Equitable distribution definition: the legal process by which a couple’s marital assets and debt obligations are divided upon the dissolution of marriage. Upon separation, each spouse has the right to an equitable distribution of assets, provided that right has not been waived in any pre- or post-marital agreement. The right to equitable distribution, however, is not automatic; spouses must assert their claim in a complaint filed with the court before the couple’s divorce is finalized.
More often than not, couples come to a mutual agreement regarding their marital property and enter into separation agreements that provide for the division of marital assets and debts, thus negating the necessity for equitable distribution. When couples cannot agree, the court will divide the marital estate through equitable distribution.
Equitable distribution is a three-step analysis. First, the court will identify and classify all of the property the parties own. Second, the court will assign a value to every asset and debt that has been identified as marital or divisible property. Third and finally, the court will distribute the property to the parties in an equitable manner.
Simply enough, the court’s first step in the equitable distribution process is to identify all of the assets in which the parties can claim a property interest. Once the marital estate is accounted for, the court will classify each property interest as marital, separate or divisible property. These definitions are provided for by statute and will determine what property interests are eligible to be distributed. Marital property, by statute, includes all real or personal property that is presently owned and was earned or acquired during the marriage. There are exceptions, however; most notably, whenever one party receives a gift or asset through inheritance. Separate property, or property acquired before the marriage, is not subject to equitable distribution; rather, each party will retain their own separate property.
The court’s second step is to value all the items identified and classified as marital property. The value of an item refers to its net or market value, meaning what the item would sell for in today’s market minus any amount owed on it, if any. While valuation might seem simple, it can easily get complicated, particularly if the marital estate is rather large and the assets are unique. More often than not, experts must be retained to value business interests or non-tangible personal property.
The court’s third and final step in the equitable distribution process is to distribute the assets equitably among the parties. Courts use 13 statutory factors to determine what constitutes an equitable distribution. These factors include the duration of the marriage, the earning potentials of each spouse going forward, and the ease in which certain property can be divided, among others. North Carolina presumes that an equal distribution, where each spouse take 50% of the marital estate, is equitable. However, that presumption is rebuttable, and its application is contingent on the particular facts and circumstances of each case.
If you’ve made the difficult decision to divorce, the specifics of North Carolina law can seem confusing, sometimes even overwhelming. We invite you to contact us online or by phone – 855-322-2355 – to discuss the specifics of your situation. We’ve helped people just like you navigate divorce proceedings and will provide you with the attention, consultation and representation you need and deserve.