a couple’s marital property in a divorce, while separate property remains with its original owner.

What is Marital Property?

The North Carolina General Statutes defines marital property as “all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property or divisible property.”

What is Separate Property?

Separate property is generally defined by the North Carolina General Statutes as “all 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.” So as a starting point the court considers any property that a spouse brings into a marriage to be separate property and stays with that person following a divorce. Further, there are several specific scenarios that the legislature has provided in defining separate property:

  • Notably, it may come as a surprise to many spouses that in North Carolina, if one spouse inherits a large sum of money during the course of a marriage, and the inheritance is specifically left to that spouse, then the inheritance is explicitly considered separate property and is not subject to the equitable division upon divorce.
  • In addition, the General Statutes provide that “Property acquired in exchange for separate property shall remain separate property regardless of whether the title is in the name of the husband or wife or both and shall not be considered to be marital property unless a contrary intention is expressly stated in the conveyance.”
  • Income that is passively generated by a spouse’s separate property, as well as any appreciation in the value of property, is still considered separate property. This remains true unless the appreciation and income is generated as a direct result of the work of one or both spouses, in which case it can be classified as marital property.
  • All non-transferable professional and business licenses are considered separate property.

Despite all of these rules preserving separate property, the legislature provided an exception that “property acquired by gift from the other spouse during the course of the marriage shall be considered separate property only if such an intention is stated in the conveyance.” The reason that this is very important is that many married couples do not make decisions and financial plans around the idea that they will someday get divorced. So the line between marital and separate property can oftentimes become blurred as joint bank accounts or “gifts” from one spouse to another may convert separate property into marital property.

Let New Direction Family Law Assist You

Classifying property following a separation can be a very complex process that requires patience and attention to detail. At New Direction Family Law, we can help you through this difficult process. Our team will work tirelessly and fight for your legal rights. We serve Wake, Johnston, Lee, Harnett, Cumberland, Nash, Granville, Franklin, and Durham counties. Contact our office today at (919) 719-3470 to schedule a consultation, or visit us at our website.