What is marital property?

You know the saying "What's mine is yours, and what's yours is mine."  Well in divorce, that is not exactly the case.  In North Carolina you must file an Equitable Distribution claim if you want the court to divide your assets and debts.  This claim must be filed prior to or at the same time as your divorce otherwise you risk losing property rights that you can only receive through a court order.

What is marital property?  Well, anything that is acquired during the marriage prior to the separation is presumed to be marital.  So even if the acquired property is only in one spouse's name, it will be considered marital unless the other spouse can show that it is separate. 

Also trading in or using marital assets to acquire property after separation will also be considered marital.  For example if a car purchased during the marriage and existing as of the date of separation (DOS) was traded in to purchase a new car, then the new car will be marital. 

Another example is if during the marriage, one of the spouse was negotiating a lucrative transaction for his business but it does not occur until after the DOS.  The value of that transaction will be considered martial.

Defining property can be confusing, so maybe the best way to explained what is marital is to distinquish the different types of properties.

1.  Separate Property is property acquired before the marriage and property acquired after the separation.  It can also be inherited property and property gifted to the individual spouse.  So if you had a house you inherited from your parents, that property will be separate. But separate property can become marital property if you are not careful.  For example, if you refinance that inherited property during your marriage, and your name and your spouse's name end up in the deed, that property will now be considered marital.  You will have to overcome the marital presumption.

If you have property before the marriage and you use that property to acquire new property during the marriage, that new property will remain separate.  For example, if you had a car before the marriage and traded in that car for another car during the marriage, that car will remain your separate car.  The value of the vehicle may have a marital component if marital funds were used to pay the balance owed on the car.

2.  Mixed Property is separate property that has a marital component to it (just like the car described above).  Let's say for example, you have inherited property, but you use marital funds (income earned during the marriage) to enhance the value of the property, then that value will have a marital component that the court can divide.  Same goes for investment accounts that were acquired before the marriage but marital funds were used to increase its value.  

3.  Divisible Property is separate property that the court can take into consideration when it is dividing the marital assets.  Any passive increase or decrease in the value of marital property occurring after the date of separation and prior to distribution, can be divisible property.  The spouse who wants to have it considered separate (and therefore not divisible by the courts) will have to show some active steps were taken to increase or decrease the value.  Let's take for example a medical practice acquired during the marriage that increased in value after the separation.  The doctor will want to argue the increase in value is due to more advertising and patient recruitment. The doctor's spouse will want to argue that a huge mall was built near the practice and is the reason for increase and not because of any active steps of the Doctor. 

4.  Debts acquired during the marriage are the only assets that do not have the marital presumption.  The court will have to determine whether the debt was for the benefit of the marrige before it will deem it marital.  For example, if a spouse runs up credit cards and borrows money to feed his/her gambling addiction, the court will consider this debt separate, even if it was acquired during the marriage.

If you have a business, investments, pensions and mutiple real estates that were acquired during the marriage, you will benefit greatly from consulting with an experienced family law attorney.


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