One of the costliest and most difficult aspects of divorce is the division of property and assets. Couples filing for a divorce may see their stress levels hit an all-time high when dealing with the division of their assets. This process, while not particularly fun, is an important part of allowing spouses to sever all ties to their marriage so they can move on to their new lives.
North Carolina is an “equitable distribution” state, which means assets are split fairly (not necessarily evenly) in a divorce.
The court has a host of factors to consider, including, for example, the length of the marriage and each spouse’s contributions (whether said contribution was made financially or as the primary homemaker) before deciding how to distribute assets.
Property is generally divided into two categories: marital property and separate property. Property may also be considered part marital and part separate – mixed property.
Property earned during the marriage is marital property that must be distributed equitably.
Separate property is acquired before the marriage or after separation and includes items like inherited property and gifts.
Mixed property is a combination of marital and separate property. This may include retirement accounts obtained prior to marriage, but contributed to throughout the marriage. The division of mixed property can be more complicated because it requires determination of the percentage acquired during the marriage.
In general, dividing property between spouses is not an event that automatically triggers additional taxes. Splitting a retirement account (such as a 401(k) or an IRA) can be done without either spouse incurring tax.
You simply present a Qualified Domestic Relations Order (QDRO) and your financial institution will split the retirement account into a new one for your former spouse, allowing your two separate retirement accounts to continue to grow tax-deferred. There are, however, some taxable events that can occur during a divorce.
Certain property, such as stocks or other investments, can be subject to a capital gains tax when it is sold. Generally, selling your marital home should not incur too much in the way of tax because this sale has an exemption in capital gains tax up to a certain dollar amount.
If you are particularly wealthy or a business owner (or both,) and your wealth/business grew during your marriage, you could stand to lose much of your money in equitable distribution. You want to be able to hold onto as much of your hard-earned income as possible without losing much of it to your soon-to-be former spouse, creditors, or taxes. There are ways of protecting your assets. Some examples include:
By preparing your finances prior to a divorce filing, you can usually come out of things in a much better position. Here are some options and proactive measures you can take to limit your exposure and protect your assets in a divorce:
While some of these actions can be taken after the divorce proceedings start, keep in mind that it is best to protect your assets prior to being served or sending divorce papers to your spouse.
Hiding assets is never a good idea and can result in criminal charges. During the divorce process, both spouses, as well as the financial institution(s) they utilize, will be asked to provide financial information during the discovery process. There’s also a good chance the spouses will be involved in a deposition, where they could be asked about their finances and assets.
If you refrain from supplying all of your financial information during discovery, or if you lie during your deposition, you could be charged with committing perjury and fined.
Dividing assets in a divorce is a complicated process that can lead to anger and frustration on both sides. Contacting a Johnston County divorce lawyer with extensive experience in divorce can be beneficial to both parties.
An attorney can advise you which options may be best suited to your unique financial situation and facilitate the process or sheltering any assets that you are entitled to by law. This can ensure things are done properly, legally, and in a way that won’t unnecessarily alert your spouse.
For over 19 years, attorney Jonathan Breeden has been helping couples in North Carolina divide their marital property and remain calm during such a difficult and emotional time. Contact Breeden Law Offices about your divorce at (919) 661-4970.
Call Breeden Law Office today:(919) 296-3978