No one wants to go through a divorce, but knowing what can happen to your assets is essential. So if you’re wondering what happens to the house in a divorce, understand your options before proceeding. Knowing what the court can do and what you’re entitled to will help ensure the best decisions for your future.
One Spouse Can File for Equitable Distribution of Assets
North Carolina is not a community property state. Legally speaking, it’s an equitable distribution state. This means that one spouse can file an equitable distribution action prior to the final divorce judgment to obtain a fair split.
Filing before the final divorce settlement makes sense so that both you and the other party can work out what is fair before the divorce decree.
In determining what is fair, a judge considers many factors, including an inventory of all assets, including the family home. However, the outcome is not always 50/50, so it’s essential to understand what process the court will use to determine property division.
Many factors affect equitable distribution, including:
- Income, debt, and property of each party
- Support obligations from a previous marriage
- Length of the marriage
- Age, health, and education of each party
- The expectation of retirement benefits
- Contributions that have increased the value of property
- The property’s liquidity
- Tax implications
- Actions by one spouse to preserve or waste assets
After the court confirms your settlement agreement and enters a court order for divorce, it may be too late to ask for equitable distribution.
An attorney specializing in separation and divorce can help you divide property equally with your spouse.
If equal distribution of property and debt is something you can agree on with your spouse outside of court, you may not need to go through the equitable distribution process at all.
If you can agree on all items of your divorce settlement, you can apply for an uncontested divorce. This just means that the judge will base the divorce decree on the agreements you’ve made with your spouse.
If you don’t file for property division before your divorce is final, you could lose the right to ask for help from the court later on. The same is true for alimony or other types of support.
However, you can file for child support at any time children are under 18 (under 20 if in high school).
Marital Property Vs. Separate Property in NC
Each property item you own with your spouse is either marital property, separate property, or divisible property.
Marital property includes both real and personal property acquired by you or your spouse during the marriage. Any marital assets, such as the family home are considered marital property and will need to be divided fairly.
Separate property is the assets you own prior to the marriage or received as a gift or inheritance. However, mixing separate property with marital property can cause it to become marital property!
Also, any passive income acquired from separate property is classified as separate property. Divisible property is modifiable so that you and your spouse may divide the proceeds.
The Process of Splitting Assets
Together with your spouse, you’ll need to create a comprehensive list of all belongings that fall under the categories of marital, separate, and divisible property.
The whole process may not be easy, but it is crucial that you are both honest and include everything— such as:
- Real property
- Property acquired during the marriage
- Separate property
- Marital assets
- Retirement accounts
- Bank account
- Marital debt
After you and the other spouse classify the property, you’ll need to assess each item at fair market value. Getting a professional opinion on the fair market value of your property is a smart move. You can consult with real estate appraisers or certified public accountants to get an accurate estimate.
Working Through Housing Options
When divorcing spouses own a home together, there are a few different options.
Let’s say there are children involved who don’t want to change schools, and the custodial parent wants to keep the house. They could work out the fair market value of the home and buy out the other spouse. They would then own the home and, as the party responsible, continue paying the mortgage payment each month.
However, this is not the only option. Depending on what each spouse can afford to pay and the other assets to split, both parties may agree on different ways to settle asset distribution in divorce proceedings.
If the home is in only one spouse’s name, because the spouse owned the home prior to marriage, it will most likely be considered separate property. (However, if you’ve refinanced with a spouse while you were married, you may want to check that the deed is still in your name only.)
If your spouse contributed to repairs or home improvements, a judge might consider the improvement value in your home as marital property. In this case, you might need to split the amount of the increase in value. You may also need to split an increase in equity value over the years for a marital home.
Another viable option for a clean break would be a cash-out refinance where an existing loan gets restructured for a divorce house buyout.
Or both parties might decide to have a property sale since neither can afford to buy the other spouse out.
However, be careful of the tax implications as you consider how to handle a marital asset worth as much as most houses are! You don’t want surprise federal taxes showing up that you can’t afford to pay!
Talk with a Family Law Attorney
No matter what method you choose for dividing assets in your divorce, it’s important to talk to a divorce attorney at Plekan Law before signing anything. Our experienced divorce lawyers can help you understand the legal implications of what you are agreeing to and ensure that your rights are protected throughout the process.
As much as you want an agreeable ending to this chapter of your life, it’s best to make an informed decision. A family law attorney can provide valuable guidance and insight into how a court may think about your situation. With our help, you’ll be able to make well-informed decisions regarding equitable distribution and what happens to your property after divorce.