How Does Separate Property Become Marital Property?
- How Does Separate Property Become Marital Property?
- What Is Marital Property and What Is Separate Property?
- The Presumption of Marital Property
- Why Property Classification Matters
- Real Estate: Separate or Marital Property?
- How About Other Assets, Accounts, and Debt?
- Myers Law Firm Will Help You Figure Out Marital Property Versus Separate Property in a Divorce
How Does Separate Property Become Marital Property?
One of the most emotional and stressful ordeals during a divorce or separation can be caused by the division of assets, especially when it seems particularly unfair to one side.
North Carolina follows the “equitable distribution” method of dividing property when spouses are separating. This means that property is divided fairly in the eyes of the court. But each side does not necessarily receive an equal share of the property. “Equitable” does not have to mean “equal.”
An experienced family lawyer can help you protect your separate property during a divorce. Myers Law Firm can guide you through the process and help you find the documentation to prove that your assets should not be included in the division of marital property.
Understanding what separate property is—and how separate property can become marital property—can prepare you to navigate the legal process of property division. We will discuss these matters more here, but please feel free to contact us if you would like to schedule a consultation.
What Is Marital Property? What Is Separate Property?
Property and assets can fall under three different classes during a divorce. These classifications determine whether one spouse or both has a claim to the value of the property.
Marital Property
Marital property is presumed to be anything that was acquired from the date of marriage to the date of separation and is owned on the date of separation.
Marital property typically includes wages, assets like houses or cars, real estate, investment accounts, retirements accounts, bank accounts, and debts. It does not matter whose name the property is in. Even if an account or car only has one spouse’s name on it, it is still marital property if it was acquired during the marriage.
Separate Property
Separate property includes property that was owned prior to marriage. It can also include any property acquired during the marriage that was a gift or inheritance for one spouse only.
Divisible Property
North Carolina also has a third category: divisible property. This is property that was acquired before the date of separation but was received after separation. It can also include marital property that has changed value since separation, such as investments that increase or decrease in value after separation.
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SCHEDULE YOUR CONSULTATIONThe Presumption of Marital Property
One very important factor in property division is the “presumption” that applies to the definitions of marital property versus separate property.
Under North Carolina law, all property that was owned by either spouse on the date of separation is presumed to be marital property. A spouse who is claiming that a certain piece of property is separate property must present sufficient evidence to overcome this presumption and prove that the property qualifies under the definition of separate property.
In other words, all separate property can be considered marital property until you prove it isn’t.
Why Property Classification Matters
The classification of property is incredibly important because a judge can decide how marital and divisible property gets divided up between spouses. Separate property only belongs to one spouse and can’t be awarded to the other. However, separate property can become marital property in certain scenarios.
When separate property gets mixed with marital property, these “comingled” assets can either become marital property or be considered “mixed” property that is partly separate and partly marital.
RELATED: Equitable Distribution — What Does “Marital Property” Mean in Property Division Cases?
How Does Separate Property Become Marital Property in Real Estate?
One of the most complicated comingling of assets is the marital house. If one spouse owned the house before marriage, then it is a separate asset. However, if the other spouse moves in, what happens then?
If the other spouse is added to the deed, then North Carolina law says the house automatically becomes marital property. If the value of a house that is separate property goes up due to the real estate market only, that appreciation is considered separate property.
However, if money earned during the marriage is used for the mortgage or renovations, the non-owner spouse will gain a marital interest in the property. In some cases, they only have a claim to the appreciation in value, such as contributions to renovations that made the house more valuable. This calculation can be very contentious and requires good recordkeeping.
Are Separate Bank Accounts Marital Property?
Not initially. If the funds were established and held solely by one individual before the marriage, the account is considered separate property. But separate bank accounts must be treated carefully to not become marital property.
If you deposit marital property such as a paycheck into a bank account, that can count as comingling assets. If you use money from a separate bank account to make payments on a marital loan, mortgage, or other joint expenses, those payments are considered contributions to the marriage and you cannot get credit for those payments.
When you have a joint bank account, there is typically less question as to whether it is considered marital property or not. In this instance, the joint account belongs collectively to the married couple and falls in the category of marital property.
How About Other Assets, Accounts, and Debt?
While real estate and houses are major considerations in property division, various accounts, investments, and debts are reviewed as well:
Appreciating Assets (Investments)
Separate property assets that appreciate passively, like investment accounts, real estate, and collectibles, remain as separate property. However, if someone were to put marital money into a separate property investment account, that can turn the asset into mixed separate and marital property.
Similarly, if a retirement account acquired before marriage continues to receive contributions after the date of marriage, the account becomes mixed separate and marital property. It may be possible to determine which portion of the account is separate property and which portion is marital property, but this can be very difficult and time-consuming.
Depreciating Assets
The same rules apply for depreciating assets like automobiles, boats, RVs, and furniture. If they were acquired before marriage or after marriage with separate funds, they are separate assets. If they were acquired after marriage using marital funds, then they are marital property that will be divided between the spouses.
For example, if a boat is acquired during marriage but paid for with money that is separate property, then the boat is also separate property. However, if the other spouse makes any contribution to payments or upkeep, it could change the classification to mixed property.
Debt
Debt can be very contentious to settle. Debt acquired before marriage is separate property. As a general rule, if the debt was taken on during the marriage and was for the benefit of the marriage, both spouses are typically responsible for that debt.
Student loan debt taken on during the marriage can sometimes be treated as separate debt. But if the other spouse benefitted from the education or the loan money was used to benefit the marriage (such as payment for groceries or rent), then the debt is marital property.
Unfortunately, if your spouse had hidden credit cards from you during your marriage, you may need to prove that you did not benefit from the things your spouse purchased to treat that debt as separate property.
Gifts and Inheritance
Gifts and inheritance given to a single spouse, whether before or during the marriage, are typically treated as separate property. If the other spouse contributes towards the asset and increases its value, then it can become mixed separate and marital property.
Get Help Keeping Your Separate Property Out of Marital Property
If you believe you have separate property during the dissolution of your marriage, it can be challenging to prove sole ownership. That’s when the help of a divorce attorney like Myers Law Firm can be invaluable.
Schedule your consultation with Myers Law Firm by calling 1-888-376-ATTY (2889) or using our online contact form. Our knowledge of the local court system in Charlotte and Mecklenburg County can help determine your best legal steps forward.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.
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