Classification

A deeper dive into the "classification" of property as marital, separate, or divisible.

Marital Property

Generally, almost anything (a) earned (b) during the marriage (c) but prior to separation is "marital property" that needs to be divided 50/50 between the spouses.

Earned

North Carolina law does not use the language "earned". Instead, the law has carved out a variety of exceptions to marital property for inheritance, gifts, personal injury claims, and other things. What do all of these exceptions have in common? Its for property that wasn't "earned" and is therefore not a part of the joint venture called marriage.

If there is some property that wasn't acquired through labor, investment, or the use of money that was itself earned during the marriage, that should be a red flag that it may be covered by an exception.

This concept of earning marital property is important for timing as well. Say you separate exactly halfway through the year. Half of the tax refund you get the subsequent year was actually earned during the marriage, even if payment was not made until after separation. In other words, waht is important is when money or debt was earned, not when it was paid.

During the Marriage

Anything either spouse owned prior to the marriage is their own separate property and doesn't need to be split between the spouses. This property is from before the joint venture called marriage was formed.

Prior to Separation

The joint venture called marriage ends when one spouse leaves the marital home. This is called the date of separation. You do not need to wait until the divorce decree to become an independent financial entity. However, once a divorce decree is signed, neither spouse can file any new claims for equitable distribution.

Separate Property

Separate property does not belong to the marriage. This is property that is personal to one of the spouses. Separate property does not need to be split 50/50. Separate property includes:

• Anything earned before the marriage
• Anything earned after separation
• Gifts, inheritance, and other un-earned property

Additionally, there is a rare exception for debt that didn't benefit the marriage. Most arguments under this exception can be safely ignored. Spouses often want to split all of the assets, but not the debts. Additionally, spouses cannot immuninize themselves from financial decisions they didn't agree with during the marriage.

However, the most common legitimate exception is for student loans for a spouse that is still going to school. This is considered an investment in that individual's future, rather than something that benefited the marriage. There can be other exceptions in extreme situations, like drugs, prostitutes, or affairs.

Divisible Property

Divisible property is a confusing (and unnecessary) concept. Divisible property is (a) a gain or loss (b) earned passively (c) from marital property (d) after separation (e) but before equitable distribution is resolved. This just means that when real estate, stocks, retirement accounts, debt, or other items change in value as a result of market fluctuations, the spouses also split whatever profits or losses the from marital property while the claim is pending.

Blended

Blended assets are partially marital and partially separate. Here's a few examples:

• A spouse bought a house before the marriage, but made mortgage payments during the marriage.
• A spouse made payments into an investment account before, during, and after the marriage
• A tax refund was provided for 2023, but the parties separated halfway through that year.

In this scenario, you have to calculate the marital and separate portions. You should consider talking to a lawyer if there are large, blended assets. Often, it is best to just reach a compromise, since the exact marital and separate portions are incalculable.