Katie Recognized by Pisgah Legal Services

Pisgah Legal Services is our local, amazingly productive and effective, legal non-profit organization.  Although there is little time to spare between this busy private practice and the family, putting some time in for people in this community who would not otherwise have access to representation is truly important.  Thanks for the kudos PLS!  Straight from the Fall 2011 Newsletter:

The MAVL Volunteer of the Month of September is Katie Fisher.   Katie practices primarily family law and some estate planning services at Siemens Law Office, P.A.  Prior to working at Siemens Law Office, Katie worked at Pisgah Legal Services for five years on the domestic violence team.

Katie volunteers for the MAVL program because she, “know[s] how great the need for legal services is in our community, having been on the front lines for a good amount of time.  I also know that the numbers of people needing legal assistance continues to rise and staff attorneys have to make tough decisions and turn people down all the time.  If I can help out by applying a skill I have and ensuring that a family can move on with a little more stability, then I’m still helping PLS in its mission to improve this community, which remains important to me out here in the private practice world.”

As a small token of our appreciation for her contributions to the MAVL program, we are giving Katie a $50 gift certificate donated by Laughing Seed Cafe.

Choosing a Divorce Lawyer in Asheville

How to Choose a Divorce Laywer

http://www.ashevilledivorcelawyer.com The divorce process is life changing, high stress and of serious consequence to you and your loved ones. Finding the right divorce lawyer at the outset is critical to the outcome. This piece provides an insiders guide to choosing a divorce lawyer in Asheville, N.C.. With a practice devoted to Family Law, the lawyers at Siemens Law Office, P.A. have the focus and expertise to help you navigate complex legal systems and to counsel you at critical junctures in your case.

For more information please visit Siemens Law Office, P.A

Updates to the 2011 N.C. Child Support Guidelines

Federal law requires that states receiving some federal public assistance and child support enforcement programs establish child support guidelines.  North Carolina receives both, and has therefore established the North Carolina Child Support Guidelines the Guidelines).  Federal law also requires that the Guidelines be reviewed and updated every four years to reflect economic growth, or lack of growth as we are currently experiencing, and what that means as far as the cost of raising a child.  Periodic review of the procedure behind using the Guidelines is a useful chance to smooth any wrinkles and speed bumps the previous version may have revealed.  From December 31, 2005 until December 31, 2010, we all worked with (and deviated from) the 2006 Guidelines.  As of January 1, 2011, the 2011 Guidelines apply.

For a look at the new Guidelines, including the parts that don’t involve the numbers,  click here.

So what’s new since 2006?  Here is a brief, 8 item list of substantive changes in 2011.

1.  Child Support in Domestic Violence Cases.  The Guidelines are now presumed to apply in all cases when child support is ordered as a remedy in Domestic Violence Orders of Protection (i.e., 50Bs, restraining orders).

2.  Retroactive Child Support. As was stated in the 2006 Guidelines, a trial court may still consider whether ordering a non-custodial parent to pay retroactive child support (i.e., “back support”) is appropriate and then figure out how much it should be.  There are two clarifications to this principle: (1) Based on a case that came through the Court of Appeals in 2009, the Guidelines now have an added rule that when any award of retroactive child support is made in a situation where the parents had a valid and unincorporated separation agreement setting the payment amount, the award must be calculated to match the agreed upon amount.  And, (2) when a court decides that retroactive support is appropriate, it has to calculate the amount based on the Guidelines that were in effect at the time and based on the salaries of the parties at the time.  In other words, if a party gets child support for the calendar years 2005 to present, the calculation of the amount owed prior to January 1, 2011 will be done with the 2006 guidelines and old pay records.

3.  High Income Parents and Low Income Parents. As in the 2006 Guidelines, the 2011 Guidelines apply to parties with combined monthly gross incomes of no more than $25,000.00 per month.  At $25,001.00 and up, it is considered to be a high income case, and a court is to set an amount of support based on the actual needs of the child.  The 2011 Guidelines simply clarify the 2006 rule with the actual wording of the statute: “…the court should set support in such amount as to meet the reasonable needs of the child for health, education, and maintenance, having due regard to the estates, earnings, conditions, accustomed standard of liv­ing of the child and the parties, the child care and homemaker contributions of each party, and other facts of the particular case.” (N.C.G.S. §50-13.4(c)).  For low income parents, the Guidelines have historically allowed an obligated parent to reserve a certain amount of income in order to ensure that he or she can cover their own basic expenses before paying child support to the other parent.  Application of the guidelines in these cases can be complicated, and a full discussion is not within the scope of this update.  Essentially however, the 2001 Guidelines allow the low income obligor to reserve $902.50 per month, and a minimum payment in the amount of $50.00 will be set for those who have an adjusted gross income of $999.00 or less.

4. Income in general. There are three areas of discussion regarding the definition of income for purposes of calculating child support.  First, based on a case decided by the Court of Appeals in 2008, the 2011 Guidelines specifically state that income received as child support for another child in the custodial parent’s household is NOT to be included as income.  Next, although the Guidelines have historically excluded most benefit payouts from being considered as “income”, the 2011 Guidelines get more specific and list the public benefits that are to be excluded.  Third, the 2001 Guidelines exclude from addition to a party’s income any payments made by an employer on an employee-parent’s behalf, directly to a third party.  For example, if my ex-husband’s boss pays for a disability insurance policy on his behalf, but does it outside of his paycheck and directly to the policy administrator, I can’t call the amount the boss pays to the policy administrator income.

5. Social Security. No real changes here, except for clarification of when a retired or disabled parent must continue to meet his/her child support payments.  If a child receives social security benefits because one parent has become disabled or has retired, and those benefits are more than the amount the disabled or retired parent would have to pay when the guidelines are applied, the obligation of the disabled or retired parent pays nothing.

6.  Preexisting Child Support Obligations. Under the Guidelines, a parent may deduct from his/her income any amount paid as child support for another child.  As of 2011, however, that deduction does not include payments made toward arrears on the obligation to that other child.

7.  Child Care Expenses. The 2011 guidelines clarify that child care costs incurred for purposes other than employment are not added to the calculation of child support.  These child care costs may be counted, however, if the parent who wants to count them has filed a motion to deviate from the Guidelines, and the Court finds the deviation appropriate.

8.  The Schedule. The “Schedule” is the numbers portion of the Guidelines.  It is a table that shows, based on the combined gross income of the parents with all credits and deductions, what economists assert is the cost of raising a child in 2011.  The most notable differences between the 2006 Guidelines and this current version is that low income families will not see as much of an increase in the child rearing costs as the number of children increases.  For higher income families, it appears that there is a greater increase in child rearing costs as the number of children increases.  The Schedule of Basic Support Obligations contained in the 2011 Guidelines can be viewed directly, beginning on page 7 of 18, by clicking here.

Family Court in Asheville 2011

Happy New Year!  For divorce lawyers practicing family law in Asheville, 2011 promises to be an exciting year.  With the retirement of Chief District Court Judge Gary Cash, and the metriculation of the Honorable Marvin P. Pope Jr. to the Superior Court bench, two vacancies have occurred in the Buncombe County Family Court.

The Honorable Julie M.  Kepple was sworn in on New Years Day and has taken the seat vacated by Judge Cash.  An appointment is anticipated by the Governor’s office this month to fill the vacancy left by Judge Pope.  Presently, The Honorable Dennis J. Redwing, from Gastonia, is sitting in Judge Pope’s seat, pending the Governor’s appointment.

We at Siemens Law Office are confident that the same consistent, credible approach to advocacy, well grounded in the law and the facts of each case, which has served our clients  in the past, will continue to serve our clients well in 2011.  We welcome the new jurists and wish them well.

Q & A for Paralegals and the Public

From a paralegal continuing legal education seminar presentation by Jim Siemens September 24, 2010:

What is abandonment?  Termination of the marital relationship without justification, without the consent of the other spouse, and without the intent of renewing the marriage.

How is separation defined in North Carolina?  Must be more than discontinuance of sexual relationship and implies living apart such that the community can see that the parties are no longer living together.  One party must have the intent to remain separate and apart.  Even after physical separation, if intent can’t be discerned, the parties may not be separated.

What constitutes reconciliation?  Resumption of the marital relationship.  Isolated incidents of sex post separation are not enough to constitute reconciliation.

What rights do parents have to custody in North Carolina?  Parents have the paramount constitutional right to custody in North Carolina.  There is a grandparent visitation statute but the relief grandparents have is limited and in an intact family, grandparents have no right to seek visitation.  Parents can abrogate their constitutional rights by acting inconsistently with those rights.

What rights do third parties have to custody in North Carolina?  Third parties can seek custody when parents are not available or when the parents have abrogated their constitutional rights by being unfit, or acting inconsistently with their rights as parents.

What discretion does the District Court have over custody decisions in North Carolina?  The Court is guided by the best interest standard which is the polar star of the custody inquiry.  However, before third parties can argue best interest, they must overcome the paramount constitutional rights of parents.

Would marital misconduct be relevant in an equitable distribution trial?  Marital misconduct is not relevant to equitable distribution in North Carolina.  However, the use of marital funds during and after the marriage may be relevant.

Would marital misconduct be relevant in a hearing on post separation support?  Only if the supporting spouse wishes to raise marital misconduct as a defense to paying support.  The supporting spouse controls the inquiry into fault in a post separation support hearing.

Would marital misconduct be relevant in a hearing on alimony?  Yes, and abandonment is a form of marital misconduct.

How are these forms of support determined in North Carolina?  Amount and duration of alimony in North Carolina are discretionary, though the Court is guided by factors listed at NCGS 50-16.3A.  Spousal support is to be determined with consideration of the income and earnings of the supporting spouse, and need of the dependent spouse.

How is child support determined in North Carolina?  Child support guidelines are typically used to determine child support, based upon an income shares model.  Guidelines are expected to change in October of 2011.  There is a growing body of case law suggesting that parties can contract to provide for the reasonable needs of their children.

Domestic Violence Protective Orders

Domestic Violence Protective Order

Domestic Violence consists of a pattern of behavior that one person uses to control another person with whom they have a relationship.  We are sensitive to the fact that in some situations, simple separation is not an available option without first considering the health and safety of all parties who are likely to be affected by it.  The purpose of this blog entry is to discuss an initial civil legal remedy available to individuals seeking to protect themselves and their children as they leave an abusive relationship.  If you believe you are involved in an abusive relationship, or are concerned about a friend in this situation, contact the local domestic violence protection agency (in Buncombe County, Helpmate, (828) 254-2968; elsewhere, call the National Domestic Violence Hotline, (800)799-SAFE).

WHAT IS DOMESTIC VIOLENCE UNDER NORTH CAROLINA LAW?

Although being party to an abusive relationship generally means that there is a pattern of behavior present on the part of the abuser, a single act as described by N.C.G.S §50B can be grounds for a protective order (also known as “restraining order” or “50B”).  An act of “domestic violence” can be:

  • an attempt to cause bodily injury; or
  •  intentionally (not accidentally) causing bodily injury; or
  • otherwise  placing you or a member of your family or household in fear of imminent serious bodily injury; or
  • committing an act of sexual abuse; or
  •  continued harassment which has the purpose of intimidating or tormenting and rises to such a level as to inflict substantial emotional distress.

WHAT IS A DOMESTIC VIOLENCE PROTECTIVE ORDER?

A Domestic Violence Protective Order is a restraining order which is designed to prevent an abuser from being violent toward you again, usually by ordering that they not assault, threaten, abuse, follow, harass, or even contact you.

A Domestic Violence Protective Order is different from a criminal warrant or a restraining order that a judge might have given you at a criminal court hearing.  This is a civil action that is designed to protect you from further acts of domestic violence by your abuser.  Your abuser will not be sent to jail just because you have a 50B order.  However, once you have a 50B, an abuser may be arrested for violating it.

This restraining order is NOT an action for custody, divorce, or dividing marital property, although each of these issues can be addressed, on a temporary basis, in the restraining order.  A Domestic Violence Protective Order should only be used as a way of protecting you or your children from domestic violence.

What Can a RESTRAINING ORDER Do?

A 50B usually orders the abuser to stay away from and to not assault, threaten, abuse, follow, or harass the victim and her children.  A judge, at his or her discretion, can also give you any of the following additional emergency assistance if he or she believes it will help protect you and/or your children from further violence:

  •   Grant possession of the residence or household and exclude the abuser from the residence or household.
  •  Require an abuser to provide a spouse and his or her children suitable alternate housing.
  •  Award temporary custody of minor children and establish temporary safe housing.
  • Award temporary custody of minor children and establish a temporary safe visitation plan.
  •  Order the eviction of the abuser from the residence and order assistance to the victim returning to the home.
  •  Order an abuser to make child support payments.
  •  Order an abuser to make spousal support payments.
  •  Provide for possession of personal property of the parties (such as the more reliable car).
  • Order the abuser to refrain from doing any or all of the following:
  1. Threatening, abusing, or following the other party;
  2.  Harassing the other party, including by telephone, visiting the home or workplace, or other means
  3.  Interfering with the other party
  • Order the abuser to stay away from the victim’s school and places where the children live or go to daycare or school.
  • Award either party court costs and attorney’s fees.
  • Order the abuser not to possess or purchase any firearms for a time fixed in the order.
  • Order the abuser to attend and complete an abuser treatment program.
  • Include any additional prohibitions or requirements the court believes are necessary to protect any victim or any minor child.

A judge is not required to give any or all of the relief listed above.  In Buncombe County, economic remedies are rarely awarded.  If the judge does award any of the things listed above such as custody or possession of the house, it is only temporary and will expire when the order expires.  Bear in mind, however, that with a protective order in place, other civil actions are available to help you resolve the common issues to divorce.

Caesar’s Head

On April 10th, 2010, I joined approximately 600 cyclists to participate in a bicycle ride sponsored by the Brevard, NC Rotary Club known as the “Assault on the Carolinas.”  This event, which celebrated its 11th year in 2010, includes a metric century (65 miles) course as well as some shorter options.

The ride begins at Brevard High School, and continues through downtown Brevard, up a steep climb at Walnut Hollow, and then along the French Broad River Valley.

The Assault is notorious for “Caesar’s Head,” a punishing climb that begins at mile 45.   From the intersection of Hwy 8 and Hwy 276 in Pickens County, S.C. the ascent covers six miles to its terminus at Caesar’s Head State Park. All riders, regardless of strength or experience, are challenged at Caesar’s Head to one degree or another.

This year marked my third “Assault” and my third climb up Caesar’s Head.  Old memories of the climb include snow, rain, cramps, and too many rest stops.  My goal this year was to climb Caesar’s head at a smooth, consistent pace, without reliving the drama of past years.

To reach the goal, I worked on an indoor trainer a few times a week throughout the winter months.  When work and parenthood allowed, and the weather cooperated, I got in as many miles on the road as I could.

To build strength for the climb, I initiated a series of strength/endurance rides close to my office, during court recesses, and other holes in my schedule.  These rides were all about slow, steady climbing in lower gears, to simulate the resistance of a steeper climb.

This year’s climb up Caesar’s Head wasn’t fast, but it was smooth and consistent. At the top of the climb, I had strength to gear down and increase my cadence.  I finished the last miles of the climb with a fast group of riders and erased the painful memories of prior finishes.

A little bit of forethought, preparation, and persistence made the difference for me on Caesar’s Head this year.  This approach has always worked in my law practice, and it turned out to work on the bike too.  Looking ahead, it’s time to set new goals for the bike and for the practice.

Separation & Divorce: FAQs

FAQ to Asheville Divorce Lawyer

 

After a combined 20 years of consultation with people contemplating separation and divorce, a mental inventory of frequently asked questions (FAQs) has crystallized.  We intend to add more FAQ entries to this blog and invite you to share with us any questions you may have.  Here are some of the most common questions we encounter during an initial consultation:

What is a legal separation?

In North Carolina, you are legally separated when you no longer live under the same roof with your spouse, and you have the intent to remain separate and apart.  It’s that simple but the simplicity is deceiving.  Once you are legally separated, the clock starts ticking on your eligibility for divorce, but all of the other issues that rise from the fact that you are married remain to be resolved.  Although no legal document is necessary to accomplish a “legal” separation, legal documents are necessary to resolve property (and debt) issues, support issues and child custody issues.

How do I accomplish a legal separation?

This is the toughest question.  When we consult with clients, we try to understand how far gone the marriage actually is.  If a client is on the fence, and there has been no attempt at counseling, we may suggest that and point the client in the right direction.  If the client is clear that separation is the goal, we spend time talking about the right approach to accomplish a legal separation.  We think the best way to initiate a separation is through an honest conversation with your spouse.  It won”t be a happy conversation, but if you can bring your spouse to recognize that separation would be best for all involved, the remainder of the process is likely to be easier.*

Someone has to leave the marital home in order for a separation to occur.  Calm conversations about how this can occur are best.  If that is not possible, you need to consult with a lawyer.  Domestic violence restraining orders can be used to initiate a separation, but they should only be used to prevent violence between spouses.*  There is also a cause of action known as divorce from bed and board, but that action can only be brought in limited circumstances.

What about abandonment?

Our answer to this question will tell you a little bit about our perspective.  Abandonment is a form of marital misconduct that a Judge can consider in entering an alimony judgment.  In Jim”s 15 years of practice, he has observed no Judge cite abandonment as a factor influencing his or her decision to award or deny alimony.  It could happen, and we don”t discount the fact that the alimony statute references abandonment as a factor.  But it could be that the concept is a bit outdated, at least as it”s defined in the statute.  Abandonment is defined as the termination of the marital relationship without justification.

The definition does not encompass the type of marital misconduct that could, in Jim”s opinion, influence a Judge.  That is, financial abandonment, and parenting abandonment.  If you or your spouse leaves the marital household to initiate a separation, the household cannot be abandoned financially.  Children likewise cannot be abandoned.  Marriages fail, and spouses separate, but in initiating a separation, care must be taken to ensure that financial responsibilities and parenting responsibilities are met.

What type of documentation do I need to provide?

In an ideal world, you will bring your divorce lawyer a copy of your prenuptial agreement, together with an exhibit that fully illustrates each spouse’s assets and debts at date of marriage.  In addition, you will bring documentation that provides an inventory of assets and debts at date of separation.  Finally, you will bring current income information that aids your lawyer in analyzing support claims.

Most people who come to see us do not have a prenuptial agreement, so we start an analysis of the equitable distribution claim with a discussion of what assets and debts were owned by each spouse at date of marriage.  This is important because assets and debts owned prior to marriage are generally defined as separate property, not subject to equitable distribution.  For instance, if you had retirement savings at date of marriage, and those retirement savings can be traced; those retirement savings should not be subject to division.

Date of separation statements are equally important.  The marital estate “freezes” at date of separation.  Passive market activity, and debt service post date of separation, is factored in equitable distribution but post date of separation, your active efforts to earn income, and the assets you acquire with that income should be characterized as your separate property.

Tax returns are important to bring.  Bring personal returns as far back as you have them.  Bring corporate returns and partnership returns if those have been filed during the course of the marriage.  Personal returns will help your lawyer determine what support should be paid, or received.  Corporate returns may be useful if a partnership or corporation needs to be valued for equitable distribution purposes.

If you have appraisals for real or personal property, bring those documents too.  Again, date of marriage and date of separation values are critical, but appraisals at any point during the marriage will be useful, if only to gauge the reliability of subsequently obtained appraisals.

Until your lawyer and opposing counsel have a complete picture of the marital estate, your case should not, and probably cannot, be resolved.

Does it matter that my spouse is involved with someone else?

Adultery is a form of marital misconduct in North Carolina.  This form of marital misconduct, like abandonment, is defined under the alimony statute and is considered by a court in awarding alimony.  It is not considered in an equitable distribution case.

Marital misconduct is generally not relevant in an equitable distribution case.  The law presumes that the marital estate (assets and debts) will be divided equally, despite the fact that aspouse has been unfaithful.  This particular realization often comes as a shock to clients.

*  A separate entry regarding the issue and implications of domestic violence in a relationship will follow this entry. This entry in no way implies that, if your partner is abusive, you should discuss separation prior to consulting with (a) the local domestic violence protection agency (in Buncombe County, Helpmate, (828) 254-2968; elsewhere, call the National Domestic Violence Hotline, (800)799-SAFE) and an attorney.  Nor does this entry imply that a domestic violence protective order should be sought in the absence of abuse.

Divorce: Dividing Property

Separation and Divorce:  Dividing Assets and Debt

           In your spare time during your adult life and for the length of your marriage, you’ve carefully managed and accumulating assets.  Maybe you’ve not so carefully managed and have accumulated significant debt. Now the marriage is ending and you’re having to learn a whole new language to keep track of what goes where and who owes what to whom.  This is the language of equitable distribution, and it is an issue that has to be cleared up before you can safely obtain a divorce judgment.

The whole point of equitable distribution is to classify property as separate, marital, divisible and/or non-statutory so that each party can walk away with their fair share of the assets and of the debt.  Getting the right piece of property (or debt) in the right category will help you keep track of what goes where.  But what are those categories, and what to I list under each one?  What follows is a very basic description of the categories designed to help you speak the language of equitable distribution and increase the productivity of your initial meeting with your attorney.*  There is alot of information contained in this entry, but equitable distribution can be a tricky issue that requires precise language.  Ensure that the attorney you trust with the division of your assets speaks this language fluently.

Marital, separate, divisible and non-statutory: The property or debt must be classified as either (a) marital, (b) separate, or (c) divisible. Yes, as with all things legal, there are times when the property or debt will not fit into any of these definitions, and thus, is something else. I call it, for lack of a better term, (d) non-statutory. It is not subject to distribution, but it can be considered as a distributional factor by the court when dividing the stuff that IS divisible. An example of non-statutory property is: a commission entirely earned (house was listed after date of separation) and received by the real estate agent spouse after the date of separation and before the date of the equitable distribution (ED) trial.  Although the earnings of one spouse after the date of separation are generally that spouse’s separate property, the court will consider this commission as part of the “big picture” when allocating assets and debt that are divisible.

Active and passive increases in value of separate property: Active increases are those increases in the value of separate property occurring during the marriage and before the date of separation, caused by the effort of either or both spouses, e.g., the husband paints his barn. These increases are marital. Passive increases are those increases in the value of separate property occurring during the marriage and before the date of separation, caused by something other than the efforts of either or both spouses, e.g., inflation.  These increases are separate. There is a presumption any increase in the value of separate property occurring during the marriage and before the date of separation is marital.  The burden thus, shifts to the party claiming the increase to be passive to prove it. There is no such thing as an active or passive increase in the pre-separation value of marital property or in the post-separation value of separate property. Any post-separation increase in the value of separate property is the property of the spouse owning the separate property and thus, is either his non-statutory property or his separate property (under a source of funds theory) and properly treated as a section 50-20(c)(1) distributional factor.

Active and passive increases (decreases) in value of marital property: We see alot of this related to the bursting of real estate bubble in 2008.  Active increases (decreases) are those increases (decreases) in the value of marital property occurring after the date of separation and before the ED trial, caused by some post-separation action or activity of a spouse. N.C.G.S. Sect. 50-20(b)(4)a. This increase (decrease) is not divisible property, but is a distributional factor under N.C.G.S. Sect. 50-20(c)(11a) or (12). Passive increases (decreases) are those increases (decreases) in the value of marital property occurring after the date of separation and before the date of the ED trial, and caused by something other than a post-separation action or activity of a spouse, e.g., inflation. N.C.G.S. Sect. 50-20(b)(4)a and c. This increase (decrease) is divisible property. As neither party has the benefit of a presumption with respect to post-separation events/activities, the party claiming the increase (decrease) to be divisible has the burden of proof. If that burden is not met, i.e., no proof the increase was passive, the increase will be treated as a distributional factor. This is tantamount to saying there is a presumption the post-separation increases (decreases) in marital property are active.

Active and passive income from marital property: Passive income from marital property received after the date of separation and before the ED trial is divisible property, e.g., dividends from marital stock. N.C.G.S. Sect. 50-20(b)(4)c. Income received from marital property after the date of separation and before the ED trial resulting from the post-separation efforts of a spouse (active income), e.g., increase in value of marital property stock portfolio occurring as a result of the management of account by the husband, is not divisible, not marital and not separate. N.C.G.S. Sect. 50-20(b)(4)a; Sect. 50-20(b)(1); and Sect. 50-20(b)(2). It is this spouse’s non-statutory property and is properly treated as a N.C.G.S. Sect. 50-20(c) (11a) distributional factor.

Transmutation: This occurs when something happens to alter or change the classification of property during the course of the marriage. Marital property is rarely transmuted into separate property, although it can occur, e.g., spouse (who has right to manage marital funds) uses marital funds to purchase a gift to give to his wife and makes clear his intention that the gift is to be his wife’s separate property. Most often our concern is with whether separate property is transmuted into marital property. An example: separate funds are commingled with marital property, e.g., placed in a joint checking account, during the marriage and before the date of separation. Has the character of the separate funds been altered? Yes, a transmutation of the separate funds into marital funds has occurred unless the party claiming a portion of the funds to be his separate property is able to trace those separate funds into their current form.  In essence, the commingling of separate and marital assets, occurring during the marriage and before the date of separation, raises a rebuttable presumption that all the assets are marital.

Marital property presumption: Although the ED statute speaks in terms of a marital property presumption, N.C.G.S. Sect. 50-20(b)(1) it does not mean all property owned by one or both of the spouses is presumed marital. To be entitled to the presumption, a spouse claiming a property is marital is required to prove it was acquired by one or both of the spouses during the course of the marriage, before the date of the separation and presently owned.  If this fact is shown and there is no contrary evidence, the property must be classified as marital. If the other spouse, however, is able to show the same property was acquired by gift or bequest or in exchange for his separate property, the asset must be classified as his separate property. The failure in the burden of proof by the party claiming the asset to be marital, however, does not mandate its classification as separate. The party claiming the asset to be her separate property has the burden of showing the asset is her separate property, which can be met by showing it was acquired by her before the marriage. If neither party meets their burden, the property passes outside ED and thus, the party having title retains ownership.

Marital gift presumption: Sometimes known as the McLean presumption. A titling of separate real property in the entireties raises a rebuttable presumption the grantor intended a gift of his separate properties to the marital estate.  To rebut the presumption there must be clear and convincing evidence no gift was intended. If the presumption is rebutted, the property retains its separate property classification under the exchange provision of section 50-20(b)(2). If the presumption cannot be rebutted, the property must be classified as marital. If not rebutted, the grantor spouse is entitled, however, to have his separate property contribution to the marital estate considered as a distributional factor. The McLean presumption does not apply to personal property.

Marital debt: Debt, like assets, must be classified, valued and distributed.  Debt is marital if acquired by one or both spouses during the marriage and before the date of separation, presently owed, and acquired for the benefit of the marital estate. As with assets, how the debt is titled (which spouse owes the debt) is not determinative. The biggest controversy here is whether the debt was for the benefit of the marital estate.  An example: dental bill incurred by one spouse and owing at time of separation has been held not to be marital. Another example: credit used to purchase clothing for a spouse is generally considered marital. There is no presumption that a debt accumulated during the marriage and before separation is for the benefit of the marital estate. Thus, the burden is on the party claiming the debt to be marital to prove it is presently owed by one or both of the parties, was incurred during the marriage and before the date of separation and was for the benefit of the marital estate. Beware: (1) if the debt is in the name of both spouses, is classified as marital and distributed to the husband and the husband does not pay the debt, the creditor (who is not a party to the ED action) can proceed with collection against either or both parties; (2) if the joint debt is classified as marital and distributed to the wife to pay and the wife petitions for a discharge in bankruptcy and that petition is granted, her obligations to the creditor and to the husband under ED can be discharged, thus, eliminating any claim he has against the wife for failure to abide by the ED order.

Divisible debt: Increases in marital debt and any finance charges, i.e., interest, related to the marital debt arising after the date of separation and before the date of the ED trial is divisible debt. N.C.G.S. Sect. 50-20(b)(4)d. Also, any post-separation (pre ED trial) payments made by a spouse on a marital debt is divisible property. Id. The discretion heretofore lodged in the trial court to treat these post-separation payments as a distributional factor or provide a direct credit to the spouse making the payments (see Hay supra) is eliminated. If the payments are made pursuant to a post-separation order, can these payments be classified as divisible in light of N.C.G.S. Sect. 50-20(f) which states that ED should be made “without regard” to support payments arising out of the marriage? The issue has not been decided by the courts. It appears, however, that N.C.G.S. Sect. 50-20(f) merely prohibits post-separation/alimony payments (arising from the marriage at issue) from being considered as a distributional factor. It does not attempt to prevent the proper classification of property or debt. New debt acquired after the date of separation and related to marital property, e.g., repairs to marital home, does not appear to be a divisible debt and could be treated as a distributional factor or the trial court could provide a credit to the party making the payment. A good argument can be made that post-separation payment of taxes and casualty insurance on marital property is marital debt to the extent the taxes and/or insurance premium accrued before the date of separation.

Acquired: Property is acquired when legal title comes into the husband and/or wife. Property is also acquired when some third party has legal title but is holding the property in trust (express, resulting or constructive) for the benefit of the husband and/or wife. If a spouse claims property owned by some third party is a marital asset, that spouse has the burden of showing the existence of the trust and the third party must be joined as a party to the ED action. This third party is a necessary party within the meaning of Rule 19 of the Rules of Civil Procedure. Although the issue of the existence of a trust is normally a question for the jury, in the context of the ED action there is no right to a jury trial.

Source of funds: The general principle provides that if the source of the funds used to purchase the property was marital, the property acquired with those funds is also marital. This is also known as tracing. It is an easy concept if the exchange occurs during the marriage and before the date of separation. What if marital funds, existing at the date of separation, are used to purchase property after the date of separation? Is this new asset marital, separate, divisible or non-statutory? By definition it is not marital, separate or divisible. Nonetheless, the source of funds theory has been used in the past to qualify the post-separation exchange asset as marital The same principle would appear to justify the classification of fire insurance proceeds, received after the date of separation, where the fire policy insured the marital home which burned either before or after the date of separation. Did the adoption of the divisible property statute, reflecting an effort to deal with post-separation events, signal an end to use of source of funds as a methodology for classifying post-separation exchanges? It can be argued it does, but I don’t think so. That statute does not even address post-separation exchanges of marital property, suggesting the legislature was aware of our case law on the source of funds theory and elected to leave it in place. Furthermore, what the Court of Appeals had to say before the divisible property statute, seems to still apply: without thesource of funds theory, there would be “an incentive for a spouse to convert marital assets titled in his or her name as soon as the parties separated, thereby undermining the very point of the (ED) Act – to alleviate the inequities caused by the title theory approach to the distribution of marital property.  The lesson: property acquired in fact after the date of separation may indeed be properly classified as marital property because in theory it was acquired before the date of separation.

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* This entry borrowed heavily from a manuscript by attorney and former Judge K. Edward Greene entitled “The Language of Equitable Distribution”.  We thank Mr. Greene for his permission to use his work.  We have removed case citations, but are happy to provide them upon request.