North Carolina Equitable Distribution Law

Equitable distribution is a part of divorce law governing the division of property and assets between spouses during separation. Under equitable distribution, property and assets acquired during the marriage are to be divided fairly between the spouses, taking into account a number of factors such as each spouse’s financial situation, income, and earning potential.

The Equitable Distribution statutes of North Carolina are found at NCGS 50-20 and 50-21. The idea behind the laws is that marriage is viewed as a financial partnership. This is sometimes (perhaps often) a difficult idea for the breadwinners of marriages to grasp of accepting. However, in the post-feminist era, it does not matter how much a spouse earns in relation to the other spouse, both spouses are viewed as equally deserving of those gains due to the partnership nature of the marriage. It is the job of a good equitable distribution lawyer to explain this idea as the reality to a client. At Culbertson & Associates, we have been patiently outlining and explaining these laws for a combined total of more than 80 years.

“Equitable Distribution” is another legal form of saying “Property Division” in relation to assets acquired during a lawful marriage at the end of the marriage by separation and/or divorce. “Equitable Distribution” is also referred to in the legal business as “E.D.” for short. Even judges will often be found calling it “E.D.” instead of “Equitable Distribution”

How do Courts Identify Marital Assets During Equitable Distribution?

The same idea applies to marital “assets,” which include bank accounts, automobiles, real estate, investments, retirement accounts, and so on. However, a good equitable distribution lawyer will also carefully explain that debts are also divisible 50/50. The Equitable Distribution lawyer should describe to a client how the court would treat these at trial if an agreement about property division cannot be reached prior to trial.

A court is required by Chapter 50 to first classify the assets/debts of the spouses as either separate property, marital property, or “mixed” separate and marital. The court will then value the assets using net value after liens (not gross value), and then the court will distribute them. It is perhaps the hardest task for the equitable distribution lawyer in the process of an “Equitable Distribution” to make sure his client understands how these analysis work and what they mean. The explanation can become nuanced.

For example, where there is an increase in the value of the separate property (property owned by one spouse prior to the marriage), and that increase is due to marital efforts and the expenditure of marital funds, that increase is deemed “active appreciation” and is “marital” property. This “marital” part of the property is then mixed with the “separate” part of the property (pre-marriage part) and the asset is deemed a “mixed” asset.

Difference Between Marital, Separate or Mixed Assets

However, if a spouse uses “separate” funds (funds owned prior to the marriage) to buy real estate during the marriage and then places the title in his/her separate name, that property may be deemed to be a “separate” asset, rather than a “mixed” asset.

These analyses can get quite involved and one needs an experienced equitable distribution lawyer to help with administering the marital estate.

Difference Between Equitable Distribution and Equal Distribution

People often ask, “Does an ‘equitable’ distribution mean an ‘equal’ distribution?

In other words, will the court take things like financial need and bad behavior during the marriage into account in dividing the marital property. A good equitable distribution lawyer will tell you, no. There is a presumption in North Carolina that an equal distribution is equitable. Thus, the courts will try to divide the property, without liquidating it, in as mathematically even a way as possible.

Ways of Accomplishing an Equitable Distribution

Former spouses can accomplish an Equitable Distribution by what is known as a Separation Agreement or Property Settlement Agreement at any time following the separation of the parties, and even following a Judgment of Divorce, provided the right to divide marital property is carefully reserved in the divorce judgment.

A careful equitable distribution lawyer will always point out that prenuptial agreements may also settle the issues that might normally surround equitable distribution prior to marriage if they are carefully drafted and executed. In the absence of any kind of agreement, or if a certain property is left out of an agreement, the court will be left to effect the division of the property according to its own judgment. This process can become quite complex and expensive, and a good equitable distribution lawyer will always try to avoid an equitable distribution trial whenever possible. At Culbertson & Associates, we have been advising clients along these lines every business day for the past 25 years.

What Happens to Pensions and 401(k) Plans in Equitable Distribution?

This is a very tricky area since most 401(k)’s and Roth retirement plans are in some way given favorable IRS treatment under the tax code and may not be “distributed” without severe penalty. Yet, a good equitable distribution lawyer will always advise that the amounts contributed to these plans during the marriage are “marital property” and are thus subject to equitable distribution following marriage dissolution.

How is this done?

Through the use of a QDRO – a qualified domestic relations order, which only a Judge can sign, ordering the distribution of the assets to the non-contributing partner. If you have a marriage that involves such an asset plan on either side you should consult an equitable distribution lawyer. At Culbertson & Associates, we are thoroughly experienced in retirement plan distribution procedures.

Identify, Classify, Evaluate, Distribute: The Job of the Court

These are the tasks that the court will have to accomplish, with the help of experienced equitable distribution lawyers, in an E.D. trial. Thus, it is also what lawyers and clients will work and strive to do prior to the process of division actually coming to trial (i.e., in negotiations).

The application of these guiding tasks often involves “tracing” and “commingling problems which can get pretty thorny. Even judges and lawyers have difficulty solving the equations that prior cases tell us should be applied to these problems, and sometimes the legal personnel in a case will wind up more or less creating a new solution to the problems. Either way, it is imperative that a husband or wife consult carefully with an experienced equitable distribution lawyer during this process.

Hire an Experienced Equitable Distribution Lawyer

There is no dispute about the trial prowess of Culbertson & Associates. Its lead litigator, Krispen Culbertson, has studied law on two continents and is one of a handful of litigators in his home county to have won a combined three or more first-degree murder jury trials and two or more jury trials in U.S. Federal Court.

Krispen has also won several important appellate cases in the North Carolina Court of Appeals, and in the United States 4th Circuit Court of Appeals. Book your appointment with Culbertson & Associates, by calling us at 336-272-4299 for details and for help from an experienced equitable distribution law firm.