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Why categorizing property during divorce can be so difficult

On Behalf of | Oct 17, 2018 | Property Division |

Throughout a marriage, the majority of the assets and debts either spouse accumulates typically belong to both parties. These assets and debts are usually considered to be marital property, and it is the property spouses will divide if the marriage ends in divorce.

However, individuals might also have or acquire separate property before and during the marriage. This property is generally not eligible for division upon divorce. While this distinction may seem straightforward in theory, there are complications that can arise when it comes to categorizing property in a North Carolina divorce.

Date of acquisition

One issue that can complicate the categorization of property is determining when one party acquired a specific asset. If this occurred after the wedding and before the date of separation, then the property in question will likely be marital property. However, if records show a party acquired the asset or debt before the marriage or after the date of separation, it could be separate.

Co-mingling of property

Another common reason for challenges to arise when categorizing property is co-mingling of property. Co-mingling happens when parties have separate property but mix it with marital property.

For instance, if you collect an inheritance which is typically considered to be separate property, but you deposit it in your shared bank accounts, it could be difficult to prove which money was separate and which was marital. Another situation can arise when income from both parties supports a piece of separate property.

In both of these cases, something that started as separate property could become part of the marital estate.

Value increases during the marriage

If you own real estate or intellectual property before a marriage, you can typically shield that property from division by keeping it separate. However, if that item increases in value during the marriage, the courts could determine that the value increase is eligible for division. This is especially true if the value increase is the result of an active effort by one or both parties during the marriage.

These are just a few elements that can complicate the categorization of assets during a divorce. Resolving these and other issues requires investigation and an understanding of the legal system, which is why it can be important for parties with concerns about complex asset division to consult legal and financial professionals.