Listen to this Article
If you are considering divorce in North Carolina, you may have questions about what will happen to your home, financial accounts, debts, and other property. These concerns are understandable. Property division can be one of the most complicated parts of the divorce process, especially when significant assets or debts are involved.
North Carolina courts use a process called equitable distribution to classify, value, and divide certain property between spouses. Equitable distribution worksheets help organize the assets and debts involved in this process.
Understanding how these worksheets are used can help you prepare for property division and make informed decisions about your future.
What Is Equitable Distribution?
Equitable distribution is the legal process used to divide marital and divisible property following a separation. Under North Carolina law, an equal division of this property is generally presumed to be equitable. However, a court may order a different division if it determines that an equal division would not be fair under the circumstances.
The equitable distribution process generally involves three steps:
- Classifying property and debts
- Determining their value
- Distributing the marital and divisible property between the spouses
North Carolina’s equitable distribution laws are primarily found in North Carolina General Statutes § 50-20.
What Is an Equitable Distribution Worksheet?
An equitable distribution worksheet, sometimes called an ED worksheet, provides an organized list of the property and debts that may need to be addressed.
Depending on the court and the circumstances of the case, the worksheet may include information such as:
- A description of each asset or debt
- The date the property was acquired
- How each spouse believes the property should be classified
- The property’s value
- The amount of any related debt
- Which spouse currently possesses the property
- How each spouse proposes dividing it
Although a worksheet helps organize the financial information involved, it does not determine the outcome by itself. The spouses may reach an agreement about property division, or the court may make the final decision after reviewing the evidence.
How Is Property Classified?
Property involved in an equitable distribution case generally falls into one of three categories.
Separate Property
Separate property generally includes property a spouse acquired before the marriage. It may also include certain property received individually during the marriage through an inheritance or gift.
Whether an asset remains separate can depend on how it was owned, titled, transferred, or used. Property classification can become particularly complicated when separate and marital funds have been combined or when marital efforts have affected the value of a separate asset.
Marital Property
Marital property generally includes property acquired by either spouse or both spouses during the marriage and before the date of separation. This may include:
- The marital home
- Bank accounts
- Vehicles
- Furniture and other personal property
- Investment accounts
- Retirement benefits
- Business interests
- Real estate
- Marital debts
An asset does not necessarily belong only to the spouse whose name appears on the title or account. The circumstances under which the property was acquired may be more important than how it is titled.
Divisible Property
Divisible property generally involves certain financial changes that occur after separation but before the property is distributed.
Examples may include:
- Passive increases or decreases in the value of marital property
- Certain commissions or bonuses earned during the marriage but received after separation
- Interest, dividends, or other passive income generated by marital property
- Passive changes in marital debt and related interest or financing charges
Because divisible property can involve changes that occur after separation, accurately documenting dates and values is especially important.
How Does the Court Decide What Is Equitable?
North Carolina law begins with the presumption that an equal division of marital and divisible property is equitable. If the court determines that an equal division would not be equitable, it may consider several statutory factors when deciding how the property should be divided.
These factors may include:
Each Spouse’s Financial Circumstances
The court may consider each spouse’s income, property, and liabilities when the property division will take effect. This provides a broader view of each person’s financial position.
The Length of the Marriage
The duration of the marriage may affect the court’s decision. Longer marriages often involve more closely connected finances and a greater accumulation of shared property.
The Age and Health of Each Spouse
The court may consider the age and physical and mental health of both spouses. These circumstances can affect a person’s financial needs and ability to support themselves.
Contributions to the Marriage
Contributions are not limited to income. The court may consider the work of a spouse who contributed as a homemaker or parent, helped acquire marital property, or supported the other spouse’s education or career development.
The Marital Residence
When one spouse has custody of the couple’s children, the court may consider that parent’s need to remain in the marital home and use its household contents.
Retirement and Deferred Compensation
The court may evaluate pension benefits, retirement accounts, deferred compensation, and other financial interests. It may also consider certain expected benefits that are not classified as marital property.
The Nature of the Property
Some property is easier to divide than other property. The court may consider whether an asset is liquid, how difficult it is to value, and whether dividing it would interfere with the continued operation of a business or other valuable asset.
Tax Consequences
Potential federal and state tax consequences may be considered when they are reasonably likely to occur.
Actions Affecting Property After Separation
The court may consider whether either spouse preserved, improved, wasted, neglected, devalued, or converted marital or divisible property after separation and before distribution.
The statute also allows the court to consider other factors it finds just and proper.
What Happens After the Worksheets Are Completed?
After the assets and debts have been identified, classified, and valued, the spouses may attempt to negotiate a property settlement. If they reach an agreement, the terms may be documented in a legally binding written agreement.
If the spouses cannot agree, the court may review the worksheets, financial records, testimony, appraisals, and other evidence before entering an equitable distribution order.
The final order will explain how the marital and divisible property must be divided. Because property division can have lasting financial consequences, it is important to provide complete and accurate information throughout the process.
Why Legal Guidance Matters
Determining whether an asset is separate, marital, or divisible is not always straightforward. Questions may arise when spouses own a business, have retirement benefits, combine separate and marital funds, own property acquired before the marriage, or disagree about the value of an asset.
An experienced North Carolina family law attorney can help you:
- Identify assets and debts that may need to be disclosed
- Review equitable distribution worksheets
- Gather relevant financial documentation
- Address disagreements about classification or value
- Evaluate potential tax and financial consequences
- Negotiate a property settlement
- Present your position to the court when an agreement cannot be reached