The average age for individuals getting married for the first time within the United States has steadily increased since the 20th century. From the early twenties (20’s), people are now experiencing their first marriage in their late twenties to early thirties.
Along with increased education levels, the increased age of those getting married make it more and more likely that people are coming into marriages already owning property. Can that property be part of the Equitable Distribution process in North Carolina should the relationship end in divorce?
The simple answer: Yes.
When thinking about marriage and your property, it is important to recognize the ways to protect your property so that you do not inadvertently transfer property ownership and interest.
Generally speaking, in North Carolina, “marital property” includes property acquired by one or both spouses between the date of marriage and the date of separation and “separate property” is property acquired by one spouse before the date of marriage. Transmutation is the act of changing the ownership interests in the property. Should property be transmuted into marital property or should a property interest be transmuted into a marital interest, then said property may be subjected to the Equitable Distribution process in North Carolina.
The Importance of the Deed
You would be correct to assume that if you bought Real Property before the date of marriage, that said property would be your separate property. However, the separate nature of this Real Property may change if you perform one of the most common activities when figuring out how to reduce mortgage payments or interest rates: the Refinance. It is common for banks to request that your spouse not only sign the Deed of Trust that secures the mortgage loan on the property but also that your spouse be added to your Deed which reflects ownership.
Should you add your spouse to your Deed on the Real Property (even if the sole purpose was to refinance the mortgage), then you have effectively “gifted” the Real Property to the marriage. If your Deed or a Postnuptial Agreement does not further clarify separate or marital interests created with the new Deed in the property, the law presumes that you gifted the entirety of the Real Property to the marriage. Therefore, any separate interest becomes null and void with the transmutation via Deed on the Real Property from your separate name to the joint names of both spouses.
One way to avoid the possibility of this outcome is to properly execute a Prenuptial Agreement (if to be signed before the date of marriage) or a Postnuptial Agreement (if to be signed after the date of marriage). In such agreements, the parties are able to decide how property should be categorized, how separate and marital interests are preserved, and how property is divided should separation and/or divorce occur.
If the spouses are already separated, then another spousal agreement to consider is the Free Trader Agreement. A Free Trader Agreement allows each spouse to purchase and/or sell Real Property as his/her sole and separate property without the need of the other spouse to be involved.
Improvements to Separately Owned Real Property
Even if the Real Property is never put into both spouses’ names, a marital interest can still be created during the marriage if improvements to the Real Property have increased the value of the Real Property. Improvements could include various items that improve the marketability of Real Property, such as adding a pool, a garage, and other notable renovations. It is important to note: the value add to the Real Property does not necessarily equal the cost of the improvements. For example: installing hardwood floors to replace carpet may add value to the fair market value of the Real Property; however, choosing the most expensive flooring versus the more common, durable flooring may not actually result in a greater added value. In fact, there are times when the reverse may result since the upkeep of certain improvements would be more expensive than the average homeowner prefers.
Regardless of the separate or martial nature of property, the Prenuptial Agreement or Postnuptial Agreement can be an invaluable tool to ensure clarity of expectations and protections should separation or divorce occur down the line.
Moral of this story – Property, like Marriage, is complicated. Before the unintended happens, discuss your situation with an experienced family law attorney to ensure preservation of property interests.
If you would like to learn more about how Marriage affects Property Rights, our Modern Legal Team is here to help.
Please note: these educational materials are based on North Carolina law where my legal practice is based. While the insights may have wide applicability, readers should consult with an attorney regarding the specific laws in their state or country.
Written by: Tiffany A. Byrd
Family is at the heart of everything I do, both personally and professionally. As a Family Law Attorney, I combine my passion for helping others with my unique journey—from growing up as the eldest child in a single-parent household to becoming the first attorney in my family. My experiences shaped my dedication to advocating for families in their most critical moments. Whether you’re building, protecting, or securing your family’s future, I’m here to help you find meaningful resolutions tailored to your needs.
