Separate vs. Marital Property in a North Carolina Divorce: Which is More Important?

One of the most important new concepts for North Carolina spouses to learn before a divorce is the distinction between marital and separate property. Although this distinction might seem simple at first, there are many factors that can complicate the issue. First and foremost, it is important to prioritize certain assets over others in the event of a divorce. If you are asking: “What are the most important assets in a divorce?” you will need to consider tax implications, long-term costs of ownership, and whether the assets can be divided as part of the normal equitable distribution process.

Separate property, as the name suggests, is separate from marital property. Therefore, it cannot be divided by spouses in the event of a divorce. In North Carolina, only marital property is eligible for the equitable distribution process. Separate property includes everything that a spouse owned prior to signing the marriage contract. It also includes everything that the spouse acquired after the official date of separation. Finally, separate property also includes anything acquired by either spouse through inheritance or third-party gifts at any point in time.

Marital property, on the other hand, must be divided by both spouses during the divorce process. This includes everything that the spouses acquired together during the marriage. Even if one spouse used their own income to purchase these assets, they still become eligible for division in the event of a divorce.

Separate property should be a priority for spouses who owned high-value assets prior to the divorce. Marital assets may be somewhat out of their control, but they should do everything in their power to hold onto what they owned before the marriage contract. If the status of these assets is questionable, spouses should work with qualified attorneys to establish without a doubt that they are, in fact, separate assets. Obvious examples include real estate, investments, and retirement assets.

Separate assets should also represent the focus after very short marriages. If the marriage only lasted a few years, there is typically not enough time to acquire significant marital assets. In this situation, it is far more worthwhile to focus more attention and resources on ensuring continued ownership of the separate assets.

Separate property should also be prioritized in a divorce involving high-value, commingled assets. If a spouse uses their inheritance to partially purchase a marital asset, for example, they should strive to get the total inheritance back after the divorce. This is especially true for beneficiaries of high-net-worth individuals, as inheritance can be worth many millions of dollars in this situation. Although “untangling” commingled assets is certainly possible, it may require the attention of qualified professionals such as forensic accountants.

Marital property is worth prioritizing when the marriage has lasted for many decades. In this situation, the accumulated property usually outstrips separate property. Even if spouses entered the marriage with significant separate assets, their net income over the course of many decades will probably overshadow this property. In addition, high-income spouses will likely invest their earnings for significant profits over the course of many decades.

Marital property is also an obvious priority for a dependent spouse with no earning capacity, no earning history, or both. Unless a dependent spouse fights for their fair share of the marital property, they risk walking away from the marriage under extremely precarious financial circumstances. In contrast, a high-earning spouse can rely on their separate assets and recoup any divorce-related losses within a few years of the split.

Finally, marital property may become an important focus for spouses with complex assets. These might include family businesses, complex investments, and perhaps even concealed assets. If both spouses contributed to a family business in different ways, it may be difficult to determine how this property should be divided in an equitable manner. Concealed assets should also become a clear focus of any spouse who believes that part of their marital property has been hidden away beyond reach.

If you have been searching for a qualified property division lawyer in North Carolina, look no further than Arnold & Smith, PLLC. Over the years, we have helped numerous divorcing spouses determine the best way to approach property division. The distinction between separate and marital property is only one useful consideration as you pursue financial security. We have considerable experience with complex assets and high-net-worth divorces. Book your consultation today to approach property division with confidence and efficiency.