What is an Interim Distribution?

An interim distribution, which is also known as an interim allocation is the distribution of a marital asset during a pending equitable distribution action. Unless good cause is shown why the court should not make an interim distribution, for good cause, a judge can classify specific property, and make either an in-kind distribution to both parties or a distributive award to one party. In the event that a court does make an interim distribution, it must take the distribution into account during the final equitable distribution award.

The court may divide part of the estate early, and the subsection is drafted to encourage it

G.S. 50-20(i1) is drafted the opposite way round from most interim relief. It opens “unless good cause is shown that there should not be an interim distribution,” so the applicant is not put to a threshold showing of necessity and the good-cause question arrives from the other direction, raised by whoever opposes the order. What follows that opening is still permissive: the court “may” enter the orders the subsection describes. Nothing in it obliges a judge to divide part of the estate early, and the absence of good cause against an interim distribution is not a direction to make one. The subsection was put in its present form by S.L. 1997-302, a Session Law whose title records that the amendment was made “to encourage interim distribution of property or debt.”

The power runs from the moment an equitable distribution action has been filed until the final judgment. Within that period the court may enter orders declaring what is separate property, and may enter orders dividing part of the marital property, divisible property or debt, or marital debt between the parties. The partial distribution may itself provide for a distributive award, and may also provide for a distribution of marital property, marital debt, divisible property or divisible debt.

It removed the rule that nothing could move before classification was complete

Before the 1997 amendment a North Carolina court could not make a cash distributive award until the whole marital estate had been classified and valued, the position taken in Brown v. Brown, 112 N.C. App. 15, 434 S.E.2d 873 (1993). The amended G.S. 50-20(i1) displaced that position for interim orders, and a court can now put money or a specific asset into a party’s hands while the balance of the estate remains in dispute.

That matters most where an estate is large but illiquid, where one spouse controls the accounts, or where a marital asset is deteriorating or costing money to hold. It also allows a judge to take a discrete issue out of the case — declaring a particular item separate property, for example — so that the trial is not spent on it.

Anything distributed early is credited at trial

G.S. 50-20(i1) requires that any interim order “shall be taken into consideration at trial and proper credit given.” An interim distribution is an advance against the final award rather than an addition to it, and the final judgment has to reconcile the two.

That reconciliation still has to satisfy G.S. 50-20(j), which requires written findings of fact supporting the determination that the marital and divisible property has been equitably divided. A judgment that distributes the remaining estate without accounting for what has already been handed over does not meet that standard.

The wording of an interim order can settle issues permanently

Interim orders are ordinarily preliminary. Because they are entered before the final judgment they are interlocutory and not immediately appealable, which is why an interim ruling that insurance proceeds were a husband’s separate property could not be appealed at once in Hunter v. Hunter, 126 N.C. App. 705, 486 S.E.2d 244 (1997).

Their language can nonetheless fix things for good. In Wirth v. Wirth, 193 N.C. App. 657, 668 S.E.2d 603 (2008), a consent order distributing a condominium to the wife stated that the distribution was final for equitable distribution purposes and set the value at which it was to be counted; that precluded any further valuation at trial and precluded treating the condominium’s later appreciation as divisible property. In the same case, proceeds of sale distributed to the wife became her separate property, and the interest they earned could not be divisible property.

Language can also preserve a claim rather than close it. In Brackney v. Brackney, 199 N.C. App. 375, 682 S.E.2d 401 (2009), an interim order allowing a husband to close on a house under contract at the date of separation recorded that the transaction was subject to the wife’s rights to an equitable distribution of marital and divisible property and that her claims were preserved, and those words kept her claim alive.

How interim distribution differs from the other pre-trial remedies

Interim distribution is one of several tools available while an equitable distribution claim is pending, and they do different jobs. G.S. 50-20(i) provides injunctive relief under Rule 65 to prevent the disappearance, waste or conversion of property, which preserves the estate rather than dividing it. G.S. 50-20(h) allows a notice of lis pendens on real property claimed to be marital or divisible. G.S. 50-21(a) directs the court to enter temporary orders to prevent disappearance, waste or destruction or to secure possession.

It is also distinct from postseparation support and alimony, which are support claims decided under Chapter 50, Article 16. G.S. 50-20(f) requires equitable distribution to be provided for without regard to alimony or child support, so an interim distribution is not a substitute for a support order and a support order is not a substitute for it.

Procedurally, G.S. 50-20(i1) provides that hearings under the subsection may be held at sessions arranged by the chief district court judge pursuant to G.S. 7A-146 and, if held at such sessions, are not subject to the reporting requirements of G.S. 7A-198. In Mecklenburg County that allows an interim application to be heard in district court in Charlotte without waiting for a trial setting.

Common questions

What has to be shown to obtain an interim distribution in North Carolina?

Less than an applicant might expect, but the order remains discretionary. G.S. 50-20(i1) allows the court to act “unless good cause is shown that there should not be an interim distribution,” so it is the objection rather than the application that carries the good-cause question; the subsection then says the court “may” enter the order, and nothing in it requires one. The claim for equitable distribution must already have been filed and the final judgment must not yet have been entered. Within those limits the court may declare what is separate property and may divide part of the marital property, divisible property or debt.

Does an interim distribution reduce what a spouse receives at trial?

Yes. G.S. 50-20(i1) provides that any order for interim distribution shall be taken into consideration at trial and proper credit given. It operates as an advance against the final award, not as an extra payment. The final judgment must still contain the written findings required by G.S. 50-20(j) showing that the marital and divisible property has been equitably divided once the credit is applied.

Can an interim distribution order be appealed immediately in North Carolina?

Generally not. Interim equitable distribution orders are preliminary to the final judgment and therefore interlocutory, which is why the ruling in Hunter v. Hunter, 126 N.C. App. 705 (1997), that insurance proceeds were separate property could not be appealed at once. Depending on their wording, however, consent orders making an interim distribution can be final for particular purposes, as in Wirth v. Wirth, 193 N.C. App. 657 (2008).

Is an interim distribution the same as postseparation support?

No. An interim distribution under G.S. 50-20(i1) divides part of the property estate early. Postseparation support and alimony are support claims under Chapter 50, Article 16, based on dependency and need. G.S. 50-20(f) requires equitable distribution to be provided for without regard to alimony or support of the children, so the two claims are decided on different grounds even when they are heard in the same case.

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