Property Division: Marital vs. Separate Property

Marital Property

North Carolina law defines marital property as “all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property or divisible property.”  Essentially, it is presumed that all property acquired after the date of marriage and before the date of separation is marital property.

Separate Property

Separate property is “all real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent (inheritance), or gift during the course of the marriage.”  Though this may seem straightforward, there are important points to keep in mind:

  • Property given to one spouse as a gift from the other spouse during the marriage is considered separate property only if the intention for that property to be separate is stated in the conveyance.
  • Property obtained in exchange for separate property shall remain separate regardless of whether the title is in the name of the husband or wife or both and it will not be considered to be marital property unless a contrary intention is explicitly stated in the conveyance.
  • The increase in value of separate property and any income obtained from separate property shall be considered separate property.  However, if there is active appreciation in any separate property resulting from the personal, financial or managerial contributions of one or both spouses, that appreciation is marital property.
  • All professional licenses and business licenses which would terminate on transfer shall be considered separate property.

How do I keep separate property from becoming marital property?

There are situations in which separate property can become marital property.  For example, if you own a house before you are married, that house is separate property.  However, if you refinance your mortgage and put your spouse on the deed, you may create marital property.  Mortgage companies often tell people that they must put their spouse on the deed, but this is a misconception.  You do not have to add your spouse to the deed.

Frequently, parties make the mistake of depositing their inheritance into a joint checking account that they share with their spouse.  If you do this, you are taking the risk that the inheritance will be considered a gift to the marriage, and thus marital property.  To avoid this and make sure your inheritance remains separate property, it is best practice to deposit it into an account with only your name on it.

It is also important to keep certain tax implications in mind when considering marital vs. separate property.   For example, in regards to gift taxes, you can give up to $15,000.00 to someone in a year and generally not have to file a gift tax return.

If you have any questions regarding the division of your property, contact our office today.  Our family law attorneys are knowledgable and prepared to move forward with any case involving equitable distribution.