Articles Posted in Equitable Distribution

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by Benjamin N. Neece, Attorney

            Equitable Distribution, in a nutshell, is giving each party to a marriage what they are entitled regarding property acquired during the marriage.  As one of the pillars of many divorce proceedings, it is commonly the most complex aspects, requiring extensive research into the lives of individuals going through a divorce.  In some instances, the parties to a divorce can amicably agree as to how the property acquired during the marriage shall be distributed, and in some instances where parties fail to agree, distribution may be simple due to the nature, amount, and availability of information regarding marital property. In other instances, the parties cannot agree, and the marital assets are numerous, complex, and difficult to find; this situation can create a very tall task for attorneys in properly representing client interests.

A recent North Carolina case, Uli v. Uli (N.C. App., 2017), breaks down equitable distribution in an effort to comprehensively explain how North Carolina courts are to handle these types of claims.  North Carolina courts conduct a three-step analysis to determine what is marital property, what is divisible property, and how to provide for an equitable distribution between the parties.  First, the court must identify and classify the property as marital or separate based upon evidence presented regarding the nature of the asset.  Next, the court must determine the net value of the marital property as of the date of separation. Lastly, the court must distribute the marital property equitably. Smith v. Smith, 433 S.E.2d 196, 202-203 (1993).

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by Benjamin N. Neece, Attorney

The two big classifications of property in all equitable distribution cases are “marital” and “separate” property.  These are the ones the get all the attention and are subject to some of the most intense scrutiny and debate; however, there is a third area of property that is equally as important and can at times, prove to be a valuable player equitable distribution cases. Yes, I am talking about “divisible property!”  Continue reading →

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by Benjamin N. Neece, Attorney

A great aspect of living in the triad area is the rich history of successful businesses that put down roots in the community and prospered over the years.  Greensboro is home to very familiar brands such as Wrangler and Volvo, and right down the road is High Point, which is known for being one of the largest home furnishing manufacturing areas in the country.  Business and industry have been drawn to the area for years, and a growing population provides ample opportunity for entrepreneurs of all sizes to flourish.  Some of the area’s most vital businesses are ones defined as “closely-held,” or more commonly referred to as, “Mom and Pop” businesses.  Unfortunately, sometimes, Mom and Pop do not see eye-to-eye, which may jeopardize the future of these businesses. Continue reading →

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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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Becker Williams, F. Supp. 3d     , 2016 WL 878492 (W.D. Wash. 2016)

Facts: Husband and wife were married in In 2002, the husband designated the wife as survivor beneficiary of his retirement plans with Xerox.

Husband and wife were divorced in 2006. In 2007, the employer received several telephone calls from a person claiming to be the husband, who said that he wanted to change the beneficiary to his son by a prior marriage. In response to these calls, the employer sent the husband three different copies of the written form necessary to complete the change. The first two forms were not returned; the third form was returned unsigned and undated.

When the husband died, both wife and son asserted claims to the survivor benefits, and the employer interpleaded the benefits into federal court. The trial court declined to allow summary judgment, and the Ninth Circuit affirmed, finding that a telephonic change of beneficiary was potentially enforceable, even without a writing, and that a it was a material issue of fact as to whether such a designation was actually made. Becker v. Williams, 777 F.3d 1035, 1042 (9th Cir. 2015). Upon remand, the district court held a trial and addressed the merits.

Issue: Who was entitled to the husband’s survivor benefits?

Answer to Issue: The wife

Summary of Rationale: Under Washington state law, to change a survivor beneficiary, an employee must substantially conform with the terms of the policy or “[S]ubstantial compliance with the terms of the policy means that the insured has not only manifested an intent to change beneficiaries, but has done everything which was reasonably possible to make that change.”   2016 WL 878492, at *2 (quoting Allen v. Abrahamson, 12 Wash. App. 103, 105, 529 P.2d 469, 470 (1974)).

The son did not meet his burden of proving substantial compliance. First, there was no evidence that the person who called to make the change of beneficiary was actually the husband. Second, the husband’s failure to return the first two forms and his failure to sign and date the third form suggest that his intention to change the beneficiary was not complete. In this regard, the court noted that the forms themselves stated that the change of beneficiary was not valid until the form was signed and returned. “[T]he failure to complete simple, mundane tasks undermines Asa Sr.’s alleged unequivocal desire to change his beneficiary.” Id. at *3.

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Walsh v. Dively, 551 B.R. 570 (W.D. Pa. 2016)

Facts: When husband and wife were divorced in Pennsylvania, they agreed that the wife would receive 50% of the husband’s The agreement was incorporated into the divorce decree, but no DRO was entered.

The wife then filed for Chapter 7 bankruptcy. The bankruptcy trustee moved in bankruptcy court for authority to ask the state court to issue a DRO. The bankruptcy court denied the motion. The trustee then appealed.

Issue: Should the trustee be permitted to seek a DRO?

Answer to Issue: No

Summary of Rationale: The trustee has a duty to collect property of the estate in bankruptcy.  But retirement plans with an antialienation provision are not part of an estate in bankruptcy. Patterson v. Shumate, 504 U.S. 753 (1992). The retirement plan at issue was governed by ERISA, and it was subject to the statutory antialienation provision in ERISA unless a QDRO was entered. Because a DRO had not even been entered, let alone qualified by the plan, there was no QDRO, and the antialienation provision remained operative. Thus, the pension was not part of the wife’s estate in bankruptcy.

Note: As we shall shortly see, it is quite important that the state court awarded the wife an actual interest in a retirement plan, and not an award of cash she could spend freely for any purpose.

 

In re Kizer, 539 R. 316 (Bankr. E.D. Mich. 2015)

Facts: In a consent judgment of divorce, a court awarded the husband 50% of three retirement accounts owned by the wife. The wife was also awarded the marital home, but required to pay the husband for his interest. Because she lacked the funds to make the payments, she agreed to pay for the home by giving up her interest in the requirement accounts, increasing the husband’s interest to 100%.

QDROs were subsequently entered and approved, directing the administrators of the accounts to transfer to the husband 100% of the balance of certain accounts. The plan administrators complied with the QDROs by giving the husband accounts containing the funds at issue. A finding of fact was made that the husband could make withdrawals from these accounts at any time, without any form of early withdrawal penalty. (The husband claimed that his withdrawals were subject to a penalty, but he failed to produce supporting evidence, even after the court gave the husband additional time.)

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By Sade Knox, Intern, Woodruff Family Law Group

Chafin v. Chafin, 791 S.E.2d 693 (N.C. Ct. App. 2016)

Facts: In late 1988, Plaintiff and Defendant entered into a marriage that lasted about twenty years before the parties separated in June of 2008. During the years of the marriage, Defendant was an owner of a close to non-profiting auto-sales company in North Carolina. The company operated during the marriage up until the date of separation between the parties, which was when the company had dissolved, in 2008. That following year, Plaintiff filed a complaint seeking equitable distribution of the marital and divisible property and provided inventory affidavits listing the assets of the marital home shared by the parties and the company that Defendant owned. The company’s assets mainly included the bank accounts, vehicle inventory, and Cash on Hand. Defendant failed to follow the trial court’s order to serve his equitable distribution inventory affidavit but, later served an affidavit in response to the proposed pretrial order, objecting to Plaintiff’s classification of the company’s assets.

Because of the evidentiary support provided by Plaintiff, the trial court found that the assets in question were marital property and awarded Plaintiff a lump sum that Defendant was required to pay in monthly payments. Though Defendant argued otherwise, the court found that due to Defendant’s income and assets from his employment, he was capable of distributing award to Plaintiff. Defendant went on to file four motions that were denied, but eventually, the court allowed Defendant’s motion to preserve the record in which evidence was offered to show that not all vehicles listed on the pretrial order were on the auto company’s lot on the date of the parties’ separation. Defendant appeals the trial court’s other findings.

Issue: Whether all the mentioned assets of the auto company and the shared home were marital and divisible property and correctly stated.

Answer to Issue: Yes.

Summary of Rationale: All personal and real property acquired by either spouse, during the marriage up until the date of separation is marital property. Defendant, owner of the auto sale company, deemed the company as personal property and the shared home was real property, both of which were acquired by the Defendant during the period of the parties’ marriage, classifying both the company’s assets and the home as marital property.

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State Farm Life & Assurance Co. v. Goecks, F. Supp. 3d       , 2016 WL 1715205 (W.D. Wis. 2016)

Facts: A Wisconsin divorce decree provided:

The respondent [Gary] shall be required to maintain the petitioner [Sharon] as the primary, irrevocable beneficiary on one third of the face value of all his life insurance policies in effect as of the date of the final hearing or in the amount of Seventy Five Thousand Dollars ($75,000) of the face value of said policies, whichever sum is greater. Respondent shall provide the petitioner proof of said insurance and beneficiary designations. Petitioner shall pay the respondent the sum of Twenty Five Dollars ($25.00) per month toward the cost of said insurance. The parties further agree to designate the children as primary beneficiaries of all life insurance policies except as set forth above.  2016 WL 1715205, at *1. The divorce decree was not submitted to the employer for qualification as a QDRO.

The husband initially complied with the above provision, but later changed the beneficiary on some of his life insurance to his new wife. Upon his death, the insurers paid some of the benefits to the new wife, and interpleaded the remainder. Both wives asserted competing claims to the proceeds.

Of the various insurance policies at issue, one was an employer-provided policy regulated by ERISA.

Issue: Who is entitled to the proceeds from the employer-provided policy?

Answer to Issue: The husband’s wife at the time of his death.

Summary of Rationale: The court first held that the husband had breached the contract, rejecting a rather weak state law argument that the agreement only required the husband to name his former wife and children as a beneficiary of the insurance, and not as the exclusive beneficiary.

The employer-provided life insurance policy was part of a benefit plan, and it was therefore subject to ERISA. Benefits regulated by ERISA can be transferred only under terms of a QDRO. No QDRO was ever submitted. Thus, federal law preempted state law and barred enforcement of the decree with regard to the ERISA- regulated policy.

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