Dividing Foreign Assets

In North Carolina, courts of this state, having jurisdiction over the parties, can equitably divide marital property. (NCGS 50-20). Marital property includes all real and personal property acquired during marriage and before separation and owned by the parties on the date of separation. It also includes income generated from the marital property and gains and losses on the property as well as property earned prior to separation but received after separation, as of the date of distribution. While the statutes further state that, “Real or personal property located outside of North Carolina is subject to equitable distribution in accordance with the provisions of G.S. 50-20, and the court may include in its order appropriate provisions to ensure compliance with the order of equitable distribution.;” NGCS 50-21(a). Carroll v Carroll 88 NCApp 453, 363 SE2d 872 (1988), it is not always easy to enforce an award for distribution of property that is located in a foreign jurisdiction. When a court in North Carolina speaks of a foreign jurisdiction, that term applies to other states as well as other countries.

North Carolina and most other states make a legal distinction between matters which are “in rem” and those which are “in personam”. An in rem action means that the property itself is located within the state (such as land) while “in personam” means that the court is asserting its power over a person, not a thing. Any attempt by a court to assert title to property in another state is void. “[s]o much of the foreign] judgment as attempts to affect the title to [North Carolina property], … is a nullity.”); Kirstein v. Kirstein, 64 N.C.App. 191, 193, 306 S.E.2d 552, 553 (1983) (holding “to the extent that the foreign] decree attempt[s] to affect title to property in North Carolina, it is void.”); Courtney v. Courtney, 40 N.C.App. 291, 297, 253 S.E.2d 2, 5 (1979) (holding that “any part of a foreign decree which attempted to determine ultimate title to North Carolina realty [is] void.” Instead, a court may order a person over whom it has jurisdiction to do an act, such as convey the real property located in the other state. Buchanan v. Weber 152 N.C.App. 180, 567 S.E.2d 413 (2002). So long as the court had the power over the person it could make an effective order by carefully drafting an order.

More complex are matters with an international scope. Assuming a party obtains a valid order in North Carolina, it would have to be enforced in a foreign country. The first step is to make sure the property is in the other country. Any financial account numbers, copies of titles or real estate records will assist you in your search. Once it is determined that the property does exist, it may be possible to “freeze” the assets by seeking an order from the local court in the foreign country. If you have a North Carolina order freezing the assets and it is properly certified with the apostille affixed, a foreign entity such as a bank, particularly a bank which does business in the United Sates, may honor the order on a short term basis while an appropriate order is being obtained locally. Check with the State Department to ascertain whether there are any international treaties which may control your ability to proceed. While there is a large and complex international treaty known as the Hague Convention which is often referred to in Child Custody matters, the United States has signed only certain parts of the document and has not signed the sub part known as the Hague Convention on the Recognition of Divorces and Legal Separations. Attassi v Atassi117 N.C.App. 506, 451 S.E.2d 371. The United States and each individual state is hesitant to allow foreign judgments to be enforced here as the foreign courts may not afford the litigants the same due process rights as are required by our courts. Conversely, foreign courts whose judgments are not honored here will often refuse to honor the judgments and orders of our courts.

That does not mean that you are without a remedy if you have a North Carolina judgment. The first step is to certify the judgment and obtain an apostille from the Secretary of State. This document, with the apostille is then presented to the courts of the foreign country for enforcement. Often times the best means of proceeding is through local counsel. Both the United States Office of Consular Services in the foreign country and the consulate office of the foreign country here in the United States can offer assistance in finding appropriate counsel and in enforcing the order obtained. In almost all cases, the association of competent local counsel is the best way to obtain a satisfactory result. It may be necessary to file an action in the foreign country to proceed with discovery of information and enforcement of the order. Be aware, however, that in many countries it is difficult, time consuming, and costly to obtain a satisfactory result. Whenever possible, a party is best off to be awarded assets located in the United States. While the IRS has held that transfers of property incident to divorce are not a taxable event, other countries may not have the same law and there may be unknown tax ramifications. Similarly, it may not be possible to remove property or currency from the foreign location.

International property distribution is a complex and daunting matter even for the most experienced family law attorneys. If your matter includes foreign assets and international issues you would be best to make your counsel aware of these facts as soon as possible so that appropriate action can be taken to find and preserve these assets for valuation and distribution.