When One Spouse Contributes More Financially, How Are Assets Split in Divorce?

People usually think that if you paid for something, you own it. You own the groceries if you buy them, and you own the house if you pay the mortgage. This is a good way to think about money in your daily life. But does that logic work in a divorce? Well, not entirely. North Carolina courts don’t just give property to the person who spent the most money in the relationship.

Today, we’re looking at Smith v. Smith, a great example of what happens when one spouse contributes significantly more than the other, and how the court decides what is fair.

Background

Carol and Dale Smith married June 2002 and separated January 2018 with no kids and a mess of property and debt. Dale owned a piece of land on Racetrack Road in Grifton, North Carolina, before he married Carol.

While they were married, they purchased a lot and built what would become their family home on Persnickety Lane. To fund it, Dale sold stock he’d received from his grandmother, took out a personal loan, and used his Racetrack Road property as collateral for a home equity line of credit (HELOC).

Much later (just a month before they separated), Dale took out the full $49,000 from a different HELOC secured by the marital home on Persnickety Lane in December 2017, and moved the money into his personal bank account.

The Decision at Trial

One of the claims Carol filed for after the separation was equitable distribution. The trial court ended up splitting the marital estate, giving Dale a net of $217,189.44 in marital property and Carol a net of negative $7,499.20.

The trail court laid out three distributional factors to support the unequal division. The first being that the couple’s more liquid accounts had been used to pay off marital debt, the second being that Dale continued paying all expenses related to the home after separation (including the mortgage, insurance, taxes, and utilities), and lastly that Dale funded nearly all of the home’s construction with his own money.

There was also the issue of the property on Racetrack Road. In January 2019, both sides signed a stipulation saying that Racetrack Road was marital property, but in August 2022 Dale tried to get rid of that stipulation, saying he had signed it by accident. The trial court didn’t directly rule on the motion to set aside the stipulation, but in its final order it said that Racetrack Road was Dale’s separate property.

Carol Appealed the Decision

Carol argued that the trial court wrongly ignored the 2019 agreement and didn’t use the exact language from § 50-20(c) when it explained why an equal split wasn’t fair. She also said that some of the court’s most important findings didn’t have enough evidence to back them up.

The North Carolina Court of Appeals disagreed on most points and affirmed the trial court’s decision. The majority held that a pre-trial order signed just days before the hearing (where both parties acknowledged their disagreement about Racetrack Road’s classification) effectively superseded the earlier 2019 stipulation. In that later agreement, Carol said that the property was “mixed,” not just marital. The court agreed with the trial judge that the property was Dale’s separate asset.

What This Case Means for Divorcing Spouses

Equal doesn’t always mean fair, and fair doesn’t always mean equal. Courts look at many factors, such as who funded the marital home, who maintained it after separation, the liquidity of assets, and so much more to determine how things are distributed during divorce.

If your spouse contributed significantly more financially during the marriage, or if you’re the one who did, those contributions will be looked at by the court. Neither outcome is guaranteed, and a lot depends on the specific facts of your situation.

Are You Concerned about Equitable Distribution in Your Divorce?

If you are facing an equitable distribution dispute in your divorce in North Carolina, Woodruff Family Law Group can help you understand your rights and protect what you have worked for. Contact our Greensboro family law team to schedule a consultation.