Top 10 Tips for Preparing for Your Equitable Distribution Case

Divorce is tough. Dividing assets and debts can be even tougher. Here are the top 10 tips for preparing for your Equitable Distribution case:

1. Know your important dates

• The date of marriage starts the time period of creating a marital estate
• The date of separation controls classification and values of property and debts
• The date of valuation and/or date of distribution will also impact the values of property and debts

If you are fuzzy on the dates, your case will become messy. The first step is to know what you owned on the date of marriage and on the date of separation. You also want to know any debts created during the marriage to help support the marriage through the date of separation. 

2. Inventory everything…including the annoying stuff

It is critical that you make a list of all of your assets and marital liabilities – from real estate to retirement, from investments to vehicles, from bank accounts, to mortgage(s), and so forth. We even want to have an inventory of household goods and personal property…absolutely everything. If you question whether something matters, it probably does; just include it in the list. And, when inventorying items, be as specific as you can. For example: for your car, be sure to include the vehicle year, make, and model.

3. Classify property and debts early (Marital v Separate v Divisible)

In North Carolina, there are three (3) buckets:

1. Marital – what was purchased/accumulated during the marriage and before the date of separation.
2. Separate – what was inherited, gifted directly to you from outside the marriage, or items you purchased/accumulated prior to the date of marriage, as well as passive appreciation on separate property. 
3. Divisible – changes in value after the date of separation to marital property  before is is distributed by agreement or court order. 

4. Gather Important Documentation

The best evidence you can gather are full statements for any accounts, including all of the pages (even the pages with the small font that we call boilerplate). You want the statements around the date of separation (plus or minus a few months) as well as ongoing statements during the separation until everything is distributed. This includes bank account statements, retirement statements, and investment account statements. You also want to include tax returns for 2 or 3 years, associated tax documents, deeds, or other title or ownership documents. Remember, negotiations and litigation strategy rely on these documents.

5. Get realistic valuations (not “well I bought it for….”)

Do not rely on purchase date values or estimates from unreliable websites to assist you with valuations. Instead, try to get concrete documentation, especially for a home – use either a full appraisal from a certified appraiser or a Comparative Market Analysis (aka CMA) from a reliable realtor. For vehicles, use a trusted website within which you can enter the specifics. Businesses and pensions may require the assistance of an outside forensic accountant or business valuator.

6. Understand the presumption and ways to overcome it

In North Carolina, the courts start with a presumption that marital and divisible assets and liabilities will be split equally (50/50) between the parties. However, this presumption can be challenged. There are factors you can use to argue why you are entitled to more than 50%; but they are case specific and not general. Some of the more common factors include salary or earning capacity disparities between the spouses as well as separate property contributions and debts incurred for something other than the joint benefit of the marriage.

7. Think strategically about trade offs

In North Carolina, the court is ordered to try to distribute assets “in kind.” This means that the court is to separate the pre-tax retirement accounts equally separate from the cash balance in a checking account, for example. But not all assets are created equally, even if you were to divide a specific account equally.  Some assets are liquid. Some are not (like retirement or stock). Some items of property have an emotional value. Some items have tax repercussions, and some items may present ‘risky’ challenges in the future. Knowing the differences to think strategically is key. 

8. Factor in taxes and transaction costs

Make sure you consider capital gains issues, transaction costs associated with dividing a retirement or investment account, refinancing costs, penalties to withdraw funds, and the like. These should be considered when determining your strategy for resolution.

9. Coordinate Equitable Distribution with financial support

An Equitable Distribution claim does not remain in a silo. Any property or debts distributed per an Equitable Distribution could, and often does, impact monthly cash flow, claims for monthly support, and so on. 

10. Decide early whether you want to file a lawsuit immediately or if you want to attempt to negotiate or mediate

It is necessary to ask yourself tough questions – are you fighting from a position of different numbers? Or are you fighting from a position of emotion? Can you look at the numbers clearly, or is grief over the loss of the marriage clouding your judgment? Does the cost of litigating outweigh what you likely will receive (e.g. your cost/benefit analysis)?

These practical tips will help you organize your thoughts and strategize about how to distribute marital and divisible assets and liabilities. A clean spreadsheet and solid documents are what will help resolve cases, both in mediation or in a courtroom. 

If you or somebody you know wants to learn more about Equitable Distribution, our team at Modern Legal 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.