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Personal Property and Equitable Distribution in North Carolina

“It’s not fair,” the client says. “It’s the law,” responds the attorney.  There are certain truisms when it comes to personal property and the equitable distribution  process in North Carolina:

  • Judges do not like to spend court time valuing and dividing up personal property like furniture, garden tools, decorations, and clothing.
  • Lawyers, even though they are paid to help you work out the issues, don’t like spending their time or your money arguing over personal property like furniture, garden tools, decoration, and clothing.
  • For purposes of court action and settlement, the price paid for an item of personal property is not usually the value at which it will be assigned.

Every lawyer I know has a story about a fight over personal property spinning out of control.  One story I like to recount is a fight I heard about over a particularly common and inexpensive set of  stainless steel flatware that the couple had been using for the fifteen years of their marriage.  This used flatware is the kind of thing you might find for $10.00 at a yard sale on any Saturday morning.     The parties and their lawyers argued about if for a couple of hours at a mediation.   The combined cost to the parties including their attorneys’ fees and mediator costs was close to $1,000.

The lesson is simple, if you are involved in a fight over personal property try to find a way to resolve it.

 

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Scott Allen is a divorce attorney in Raleigh, NC with over eighteen years of experience in all areas of family law litigation and settlement.

Filed Under: Property Distribution

Retirement Division in Divorce

QRDO Retirement DivisionHow are retirement benefits divided in your divorce?

The most valuable assets of most marriages are the home and retirement benefits.   North Carolina’s equitable distribution law allows the court to divide these (and other) assets if they are marital property.

Unlike financial assets such as savings, money market and checking accounts, it is unwise (or even impossible in some circumstances) to simply withdraw money from a retirement account like a 401(k) or IRA to transfer to the other spouse.    The reasons that withdrawing funds from these accounts is unwise is because of the severe tax consequences to certain kinds of withdrawals form these kinds of accounts.  A special kind of document is required in most circumstances to allow the division, and this is called a QRDO.

Qualified Domestic Relations Orders (QRDOs) are court orders with specialized language that are applied to retirement plans subject to the Employment Retirement Income Security Act (ERISA).  There are other non-ERISA retirement plans that are also frequently divided in divorce.  These include state, federal and military retirement and pensions.

Keep in mind that there are two basic types of retirement assets: defined benefit plans and defined contribution plans.     The type of plan has an impact on how it is valued for purposes of figuring out what a reasonable distribution of property

Defined Contribution Plan (DCP):

A 401(k) is a defined contribution plan.  Generally speaking, the value of a DCP is the account statement balance on any given date.  For example, if someone wants to know the value of  a Fidelity 401(k), simply collect the account statement on the date that is of interest.  Usually this date is the date of separation of the parties.

Defined Benefit Plan (DBP):

A company pension is an example of a defined benefit plan.   The DBP is characterized by statements showing what a person’s retirement would be if they retire on a certain date in the future and the statement usually shows this as a monthly amount.   This kind of retirement plan is more difficult to value than the 401(k).   To obtain a present value, a math process has to be performed where the goal is to calculate the present value of the future stream of retirement benefits.  With any prediction such as this, the value will change based on the variables used.  The variables in this kind of present value calculation are life expectancy of the plan participant and the discount rate.

Conclusion:

The QDRO is a complex document because not only must it be a proper court order, it must comply with the ERISA requirements.

How to get assistance with a QDRO in your case?  There are several choices.  Your lawyer can help you with it.  You can also get information from the retirement plan administrator.

 

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Raleigh divorce lawyer Scott Allen handles equitable distribution, retirement division, and other related matters.

If you have questions or need assistance call him at (919) 863-4183 or email at sallen@allenspence.com.  

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Guardians and the Family Law Case

In Raleigh, NC where I have practiced law most of the last seventeen-plus years there have been a few rare occurrences in my cases.  More rare than lunar eclipses in fact.  I am referring to the appointment of guardians in family law cases.

Under the NC Rules of Civil procedure a guardian may be appointed for a party or a child.  A guardian in this capacity is called a “guardian ad litem” and frequently referred to as a GAL.

Guardians are appointed for a party in a divorce case when that spouse is not mentally or physically capable of handling the matters related to the litigation.  For example, if a spouse suffers from schizophrenia or other serious psychological condition where their decision-making process is impaired, a guardian can be appointed.

It’s the guardian’s job to look out for the party’s legal interests and assist the attorney in prosecuting or defending the case. GAL’S for adults in domestic cases often have a very hard job.  They have to balance the duty to the party for whom he or she is guardian and listen to their stated wants and desires while using their best judgment about how to proceed forward in the divorce case.

It’s also a tricky situation for the attorney who thinks his or her client may need a guardian.  Frequently, however, there is a mental health professional who is making it clear that the client shouldn’t be or can’t make decisions for himself or herself.

Guardians for children have a similar role.  In family law cases, they are frequently appointed in cases where there are allegations of parental abuse or neglect that involve child protective services.  Children’s guardians are somewhat rare in Wake County in the “normal” child custody case where two parents simply disagree over scheduling and decision-making issues.

The guardian for a child in a case has the ability to report to the court how the child doing and be a voice for the child’s interest in the court process.  I have seen instances where the  GAL takes the witness stand and reports on how the child is doing in school, in therapy, and what the GAL wants for the custodial arrangement for the child.

Of course, whatever the GAL says in court, the final decision in a custody case is for the judge to make.  However, judges frequently give great weight to the statement of the guardian.

 

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Raleigh lawyer Scott Allen has litigated  cases involving guardians in custody, equitable distribution and alimony

If you have questions or need assistance call him at (919) 863-4183.  

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Filed Under: Child Custody, Property Distribution Tagged With: , , , , ,

Financial Mediation in Wake County – The Basics

Wake County has a family court system and local rules that are designed to streamline the court process.  Financial mediation is a requirement in Wake County family law cases where equitable distribution, postseparation support, and alimony are at issue.

Family financial mediation is presided over by a mediator.  A mediator is a neutral person who is there to assist the parties in reaching a settlement of their disputes.

Prior to the mediation, the mediator will have each party sign a mediation agreement that sets out the details of the mediation and how the mediator’s fee will be paid. The mediator’s fee is usually divided equally between the parties and is due at the end of the mediation.

The mediator may not be called as a witness in the case and is boung by rules of strict confidentiality.  Also, offers made back and forth at mediation cannot be used against a party in court.  For example, let’s say you agreed to accept $100,000 to settle equitable distribution at the mediation.  If it does not settle, the other party can’t go into court and say that you agreed to accept that amount.

Generally, the parties are in separate rooms with their lawyers.   The mediator will go back and forth throughout the day carrying offers and counteroffers between the parties.

If the mediation is successful, the parties usually sign a settlement document at the end of the mediation.  The reason a document is signed at mediation is to insure that a deal has been reached and people won’t change their minds later on.

Mediation is a way for the parties to settle their conflict outside of a courtroom.  It can save money and time.  Mediation is also less emotionally taxing than going to court.

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Raleigh lawyer Scott Allen is a mediator and also represents clients in equitable distribution, postseparation support, and alimony cases.

If you have questions or need assistance call him at (919) 863-4183 or email at sallen@allenspence.com.  


		

		
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Jury Trial in North Carolina Family Law Cases
 
		
				

			
Most family law cases in North Carolina are heard in district court by a district court judge sitting without a jury.   When a judge hears a case without a jury, the judge decides both how to apply the law to the case and what the facts of the case are.


Although not a typical family law case, claims for alienation of affections and criminal conversation may be heard by a jury if either party makes a timely demand.  In alienation of affections and criminal conversation the jury decides both liability for the claims and the money  damages to award (or not award) to the plaintiff.


Either party in an alimony case has the right to request a jury trial; however, North Carolina law limits the jury’s involvement to the determination of marital misconduct or fault.  A jury in an alimony case cannot set the amount or duration of the alimony award.


A jury trial is absolutely not available in child custody or child support cases or in equitable distribution of property cases; however, one may be demanded in an absolute divorce,  divorce from bed and board and annulment actions.


Family law attorney Scott Allen has litigated cases before judges and juries and has over seventeen years of experience.  If you have questions or need assistance call him at (919) 863-4183 or email at sallen@allenspence.com.

		

		
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When and How Should an Equitable Distribution Claim be Made?
 
		
				

			
I often get asked how a claim for equitable distribution can be asserted in North Carolina and if there are any rules about when the claim must be made.


The short answer is: file your equitable distribution claim before the judge grants the divorce and if you don’t do that your claim to be able to divide your marital and divisible property will likely be lost forever.  And for most people, this would be a really bad thing to lose forever.


Here is how the claim may be asserted and preserved: G.S. § 50-21(a) provides that a claim for property distribution in North Carolina may be filed as (a)  As a separate civil action, or (b)  with any other Chapter 50 action, or (c) as a motion in the cause as provided by G.S. § 50-11(e) or (f).  It is clear that an oral request is not sufficient.




In general, the claim for equitable distribution must be made after  the parties’ separation and prior to the entry of the court of the judgment of divorce.    There are a couple of exceptions in the statute that allows for property distribution claims after divorce, but these exceptions are rare.


First, G.S. § 50-11(e) provides that a defendant in an action may bring an action or file a motion in the cause for equitable distribution within six months after entry of judgment for absolute divorce if service of process in the divorce action was by publication and defendant failed to appear.


Second, G.S. § 50-11(f) provides that equitable distribution may be sought by action or by motion in the cause in an action for absolute divorce within six months after judgment is entered if the court entering judgment lacked personal jurisdiction over the absent defendant or lacked jurisdiction over the property subject to equitable distribution.


 


 



		

		
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Equitable Distribution and the Trial Court in NC
 
		
				

			






equitable distribution rulesG.S. § 50-20(a) provides that “[u]pon application of a party, the court shall determine what is the marital property and divisible property, and shall provide for an equitable distribution of both between the parties in accordance with the provisions of this section.”


Several appellate cases have outlined a three-step process for trial judges to follow in our district courts.  The trial judge must (a)  determine which property is marital and divisible property; (b)  calculate the net value of the property; and then is distributes the property in an equitable manner.  See e.g. Brackney v. Brackney, 682 S.E.2d 401 (2009).


Classification of Property:


There are three statutory classifications in G.S. § 50-20: marital, separate, or divisible property.  The court must classify debt as either marital, separate or divisible and in the judgment of equitable distribution support its classification of property by written findings of fact. Hunt v. Hunt, 112 N.C.App. 722, 436 S.E.2d 856 (1993).


Valuation of Property:


Once the property is classified then tr judge must value marital and divisible property and marital and divisible debt.










An often confusing aspect of the court’s valuation process is that there are correct dates for the valuation.  Marital property is valued as of the date of separation pursuant to G.S. § 50-21(b) and marital debt is valued as of the  date of separation pursuant to Mrozek v. Mrozek, 129 N.C.App. 43, 496 S.E.2d 836 (1998).   Divisible property and divisible debt are valued as of the date of distribution pursuant to G.S. § 50- 21(b).
















Dividing the property:


Once the foregoing identification and classification exercises are complete, the trial court must distribute marital and divisible property and marital and divisible debt.  G.S. § 50-20(a).


There is a presumption in thew that  marital and divisible property are to be equally divided unless he or she determines that an equal division is not equitable. G.S. § 50-20(c).


 









		

		
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What is Equitable Distribution in NC?
 
		
				

			
Equitable distribution is the the process by which a court in North Carolina identifies, classifies, values and divides property between spouses.


Prior to new laws being enacted in 1981 by the general assembly, North Carolina was a common law “title” jurisdiction with regard to property distribution after divorce. Property was allocated after divorce to the party holding title, a disposition that “tended to reward the spouse directly responsible for its acquisition, while overlooking the contribution of the homemaking spouse.”  This meant that before property went to whichever spouse had legal title at the time of divorce. For example, if a spouse owned a car in her name, even if it was purchased during the marriage with marital money, it would go to the spouse who’s name was on the title.




In 1984 the NC Court of appeals explained the rationale of the legislature: “Our equitable distribution statute, G.S. 50-20, was enacted in recognition of marriage as a partnership, economic and otherwise, to which both parties contribute either directly or indirectly. By enacting G.S. 50-20, our Legislature granted courts the power to consider factors other than legal title in distributing the marital assets upon the dissolution of the marriage thereby permitting courts to make an equitable distribution which effects a return to each party of that which he or she contributed to the marriage. As we interpret it, the policy behind G.S. 50-20 is basically one of repayment of contribution.” Hinton v. Hinton, 70 N.C.App. 665, 668-69, 321 S.E.2d 161 (1984).


Since the enactment of equitable distribution law in North Carolina, the courts and general assembly have been working to interpret and clarify the law.  Today, equitable distribution is one of the most complex ares of North Carolina family law.


 


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Raleigh lawyerScott Allen handles property distribution and all other types of family law matters and has over seventeen years of experience.  


If you have questions or need assistance call him at (919) 863-4183 or email at sallen@allenspence.com.  


 



		

		
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