Property Division in North Carolina: Dividing Commingled Assets in Divorce
Oct. 3, 2023
Aside from child support and co-parenting, property division is one of the major issues during divorce. Disputes often arise, especially when partners have mixed non-marital and marital assets. North Carolina is an Equitable Distribution state. This means that splitting assets on a 50/50 basis is the primary approach. However, courts may allow unequal distribution where the former is considered unfair.
Generally, commingled assets are treated as marital assets, subject to 50/50 distribution. However, under the equitable distribution theory, a spouse may be able to get more than 50% if they can demonstrate that a 50/50 allocation is unfair. In this post, I discuss commingled assets and how they affect property division in divorce.
What Are Commingled Assets?
Commingled assets refer to separate property mixed with marital assets. For instance, a case of commingled assets arises if a partner receives an inheritance and deposits the funds into a joint account or channels them towards mortgage repayment for their family home.
While mixing separate and marital assets may not seem like an issue of concern to many couples during the marriage, it can become a major area of dispute in divorce. Common examples of separate assets that get commingled during marriage include:
Inheritance deposited into joint accounts
Using funds from a joint account to repay a mortgage for a home one owned before marriage
Gifts or personal injury awards deposited into a joint account
A spouse depositing funds into the other partner's separate bank account
Continued contributions to an investment one owned before marriage
Separate, Marital, and Divisible Assets
To understand the division of commingled property, let's first look at the three categories of assets considered during divorce in North Carolina – separate, marital, and divisible assets.
Separate Assets
Also known as non-marital assets, these refer to property one owned before the marriage or unilaterally received gifts and inheritance during marriage. Non-marital assets are not subject to division during divorce. Examples include:
Real estate acquired before marriage
Income from or increase in value in non-marital property
Inheritance and gifts received unilaterally
Marital Assets
Marital assets are assets acquired during the marriage by both or either of the parties. Note that the name on the title does not count; as long as the partner acquired it during the marriage, it's considered marital property. The only exception is unilaterally received gifts and inheritance.
Divisible Assets
Divisible assets refer to property acquired during the period between separation and divorce. The assets that may be due for division under this category include property received that was earned during marriage and passive income from or increase in value of marital property. However, a partner may dispute a 50/50 division of increase in value if they can demonstrate that the gain resulted solely from their efforts.
How Are Commingled Assets Handled During Divorce?
Commingled assets are primarily considered marital property. Nonetheless, exceptions may be allowed as the equitable distribution theory promotes fairness.
Usually, the best way to avoid the issue of commingled assets from arising is to establish a prenuptial agreement and keep non-marital assets separate during the marriage. However, if you're facing the issue of sharing commingled assets now, you probably skipped these two steps, which happens to many people.
If you commingled your assets (willingly or unintentionally) and your partner wants an equal share, an experienced divorce attorney can assist you in filing an equitable distribution claim. If you can demonstrate the source of the commingled assets, earning a fair distribution determination may be possible.
Need Help With Equitable Distribution Claim?
If you are going through a divorce and facing the challenge of commingled assets, I can help you file an equitable distribution claim. I've been providing father-focused legal services to North Carolina dads since 2009 and understand the challenges spouses face, especially in the property division. If you believe your partner is claiming an unfair share, contact me and let me help you explore your legal options.