What is Equitable Distribution in North Carolina?

Under North Carolina General Statute 50-20, Equitable Distribution is the division of assets acquired during a marriage. The Equitable Distribution Act presumes that property acquired during marriage is marital, and should be divided equally as an “in kind property division.”

The Equitable Distribution of Property Act of North Carolina was put in place to recognize the concept that marriage is a partnership and a shared enterprise, which both spouses make valuable contributions to, even though those contributions may be in a different form. The policy behind the act is to treat the work of each spouse as equally worthy, whether or not a spouse is actually earning income. The act allows an individual acting as a homemaker to be treated the same as the breadwinner when assets are distributed.

The Act only operates when a party applies for it

In North Carolina the Equitable Distribution Act is not self-executing. G.S. 50-20(a) begins “upon application of a party,” and a court has no power to classify, value or divide anything until one spouse files the claim. That is why G.S. 50-11(e) is the single most consequential provision in the statutory scheme: 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 prior to the judgment of absolute divorce.

The claim may be brought as soon as the parties begin to live separate and apart. G.S. 50-21(a) permits it to be filed “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).” It is heard in the district court division under G.S. 7A-244, which is the proper division for divorce, equitable distribution, alimony, child support and custody without regard to the amount in controversy. For separations in Mecklenburg County that is the district court in Charlotte.

Everything the parties own falls into one of three statutory categories

North Carolina recognizes three classifications, and every asset and debt in the case has to be placed in one of them. Marital property under G.S. 50-20(b)(1) is all real and personal property acquired by either or both spouses during the marriage and before the date of separation and presently owned, other than separate or divisible property. Separate property under G.S. 50-20(b)(2) is property acquired before the marriage or acquired during it by devise, descent or gift, together with property acquired in exchange for separate property.

Divisible property, added to the Act by S.L. 1997-302 and defined in G.S. 50-20(b)(4), captures what happens to the estate between separation and trial: postseparation appreciation and diminution in the value of marital and divisible property that is not the result of a spouse’s postseparation actions, property received after separation that was earned by marital effort before it, passive income from marital property, and passive increases and decreases in marital debt and the financing charges and interest related to it.

Only marital and divisible property is divided. Separate property is identified, and it can be relevant as a distributional factor under G.S. 50-20(c)(1), but it is not part of the estate the court splits.

The statutory presumption is equal, and the exception has to be proved

G.S. 50-20(c) requires “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 where the court makes that determination does it divide the estate on another basis, but the fourteen distributional factors the subsection sets out — subdivisions (1) through (12), together with (11a) and (11b) — are what the court weighs in reaching that determination in the first place: where evidence is offered on a factor the court must consider it and make a finding, and G.S. 50-20(j) requires written findings supporting the determination even in an order that divides the estate equally. The factors have no separate life outside that question; they are the material on which the court decides whether equal would be inequitable and, if it would, how the estate should be divided instead.

The spouse seeking an unequal share must produce evidence on one or more of those factors and prove by a preponderance of the evidence that an equal division would not be equitable, under White v. White, 312 N.C. 770, 324 S.E.2d 829 (1985). Producing that evidence does not entitle the party to more than half; the trial court still has discretion to order an equal division.

In-kind division is presumed, and a distributive award is the fallback

The Act prefers to hand each spouse actual assets rather than to order one to pay the other. G.S. 50-20(e) provides that, subject to the equal division presumption, an in-kind distribution of marital or divisible property is presumed 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 must provide for a distributive award to achieve equity between the parties. G.S. 50-20(b)(3) defines a distributive award as payments “payable either in a lump sum or over a period of time in fixed amounts,” and excludes alimony and similar support payments treated as ordinary income under the Internal Revenue Code. The court may also secure an award payable over time by a lien on specific property.

Property division is decided without regard to alimony or child support

The two financial claims are deliberately walled off from one another. G.S. 50-20(f) requires the court to “provide for an equitable distribution without regard to alimony for either party or support of the children of both parties,” and then, after the distribution has been determined, to consider on request whether an existing alimony or child support order should be modified or vacated under G.S. 50-16.9 or G.S. 50-13.7.

The North Carolina Supreme Court applied that separation in Wiencek-Adams v. Adams, 331 N.C. 688, 417 S.E.2d 449 (1992), holding that the catch-all distributional factor in G.S. 50-20(c)(12) cannot be used to import a matter the Act expressly excludes. A trial court therefore could not treat a spouse’s waiver of child support as a reason to divide property unequally.

The judgment has to show its working

G.S. 50-20(j) requires that in any order for the distribution of property the court “shall make written findings of fact that support the determination that the marital property and divisible property has been equitably divided.” In Armstrong v. Armstrong, 322 N.C. 396, 368 S.E.2d 595 (1988), the North Carolina Supreme Court read that plain language as applying to every distribution order, not only to orders dividing an estate unequally.

Findings are also required on each distributional factor on which evidence was offered, and the conclusion has to be expressed in the statute’s own terms. Under Lucas v. Lucas, 209 N.C. App. 492, 706 S.E.2d 270 (2011), an order that merely concludes an unequal distribution is equitable does not show that the trial court gave adequate weight to the presumption; it must conclude that an equal division is not equitable.

The interest created by the Act vests at separation

G.S. 50-20(k) describes the parties’ rights to an equitable distribution as “a species of common ownership, the rights of the respective parties vesting at the time of the parties’ separation.” The interest is created by the separation itself, which is why postseparation dealings with marital assets are controlled by the divisible property rules and, where the court is weighing whether an equal division would be equitable, by the distributional factor in G.S. 50-20(c)(11a), rather than being treated as one owner’s free disposal of their own property.

The claim also outlives a party. G.S. 50-20(l) provides that a claim for equitable distribution, whether or not an action has been filed, survives the death of a spouse so long as the parties were living separate and apart at the time of death, applies Article 19 of Chapter 28A to a claim against the deceased spouse’s estate, and requires any claim by the estate of the deceased spouse against the surviving spouse to be filed with the district court within one year of the date of death or be forever barred.

Common questions

What does the Equitable Distribution Act actually divide in North Carolina?

It divides marital property and divisible property, and the debts attached to them. Under G.S. 50-20(a) the court determines what is marital and divisible and provides for an equitable distribution of that estate. Separate property under G.S. 50-20(b)(2) — property owned before the marriage, or received during it by devise, descent or gift — is identified and set aside, though its existence can be weighed as a distributional factor under G.S. 50-20(c)(1).

Does equitable distribution in North Carolina mean an equal split?

It starts there. G.S. 50-20(c) requires an equal division by net value “unless the court determines that an equal division is not equitable.” Under White v. White, 312 N.C. 770 (1985), the spouse who wants an unequal division must produce evidence on the statutory factors and prove by a preponderance of the evidence that equal would not be equitable. Even then the trial court may still order an equal division.

Can equitable distribution be filed after the divorce is final in North Carolina?

Almost never. G.S. 50-11(e) provides that an absolute divorce obtained within this State destroys the right to equitable distribution unless it was asserted before the divorce judgment. Two narrow exceptions allow a filing within six months of the judgment: a defendant served by publication who did not appear, and, under G.S. 50-11(f), a divorce granted without personal jurisdiction over the absent spouse or jurisdiction over the property.

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