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Equitable distribution in Charlotte, North Carolina

In North Carolina, Equitable Distribution can be the most complex cause of action that may arise between two individuals who are currently parting ways in anticipation of divorce. A spouse must file for Equitable Distribution prior to Divorce in order to preserve his or her right to marital property. In the event that a spouse fails to file for Equitable Distribution in NC, marital property will revert back and become the legal object of the individual whose name the asset is titled in.

Equitable Distribution requires the help of an experienced Attorney due to the multitude of variables that exist in the accounting of assets; classification of whether an asset is Separate, Marital, or Divisible; the valuation of assets; and the proper distribution of each and every asset.

It takes hard work, discipline and sometimes a lifetime to acquire the net worth that you may soon be dividing. It is imperative that you are represented by an individual with not only experience in the Accounting and Classification, but the Valuation of your estate. Mr. Sheehan’s experience goes far beyond acting as an Attorney and representing individuals through an Equitable Distribution lawsuit. In addition to his legal degree, Mr. Sheehan Majored in Finance with a concentration in Managerial Finance, and has worked in the finance industry. With his diverse background, he has a firm grasp on capital markets and understands business and asset valuation.

Sheehan at (704) 222-4752 in Charlotte, NC and be assured that your estate will be protected.

What this covers

  • What is Equitable Distribution in North Carolina?
  • Does Fault Play a Role in Equitable Distribution?
  • Who Divides Our Property?
  • What is Marital Property?
  • What is Separate Property?
  • What is Divisible Property?
  • What Factors will a Judge Consider in Dividing Property?
  • What is an Interim Distribution?
  • Does Fault Play a Role in Equitable Distribution?
  • What Factors will a Judge Consider in Dividing Property?
  • What is Divisible Property?
  • What is Equitable Distribution in North Carolina?
  • What is Marital Property?
  • What is Separate Property?

Equitable distribution is a separate claim, and it dies with the divorce judgment

In North Carolina, equitable distribution is a claim in its own right and is not carried along by a divorce judgment. G.S. 50-11(e) provides that an absolute divorce obtained within this State destroys the right of a spouse to equitable distribution under G.S. 50-20 unless the right is asserted before the judgment of absolute divorce. The two actions are separate, and the order in which they are resolved decides whether there is a property claim at all.

The earliest point is fixed by G.S. 50-21(a): “At any time after a husband and wife begin to live separate and apart from each other, a claim for equitable distribution may be filed and adjudicated, either as a separate civil action, or together with any other action brought pursuant to Chapter 50 of the General Statutes, or as a motion in the cause as provided by G.S. 50-11(e) or (f).” A spouse does not have to wait out the year of separation that G.S. 50-6 requires before an absolute divorce can be granted.

There are two narrow rescue provisions and nothing else. G.S. 50-11(e) allows a defendant served by publication who did not appear to file within six months of the divorce judgment, and G.S. 50-11(f) preserves the claim where the divorcing court had no personal jurisdiction over the absent spouse or no jurisdiction over the property, again on a filing made within six months. Outside those situations the loss is permanent and each asset stays with whoever holds the title.

A North Carolina court classifies, values and then distributes

Equitable distribution in North Carolina proceeds in three steps, and the North Carolina Court of Appeals treats the sequence as mandatory. The trial court must first classify every item of property and debt as marital, separate or divisible, then find the net value of what is subject to division, then distribute it. That framework is drawn from G.S. 50-20 and was restated in Zurosky v. Shaffer, 236 N.C. App. 219, 763 S.E.2d 755 (2014).

The duty is put on the court by G.S. 50-20(a), under which, “upon application of a party, the court shall determine what is the marital property and divisible property and shall provide for an equitable distribution of the marital property and divisible property between the parties.” Classification is a legal conclusion, not a matter of impression, and it has to be supported by written findings of fact.

The two valuation dates are set by G.S. 50-21(b): “marital property shall be valued as of the date of the separation of the parties,” with preseparation and postseparation evidence admissible as corroboration, while “divisible property and divisible debt shall be valued as of the date of distribution.” A single asset can therefore carry a date-of-separation value and a separate date-of-distribution figure attached to the change in it.

An equal division is presumed, and the party who wants something else carries the burden

G.S. 50-20(c) states the rule plainly: “There shall be an equal division by using net value of marital property and net value of divisible property unless the court determines that an equal division is not equitable.” Only if the court makes that determination does it divide the estate on some other basis. The fourteen distributional factors the subsection lists — subdivisions (1) through (12), together with (11a) and (11b) — are the material on which that determination is made, and they are weighed inside that question rather than applied as a free-standing checklist in every case.

The burden sits on the spouse asking for more than half. Under White v. White, 312 N.C. 770, 324 S.E.2d 829 (1985), that party must produce evidence on one or more of the factors in G.S. 50-20(c) and must prove by a preponderance of the evidence that an equal division would not be equitable. Evidence on the factors does not compel an unequal result — the trial court retains discretion to divide equally anyway.

The wording of the judgment matters as well. In Lucas v. Lucas, 209 N.C. App. 492, 706 S.E.2d 270 (2011), the Court of Appeals held that it is not enough for a court to conclude that an unequal distribution is equitable; the order must conclude that an equal division is not equitable, so that the appellate court can see the presumption was given its weight. G.S. 50-20(j) requires written findings of fact in every distribution order, including one that divides the estate equally.

Property is divided in kind unless that presumption is rebutted

North Carolina presumes not only that an equal division is equitable but that an in-kind division is. G.S. 50-20(e) provides that, subject to the equal division presumption, “it shall be presumed in every action that an in-kind distribution of marital or divisible property is equitable,” and that the presumption “may be rebutted by the greater weight of the evidence, or by evidence that the property is a closely held business entity or is otherwise not susceptible of division in-kind.”

Where the presumption is rebutted the court makes a distributive award instead. A distributive award is defined by G.S. 50-20(b)(3) as payments “payable either in a lump sum or over a period of time in fixed amounts,” excluding alimony and similar support payments treated as ordinary income to the recipient under the Internal Revenue Code. G.S. 50-20(e) also allows the court to secure an award payable over time by a lien on specific property.

Inventory affidavits and a scheduling conference set the timetable

The disclosure sequence is statutory. Under G.S. 50-21(a), within 90 days after service of a claim for equitable distribution the party who first asserted the claim must serve an equitable distribution inventory affidavit listing all property claimed to be marital and all property claimed to be separate, with the estimated date-of-separation fair market value of each item. The other party has 30 days after that service to serve an affidavit in reply.

Those affidavits are not final positions. G.S. 50-21(a) makes them subject to amendment and provides that they “shall not be binding at trial as to completeness or value,” though they are subject to Rule 11 of the North Carolina Rules of Civil Procedure and are deemed to be in the nature of answers to interrogatories, so a party who leaves information out is exposed under Rules 26, 33 and 37.

G.S. 50-21(d) then requires that within 120 days after the initial pleading or motion the party who served it apply to the court for a scheduling and discovery conference, and permits the other party to apply if that is not done. At that conference the court sets the discovery schedule, rules on applications including motions to appoint expert witnesses and to determine the date of separation, and fixes a date for an initial pretrial conference.

A district court judge decides the case, and mediation usually comes first

Equitable distribution is heard in the district court division. G.S. 7A-244 provides that the district court division is the proper division, without regard to the amount in controversy, for the trial of civil actions for “annulment, divorce, equitable distribution of property, alimony, child support, child custody and the enforcement of separation or property settlement agreements between spouses.” In Mecklenburg County that means the district court of the 26th Judicial District in Charlotte.

There is no jury. G.S. 50-21(c) provides only that nothing in G.S. 50-20 or G.S. 50-21 “shall restrict or extend the right to trial by jury as provided by the Constitution of North Carolina,” and in practice an equitable distribution claim is tried by a district court judge sitting without a jury.

Before trial the parties are normally sent to a settlement event. Under G.S. 7A-38.4A(c) any chief district court judge may order a mediated settlement conference or another settlement procedure for an action pending in that district involving equitable distribution, alimony, or child or postseparation support. The power is permissive, so whether a particular case is sent depends on the order made in it. Where such an order is made, G.S. 7A-38.4A(d) requires the parties, their attorneys and any other person or entity with authority to settle a party’s claim to attend, while providing that no participant is obliged to make an offer or demand they do not wish to make and that a party who has been the victim of domestic violence may be excused from attending in person. G.S. 7A-38.4A(e) permits the court, after notice and a hearing, to impose sanctions on a party who fails without good cause to attend or to pay the mediator’s fee.

The marital estate can be protected while the claim is pending

North Carolina gives a spouse several tools to keep the estate intact between separation and distribution. G.S. 50-20(i) allows a party, on filing an action or motion requesting equitable distribution or alleging that one will be requested when it is timely, to seek injunctive relief under Rule 65 “to prevent the disappearance, waste or conversion of property alleged to be marital property, divisible property, or separate property of the party seeking relief.” The court may take a bond instead of granting the injunction.

Where real property is at stake, G.S. 50-20(h) permits a party who claims that real property is marital or divisible to record a notice of lis pendens, and provides that anyone whose conveyance or encumbrance was recorded before the lis pendens takes free of the equitable distribution claim. G.S. 50-21(a) separately directs the court to enter temporary orders as necessary to prevent the disappearance, waste or destruction of property or to secure possession of it.

Delay has consequences of its own. G.S. 50-21(e) requires the court, on motion or its own initiative, to impose an appropriate sanction where a party has wilfully obstructed or unreasonably delayed discovery or the proceeding and that conduct is or would be prejudicial to the other party. The sanction may include reasonable expenses and damages, a reasonable attorneys’ fee, and appointment at the offending party’s expense of an accountant, appraiser or other expert.

Debt is classified and divided alongside the assets

A North Carolina court has to classify, value and distribute marital debt as well as marital property. Marital debt is debt incurred during the marriage and before the date of separation, by either or both spouses, for the joint benefit of the parties, regardless of which spouse is legally obligated on it — the rule stated in Geer v. Geer, 84 N.C. App. 471, 353 S.E.2d 427 (1987) and applied in Jessee v. Jessee, 212 N.C. App. 426, 713 S.E.2d 28 (2011).

The party who says a debt is marital carries the burden of proving it, and joint benefit is not presumed simply because the debt arose during the marriage: Becker v. Becker, 127 N.C. App. 409, 489 S.E.2d 909 (1997). A debt can also be marital where the marital estate has no assets left at all, and the court must still distribute it.

What the order cannot do is bind the lender. In Branch Banking & Trust Co. v. Wright, 74 N.C. App. 550, 328 S.E.2d 840 (1985), the Court of Appeals said it found “no authority for using the Equitable Distribution Act to defeat the rights of creditors.” Both spouses remain liable to the lender on whatever they signed, and a spouse left exposed by the other’s failure to pay a debt assigned in the judgment has a remedy against that spouse rather than against the lender.

Retirement and pension benefits are governed by G.S. 50-20.1

Marital property expressly includes “all vested and nonvested pension, retirement, and other deferred compensation rights, and vested and nonvested military pensions eligible under the federal Uniformed Services Former Spouses’ Protection Act” under G.S. 50-20(b)(1). How those benefits are divided is then governed by its own statute, G.S. 50-20.1.

The share is calculated differently according to the kind of plan. Where the amount of the benefit is determined in whole or part by the length of time of the participant-spouse’s employment, G.S. 50-20.1(d) requires the marital portion to be determined using the proportion of time the marriage existed (up to the date of separation of the parties) simultaneously with the total time of the employment which earned the benefit subject to equitable distribution, to the total amount of time of that employment, based on the vested and nonvested accrued benefit calculated as of the date of separation, excluding contributions, years of service or compensation accruing after separation, and including gains and losses on the prorated portion of the benefit vested at separation together with cost-of-living adjustments. Where the benefit is instead based on contributions and held in one or more accounts with readily determinable balances — an individual retirement account, or a defined contribution plan described in section 401(k), 403(b), 408, 408A or 457 of the Internal Revenue Code — G.S. 50-20.1(d1) provides that the court shall not determine the award using that fraction, and requires it to determine the marital portion by finding the part of the account balance due to contributions made or earned during the marriage and before separation, together with the income, gains, losses, appreciation and depreciation accrued on those contributions. Where the evidence presented is not sufficient to allow that determination, the subsection directs the court back to the subsection (d) fraction.

G.S. 50-20.1(e) limits an award to fifty percent of the benefits the other spouse is entitled to receive as vested and nonvested pension, retirement or other deferred compensation benefits, subject to the exceptions the subsection itself lists — among them that the other assets subject to distribution are insufficient, that there is difficulty in distributing an interest in a business or profession, and that both parties consent — and provides that in no event may an award exceed fifty percent where the plan itself prohibits it. How the award is paid is governed by G.S. 50-20.1(a) and (b), and the routes differ for vested and nonvested benefits. A vested benefit may be made payable as a lump sum or over a period of time in fixed amounts from the plan, subject to subsection (d1), as a prorated portion of the benefits made to the designated recipient if the plan permits it, by awarding a larger portion of other assets to the party not receiving the benefits, or as a lump sum or fixed amounts by agreement. A nonvested benefit may be made payable as a lump sum or in fixed amounts only by agreement, or as a prorated portion if the plan permits it. Subsection (c) then limits what can be demanded of the plan: the court shall not require the administrator of the plan or fund involved to make any payment or distribution to the non-participant spouse except as permitted by the terms of the plan. G.S. 50-20.1(g) allows the court to require distribution of the award by a qualified domestic relations order.

What the firm handles in an equitable distribution matter

Equitable distribution work in North Carolina is part accounting, part evidence and part procedure. The claim has to be filed in time, the estate has to be identified and classified, values have to be proved by admissible evidence at two different dates, and the distributional factors have to be raised and supported before the court can be asked to depart from an equal division.

  • Filing and preserving the claim before an absolute divorce judgment is entered
  • Preparing and answering the equitable distribution inventory affidavit under G.S. 50-21(a)
  • Classification disputes over marital, separate and divisible property and debt
  • Tracing separate funds through accounts, exchanges and jointly titled property
  • Valuation of closely held businesses, professional practices and other assets that are difficult to value
  • Pension, retirement and deferred compensation division, including qualified domestic relations orders
  • Military pensions falling under the Uniformed Services Former Spouses’ Protection Act
  • Interim distribution and injunctive relief under G.S. 50-20(i) and (i1)
  • Mediated settlement conferences and judicial settlement conferences under G.S. 7A-38.4A
  • Property settlement and separation agreements executed under G.S. 52-10 and G.S. 52-10.1
  • Trial of the claim in Mecklenburg County district court and enforcement of the resulting judgment

Common questions

Does a North Carolina divorce automatically divide the couple’s property?

No. In North Carolina a divorce judgment ends the marriage and nothing more. G.S. 50-11(e) provides that an absolute divorce obtained in this State destroys the right of a spouse to equitable distribution under G.S. 50-20 unless the right is asserted before the divorce judgment is entered. If no claim is pending, the property stays with whichever spouse holds legal title to it, whatever the source of the money that bought it.

Can a spouse file for equitable distribution before the one-year separation is complete?

Yes. G.S. 50-21(a) allows a claim for equitable distribution to be filed and adjudicated at any time after the parties begin to live separate and apart from each other, as a separate civil action, alongside another Chapter 50 action, or as a motion in the cause. The one-year period in G.S. 50-6 is a precondition for an absolute divorce, not for the property claim.

Is equitable distribution in North Carolina decided by a jury?

No. Equitable distribution is heard in the district court division under G.S. 7A-244, which makes that division proper for divorce, equitable distribution, alimony, child support and custody without regard to the amount in controversy. G.S. 50-21(c) provides only that the equitable distribution statutes neither restrict nor extend the jury right given by the Constitution of North Carolina, and in practice a district court judge decides the claim without a jury.

Does the value of the marital estate get fixed at separation or at trial?

Both dates apply, to different things. G.S. 50-21(b) requires marital property to be valued as of the date of separation, with preseparation and postseparation evidence admissible as corroboration of that value, and requires divisible property and divisible debt to be valued as of the date of distribution. A house, for example, carries a date-of-separation value as marital property and a separate figure for its passive change in value as divisible property.

Questions people ask

Written for North Carolina law and reviewed by David P. Sheehan, attorney, Charlotte. General information, not legal advice — see the disclaimer.

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