Just like business partners parting ways, separating spouses must divide up the assets and debts of the marital partnership. Usually, the property obtained by either or both spouses during the marriage and before separation is considered marital property. The debts incurred by either or both spouses for a marital purpose during the marriage and before separation are considered marital debts. The spouses can divide those assets and debts on their own and document their division in a separation agreement. If the parties cannot agree, the court will divide the property for them.
Identify, Classify, Distribute
In court, equitable distribution is a three-step process. The judge first classifies the assets and debts as either marital or separate. Only those assets and debts which are marital are subject to equitable distribution. Next, the judge must value the assets and debts as of the date of separation. Of course, asset values and debt balances may change between the date of separation and the time the parties are before a judge. There are mechanisms to address those post-separation changes in value. Finally, the judge distributes the items.
Many of our clients think that the judge will divide each asset, but that is not generally the case. The judge will distribute some assets to the husband and some to the wife. The judge may distribute certain debts to one and certain debts to the other. The goal is to reach an equitable division. Equitable means fair and is usually as close to a 50/50 division as possible. However, there are factors which could make a 50/50 division unfair, and the judge can order an unequal division in certain, limited circumstances.
Unlike other areas of Family Law, fault and other emotional issues are not usually relevant in equitable distribution. Because of this, equitable distribution is particularly well-suited to mediation. Family Financial Mediators are those mediators that are certified by the North Carolina Dispute Resolution Commission to mediate the economic issues in Family Law cases. We are both Family Financial Mediators and bring that result-oriented approach to our clients and their family law cases.
If you would like sample forms and instructions for listing your property and debts, please click the links below.