What is Marital Property?

One of the difficult areas people face when going though a separation and divorce is the valuation and distribution of property. The law of North Carolina states that upon separation, either party may petition the court for equitable distribution of marital property. (N.C.G.S. §50-21) Separation begins when a couple lives separate and apart from each other and at least one party has the intent of living apart permanently. A general definition of marital property is that marital property is all property acquired during the marriage and owned as of the date of separation, other than property acquired by gift from a third party or an inheritance. Income received from separate property remains separate property, with a few exceptions.

>Assuming that a couple is separated and has property, the process is that the property must be classified, valued, and divided. Because only Marital Property can be divided by the court, classification is important. Property can be marital, separate or mixed.

There the court sets out the procedure for us: A party claiming that property is marital property has the burden of proving beyond a “preponderance of the evidence” that the property was acquired:

1. by either or both spouses;
2. during the marriage, before the date of separation; and
3. is presently owned.

If the party meets this burden, then the burden shifts to the party claiming the property to be separate to show by a “preponderance of the evidence” that the property meets the definition of separate property. If both parties meet their burdens, the property is considered separate property.

Property can have a dual nature, and can be classified as part separate and part marital. Where property is dual in nature, the trial court applies a “source of funds” approach to distinguish between marital and separate contributions to the property. Under this approach, when both the marital and separate estates contribute assets towards the acquisition of property, each estate is entitled to an interest in the property in the ratio its contribution bears to the total investment in the property. For example:

If you inherited an empty lot from Aunt Gertrude and it remains the same empty lot today, it is your separate property and your spouse as no rights to it. If Aunt Gertrude left the same lot to Husband Joe, and his Wife, Sue, then the property is marital property. If Aunt Gertrude left the lot to you and you and your spouse built a house on it after marriage, the property is mixed.

Another kind of property which is subject to distribution in an equitable distribution action is property that continued to accrue or be earned other than by the work of one party after the date of separation. This property is called divisible property and can also be divided by the court.