North Carolina Divorce Lawyers Blog

Articles Posted in Property Division

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Davidson v. Comm’r, T.C. Memo. 2018-38, 2018 WL 1611811 (2018)

 

(a) Facts: The parties were divorced by an Arkansas court, and the divorce decree divided the parties’ debt.  Within a few days after the decree was entered the judge sent the parties a letter, which stated:

 

When I made my ruling from the bench last Thursday, I failed to mention the following issues that should be included in the Decree of Divorce:

 

  1. The division of debt ordered from the bench shall be considered as support for Mrs. Davidson [Kelley] and shall not be dischargeable in bankruptcy[.]

 

2018 WL 1611811, at *1.  The court then entered a modified decree, which stated:

 

  1. ALIMONY: In light of the foregoing division of the debts, and real and personal property, and having reviewed all the primary and secondary factors of alimony the Court recited, the Court finds that it is not appropriate to award the Plaintiff [Kelley] alimony in this case. Further, given this Court’s division of the marital property and debt between the parties and because Mr. Davidson’s future income is too speculative to set any kind of time frame on when his income would have to improve for it to inure to the benefit of the Plaintiff [Kelley], the issue of alimony will not be held open to allow Plaintiff [Kelley] to reopen this case and file a petition for alimony in the future.

 

  1. BANKRUPTCY: The division of the debt ordered from the bench shall be considered as support for Mrs. Davidson [Kelley] and therefore shall not be dischargeable in bankruptcy.

 

Id. at *4.

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Recently, Kiplinger’s reported on “gray divorce,” or divorce among couples that have been married for 30-plus years. It pointed out the emotional and financial drains of a divorce, even when couples are older and presumed to have more security. Couples may find divorce tough if they’ve been married for so long that their assets and future plans are tied together. Often both spouses wind up living on half of the income they anticipated but many of the same expenses when they have a late-in-life divorce.

 

North Carolina is an equitable distribution state in which the court divides a couple’s property in a way that is equitable or fair, but this does not necessarily mean property is divided evenly in half. The court starts by presuming a 50-50 division is fair, but either party can submit evidence to rebut this presumption.

 

The thirteen factors the court may consider when deciding whether to deviate from an even split are: each spouse’s income and debts, support obligations in earlier marriages, how long the marriage was and the ages of the spouses, parent’s needs with the custody of a child and use of marital home, whether pension and retirement benefits are expected and whether they will be separate property, each spouse’s contributions to acquiring the marital estate, contributions made by one spouse to the other’s career or education, contributions that increased the value of the separate property, whether the divisible property was liquid or non-liquid, the difficulty of assessing interest in assets or business, each party’s tax consequences, actions by either party that increased, wasted or devalued assets, and other factors the court believes are property and just.

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You may be wondering whether you’ll need an expert to value your property during a divorce. It may be necessary to retain one, but there are also some cases, where a property owner can provide adequate testimony about the value of assets. In a recent North Carolina appellate decision, a plaintiff appealed from the judge’s equitable distribution of his and his wife’s property. He argued that the lower court had made a mistake in valuing sports memorabilia at $190,000 when his ex-wife hadn’t provided competent evidence of the memorabilia’s fair market value.

The couple had married in 1999. They had a child while married and separated in 2015. The husband sued for child support, child custody and attorneys’ fees. The wife counterclaimed. The husband moved for equitable distribution of their property. Of particular contention were items of sports memorabilia. Some was with the husband and some was with the wife. The wife thought the father had sold the missing memorabilia after they’d separated and believed appointing an expert was critical to value the memorabilia.

In the course of the divorce, the wife subpoenaed eBay to get the husband’s purchase history. She also sent the husband a spoliation letter. The husband went to their home and unloaded various sports items. The court allowed her to inspect his apartment and storage unit and she valued the items assigned to him at $190,000, while items assigned to her were valued at $5000. Included in the $190,000 figure were items not left behind that had been removed. Among other things the husband owned 13 boxes of baseball cards that were about 3200 a piece, 200 jerseys that were about $110 each plus the value of the signature when these jerseys were signed, as well as other memorabilia. Altogether the wife believed the fair market value was $190,000.

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A 529 Savings Plan allows parents to put aside money for their kids’ college expenses under tax-favorable conditions. How should trial courts classify the money in a 529 Savings Plan that is created and funded during marriage when a couple is getting a divorce?

In a recent North Carolina marital property appellate decision, a mother argued that contributions to a 529 Savings Plan were a gift to the children, rather than marital property to be divided. Alternatively she requested that the court carve 529 Savings Plans from the marital estate by creating a rule to treat the property differently from other marital assets.

The appellate court rejected her arguments, explaining that the beneficiaries of the plan didn’t have ownership of the funds, and the people participating in the plan could choose not to spend the money on education and after paying a penalty could spend it on something different. Accordingly, contributions aren’t gifts. The court also explained that it didn’t have the authority to create a way to carve 529 Savings Plans from the marital estate. It reasoned that the General Assembly was the governmental body with this authority, and that its role was to consider the purpose of marital funds to determine equitable distribution.

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Dear Carolyn,

I have a family member who is separated. Before the separation, this person purchased a house with the deed only in her name and the deed of trust in both names. How will the courts view this property for equitable distribution? My family member thinks that since the property is only in her name that the other party has no rights under equitable distribution. Can you explain the difference between Deed and Deed of Trust?

Thanks

 

Carolyn Answers:

This is a very interesting and quite technical question. So, thank you for writing.  I’ll start first with the definitions of deed and deed of trust.

A deed is the ownership or title documents; by analogy, your car title is a title document for a car like a deed is the title document to your home. Thus, the deed states who owns the home, and generally on the deed the owner is referred to as the grantee. This ownership document (deed) is registered at the Register of Deeds.

A deed of trust is the security for the debt or Promissory Note. When you buy a home or get an equity line on your home, you sign a Promissory Note to the lender. At the time of borrowing, you also sign a document called a deed of trust as security (a lien); if you do not pay the Promissory Note, the signatures on the deed of trust allow the lender to foreclose on the home and take the home away from you. If you examine the deed of trust, you will notice that the lender is the beneficiary of the deed of trust, and that there is a trustee. It is the trustee that forecloses if the Note is not paid. When the Note is completely paid, the lender is required to cancel the deed of trust on the public record at the Register of Deeds. We are one of about twenty states that use the “deed of trust” system.  The majority of states use a “mortgage” system.

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Dear Carolyn,

My wife and I have been married 20 years. Our child is graduating from high school this year, and we are miserable.  We own a home with lots of debt and we cannot afford to separate without selling our home first.  We both work, but there simply is not enough money to maintain two households without first selling the house.  Is there any way we can declare ourselves separated and maintain the same household until the house sells?   Why is the North Carolina waiting period for divorce a year?  I hear that one year is a long time as compared to other states.  Can we settle our property now?  We have retirement, cars and furniture, along with the house?

 

Carolyn Answers:

Generally, North Carolina requires 365 days of separation, with the intent of one spouse to live separate and apart forever, before a spouse may apply to the court for an absolute divorce. Separation in this state means, literally that the spouses, during separation, must have separate residences and essentially, conduct themselves as single for the entire 365 days. Isolated incidences of sexual intercourse, such as a weekend at the beach with an estranged spouse, do not start the 365 day period over.

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Dear Carolyn,

I am involved in an equitable distribution case and I have a closely-held business in the Triad, which was started by my father. He still owns the majority of the business.  Eight years ago, my father gave me twenty-five percent of the business. I separated from my husband eight months ago. What can I expect in my divorce case related to my closely held business?  How do we go about getting a appraiser to appraise the business?  Can he get any of my stock in the family business?

 

Carolyn Answers:

 You ask a complex, but very interesting, question.  Rest assured that he cannot get any of the actual stock in your family’s business.  The stock itself is separate property because it was given to you by your father.

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Dear Carolyn,

My wife and I have been married almost two years. Recently, and unfortunately, her grandmother passed away. Her grandmother had no immediate means to pay for funeral and burial services. The costs were paid by my wife and me on our credit card. The family has considerable land assets in Guilford County, but it is in her grandmother’s and multiple siblings’ name. My wife will inherit a portion of her grandmother’s land (split with my wife’s uncle). No one in the family has the means to buy us out, and, as is often the case, there is no reachable agreement by the family to divide the land. Is there any way to sell off some or all of what my wife is entitled to help reimburse us for the costs of the funeral and burial services?

Thanks for your helpful insight,

Jon D.

 

Dear Jon,

We have a solution for you!  The property can be sold to pay funeral and burial expenses, but there are several steps you must follow.

The answer assumes there was no Will, as a Will was not mentioned.

First, your spouse will need to go to the Clerk of Court, Estates Division at the Guilford County Courthouse if the grandmother died in Guilford County and open an estate file for the grandmother. If the grandmother died in another county, you need to open the estate file in that county.  Someone is going to have to qualify as the administrator of the estate.  Your wife, as a granddaughter, may apply; others may also apply, but hopefully they will not.

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Dana M. Horlick, Attorney, Woodruff Family Law Group

Whenever you become a party to a lawsuit, whether you are the Plaintiff or the Defendant, there are deadlines imposed by the Court, by statute, and by the Rules of Civil Procedure that are important to follow. There are deadlines whether you are in Guilford County, North Carolina or Fulton County, Georgia. Missing such a deadline could severely impact your rights.

For a real life celebrity example, let’s look at Phaedra Parks – star of Real Housewives of Atlanta – and her jailed husband, Apollo Nida. The couple were married in 2009 and separated in 2014.

On December 1st of this year, Apollo Nida filed a Complaint against Phaedra Parks, seeking a divorce, along with joint legal custody of the minor children and an equitable division of all of the personal property, assets, and marital debts.

However, back in November of this year, the parties were granted a divorce, after Nida failed to respond to Parks’ divorce petition. Parks filed for divorce in March of 2015 and subsequently was divorced in November. The judge also awarded Parks custody of the parties’ two children. Nida will have visitation rights once he completes the eight-year prison sentence he is currently serving for bank fraud and identity theft.

Now consider if this situation happened here in Guilford County. Once the parties remain separated for one year, either of the parties can file for divorce, which Parks does. Once the Plaintiff has effectuated service of the divorce complaint on the Defendant, the Defendant has 30 days to respond. The 30-day deadline is according to the North Carolina Rules of Civil Procedure. To extend this deadline, the Defendant can file a Motion for Extension of Time and receive an extension, as long as the deadline has not already passed. Now in the case of Parks and Nida, Nida never filed an Answer and never sought an extension of time.

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13062458_1042739802458603_2436945721037467362_nBy: Dana M. Horlick, Attorney, Woodruff Family Law Group

 

Now let’s change the hypothetical of our Greensboro couple – Petunia and Rocky – in one respect. Recall that Petunia’s parents wanted her to have a premarital agreement regarding Home Grown Lawn Care, but Petunia and Rocky did not sign one. Maybe a few years into her marriage, Petunia realizes that she wants to keep Home Grown Lawn Care in the family and that Rocky and her parents just do not get along. So Petunia executes a will, leaving her shares of Home Grown Lawn Care to her parents and the remainder of her estate to Rocky.

Under this scenario, Petunia’s parents would receive her shares of Home Grown Lawn Care, valued at $125,000.00. Rocky would receive the 401(k) worth $15,000.00. Rocky may decide that he is entitled to a larger share of Petunia’s estate. He can then exercise the right to elective share, which is a two-step calculation. First, you have to determine what percentage of the total net assets the surviving spouse receives. Second, you have to determine the amount of the elective share, based on the percentage calculated in step one.

Let’s take this step-by-step. The North Carolina legislature has determined that the percentage of the total net assets should vary based on the length of the marriage. Thus, the longer the marriage, the higher the percentage of the total net assets. The below chart shows the percentages, based on the statutory language in N.C.G.S. §30-3.1:

 

Number of Years Married Share of the Total Net Assets
Less than five years 15%
At least five years, but less than ten years 25%
At least ten years, but less than 15 years 33%
15 years or more 50%

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