Dividing Property by Equitable Distribution in NC

PROPERTY DIVISION BY EQUITABLE DISTRIBUTION

So your marriage has ended and you are headed towards a divorce. You have lots of questions about who will get the house, how the bills will get paid, and whether you get to keep your retirement. In North Carolina, this process of dividing up marital assets and bills is called “equitable distribution.”

WHAT IS EQUITABLE DISTRIBUTION?

Equitable distribution is the process by which your marital property and debts are divided in a divorce. “Property” includes the house, the cars, the bank accounts, the furniture, and all of the other assets. If the asset or debt is part of the marriage, then it gets divided between the two of you. If the asset or debt is separate, then it stays with the person it belongs to and is not split. You and your spouse may come to an agreement on how to divide the property and debts owed; if you are unable to agree, the court will make the decision for you. If you are able to come to an agreement on how to divide your property, you may have an attorney draft a separation agreement, or a consent order signed by a judge. If you need the court to divide your assets, you must file a claim for equitable distribution BEFORE you get divorced. Whether you work out a division of property by consent or through the court system, dividing your debts and property in a divorce is a four-step process:

1. List all the property and all the debts that you and your spouse have;
2. Determine if each one is marital or separate (more about that below);
3. Value each item as of the date you and your spouse separated;
4. Distribute each item to either you or your spouse, usually on an equal 50/50 basis.

HOW ARE DEBTS DIVIDED IN A DIVORCE?

If the debt was incurred during the marriage and was used for the benefit of the marriage, it’s a marital debt, even if it’s only in your name.  So, the mortgage on the marital home, the loan on the cars, car, credit cards in either name, medical bills, are all probably martial debts to be divided between the two of you. Credit card expenses for clothes, vacations, repairs, normal living expenses are probably marital. Again, there are some exceptions, for example, you have student loans, and you left your wife the minute you graduated.  She never got the benefit of your new degree and the money you can now earn because of that education.   In that case, the debt did not benefit the marriage and it’s your separate debt.  If your wife has gambling debts, or ran up the credit cards paying for hotels and gifts for her lover, then that did not benefit the marriage; so it’s a separate debt.

HOW IS THE PROPERTY VALUED?

For each item on your list, you have to assign a value. The value is the amount the property would sell for on the open market. The value is not the purchase price, or what it would cost to replace it item. The value is what it would sell for on eBay or at a yard sale to a stranger. The value of an account, like a bank account or retirement account is the value on the account statement on the date of separation.

Debts are valued based on the statement or invoice closest to the date of separation.

WHAT IF THE VALUE CHANGED AFTER SEPARATION?

Values often change after the date of separation. Stock values fluctuate, payments on debts reduce the balance, investment accounts earn interest, and cars depreciate. Those changes are called divisible property and get taken into account when the entire list is distributed.

WHAT ABOUT TAXES WHEN DIVIDING PROPERTY IN A DIVORCE?

Transferring a marital asset from both of you to one of you is not a taxable event. But some assets, for example retirement accounts, cannot be cashed out without tax consequences and penalties. Selling your house may have tax consequences, or other costs, such as a realtor’s fee. These costs need to be factored into the value of each item depending on how the item is distributed.

I GOT DIVORCED, BUT WE STILL HAVE PROPERTY IN JOINT NAMES. HOW DO I GET MY EX’S NAME OFF THE HOUSE, CAR, ETC.?

If you did not file a claim for equitable distribution before you got divorced, you can’t file that claim after the divorce was entered. If you still have property titled in both names, and that property needs to be divided you can file a petition with the clerk of court where you live, or where you ex lives and ask the court to either divide the property or sell it.

AFTER I GOT DIVORCED, I WAS TOLD I AM ENTITLED TO HALF MY EX- HUSBAND’S RETIREMENT. HOW DO I MAKE A CLAIM FOR HIS RETIREMENT?

If you did not file a claim with the court for equitable distribution to have the court divide the property and debts from the marriage before you got divorced, you can’t file that claim after the divorce was entered. You have given up your right to his retirement.

If you have a separation agreement or a court order that awards you a portion of your ex spouse’s retirement funds, you typically have to have a special court order, called a Qualified Domestic Relations Order, or QDRO, signed by a judge for those funds to be distributed to you.

WHAT IS A QDRO?

Retirement accounts or pension plans are typically managed by a plan administrator, such as Fidelity, or BB&T. If you have been awarded a portion of your spouse’s retirement account in a court order or separation agreement, you need a special court order authorizing the plan administrator to transfer those funds to you. Some plan have forms you can file out, but you probably need an attorney to fill out the forms, file the claim with the court and get a judge to sign the QDRO if you want to make sure you get your share.

If you have questions about how to divide your assets and debts in a divorce, the attorneys at Averett Family Law are happy to meet with you. Just call the office to schedule a consultation.