A very common misnomer about equitable distribution is that it means 50/50, but that is not true. Generally, there are three steps to equitable distribution: (1) Identifying and characterizing each asset as martial or separate; (2) Valuing each item that is martial, and; (3) distributing all divisible assets equitably or equally, or, in the alternative, ordering monetary award from one spouse to another to adjust their financial positions in accordance with the court’s decision.
Categorizing property can be complicated. Generally property owned prior to the marriage is not considered martial property. However, that can change. If both spouses reside in the house and contribute to the mortgage, a portion or all of the property can change into martial property. The same applies with rental property. Say a spouse owns houses he/she rented out prior to the marriage. If the spouse has no active role in managing the property, and just accepts a check from a property manger, that rental property will likely continue to be non-martial property. However, if the spouse regularly performs repairs and maintenance on the rental properties, actively participates in getting it rented out, or partakes in an active role for management, the property can become martial property.
The issues of which property is martial property and which is separate property is one of the more disputed issues in property division. Remember, property includes both assets and liabilities. If property is deemed separate, it will go to the person whose property it is. In general, separate property is property acquired by a person before the marriage, by gifts, or inheritances. Student loans are frequently separate debts but can be community and in some instances are treated as a hybrid of community and separate debt. Proof that something was a gift is often circumstantial and harder to prove. If an item is significant enough and disputed, this requires a deeper analysis and tracing of financial records.
Value of the property can also be heavily disputed. Property can be sentimental to one party who places a high value on it, while the other party places “market value”. This can make determining the value very difficult. It is important to have an attorney who can help you work through these issues.
There are times that a court may find that 50/50 is not fair. However, this is based on statutory factors and involves a case-by-case analysis.
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A party can ask for equitable distribution any time prior to the divorce being finalized. It is important to have someone who can help you through the complex maze of when assets are martial and non-martial and ensuring fair distribution. Contact us now to schedule your free consultation at 919-591-2240 or send us an email by clicking on the button below.