Month: September 2023

Separate Property in a Nutshell

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NC Gen. Stat. §50-20 defines marital property and separate property for purposes of equitable distribution, the division of marital assets in North Carolina. Marital property is generally property either of you acquire during the time you are married and live together, so long as the property exists when you separate. There are certain distinctions concerning assets and debts during the time period after spouses separate. A case can become quite complex because there are also assets that can be mixed, being partly marital and partly separate. If debts for an asset were paid with marital money, for example, the asset might be mixed in nature. This article focuses on assets that are purely separate property.

Legal Definitions

Separate property is property you acquired before you got married. This applies not only to personal property, such as a vehicle, but real property as well. If you can prove an asset was one you inherited, it will be your separate property. A gift to you alone, not to you as husband and wife, is separate property as long as the gift is not from your spouse. In a peculiar twist, the statute says if your husband or wife gives you a gift while you are married and living together, that gift is marital property and not your separate property, with one exception. If your spouse says the gift is your separate property when the gift is given, it will be.

Professional licenses and business licenses that cannot be transferred are separate property. For example, a law license or medical license is separate property. Do-It-Yourself definitions are sometimes called pre-nups or pre-nuptial agreements.  Valid signed pre-marital agreements can be used to substitute an agreed-upon definition of separate property that is different from the definition used in the statute. Such an agreement can define separate property by title, meaning the spouse who bought an asset in his or her sole name while married and living together owns it as separate property. Similarly, people can agree who keeps what in a separation agreement, which is also a contract.

Do-It-Yourself Definitions

Sometimes called a pre-nup or pre-nuptial agreement, a valid signed pre-marital agreement can be used to substitute an agreed-upon definition of separate property that is different from the definition used in the statute. Such an agreement can define separate property by title, meaning the spouse who bought an asset in his or her sole name while married and living together owns it as separate property. Similarly, people can agree who keeps what in a separation agreement, which is also a contract.

Going Through Your Case with a Fine Tooth Comb: Appeals in North Carolina

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Judges sometimes make a ruling the day of court, perhaps after a child custody case. Other times, they take the case “under advisement” which means the judge is not prepared to make a ruling in court. Instead, the judge will consider testimony given by the witnesses, and sift through stacks of evidence and notes. Then, the judge usually makes a ruling by sending an e-mail to the attorneys or by putting a letter in their courthouse boxes.

You Don’t Like What Happened – Now What?

To appeal the ruling in your case, there must generally be some error in the way the judge applied the law in the case. If the judge ruled on the disputed facts in a case, the ruling is about the facts of the case, not the law. The judge decides the facts when there is a ruling that a person did something, or did not do something when there is a “he said, she said” situation. There are strict time limits for you to appeal, limits that begin on the day the order is officially filed. Temporary rulings are not typically eligible for appeal because they are later replaced by permanent orders entered when the entire case is done. At that time, the judge may choose to adjust the ruling to account for anything he or she feels should be addressed since the time the case was first filed.

Where Does Your Case Go and Who Handles It?

At the trial level, North Carolina family law cases are tried in District Court, the same court that handles traffic matters or misdemeanor criminal matters. Appeals from the trial court are heard by the North Carolina Court of Appeals in Raleigh. In rare cases, family law cases are then appealed to the North Carolina Supreme Court. Some family law attorneys handle appeals but many do not. There is a completely different set of rules and procedures for appellate cases. Such a case can easily take a year or two for the appeal to be completed. The appellate court will affirm (uphold), reverse (overturn) or remand (send back to be tried all over again) the trial court’s original ruling.

What Does All This Mean?

Any appeal takes a long time to wind through the system, just as a trial case does. And just like the lower court trial, an appeal is expensive and the stakes are high. In Eastern North Carolina, the cost of appeals makes them out of reach for many people. The trial level ruling is extremely important. Appeals are not the only option. If both parties agree, they can participate in alternative dispute resolution such as arbitration. If they participate in arbitration, they essentially hire a qualified decision-maker to make the decision for them.

How Long Will My Case Take?

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The time it takes depends on several factors, including which attorney your ex hires, how ready you are (or the other person is) to get the case resolved, and of course, how many things are disputed. People’s emotions can come into play as well, especially if one person wanted to separate, but not the other person.

Negotiation process

If you choose to negotiate through your attorneys, the attorneys will need paperwork from clients to determine the incomes and, sometimes, living expenses if you are negotiating child support or spousal support. Your attorney will also need documents from you to identify and value the assets and review the outstanding debts. The negotiation process can take as little or as much time as it takes to reach a mutual agreement. It does take some time for all parties and attorneys to get all of the appropriate documentation and correspond with each other or meet to attempt settlement.  No lawsuit is required to participate in child custody mediation, financial mediation, arbitration or collaborative family law.

Trial process

While each case is different, the usual case that becomes a lawsuit involving property, custody and child support, and perhaps alimony, takes about a year if it is tried in court. At least, that is the goal of family court.  There are several phases of litigation.

A document called a complaint generates the lawsuit.  Once it is filed and served on the other party, he or she will generally have 60 days to file an answer and any counterclaims if he or she files a request for additional time.  The party who filed the complaint will then generally have up to 60 days to file a reply to the counterclaims, assuming an extension of time was filed.

Court hearings for temporary matters, such as temporary child support, are usually scheduled for a date that falls 2 or 3 months after the date the complaint is filed. Next is mediation, which the court requires before any hearings on permanent relief are scheduled to be tried by a judge in the courtroom.  If the case is not resolved by mediation, there are many strategic things that can take time, such as depositions, appraisals and discovery. The trial itself will often take several days, and after that, the entry of the order may take a month or two.

We’re Splitting Up: What About the Pets?

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Like many people, I have a cat. Okay, maybe I have a couple of cats. They sleep most of the time but they are warm and fuzzy and do something that makes me laugh on a daily basis. They are both orange and I have a habit of referring to them as the twins. Today,  many people think of their dog, cat or other pet as a family member. These pet owners often have more than one pet.

What Happens to Pets When There’s a Separation?

In North Carolina, pets caught in divorce generally are considered personal property and the court has the same authority to distribute them to a spouse or former spouse in the same manner as a coffee table. When there are children in a separation or divorce, the court must consider only what is in the child’s best interest when determining who has custody of that child, regardless of what the parents want or need. In contrast, when the court determines which person will keep which pet, there is no legal requirement that the judge base his or her decision on the best interest of the animal. Moral or ethical standards are not necessarily the same as legal requirements.  In marital property cases, judges will assign a value to an animal and grant ownership of it to one of the parties as he or she sees fit.  The reasons a judge has for ruling on who keeps a pet are his or her own, made in his or her discretion.

Legal Trend

There is a trend in the legal world towards animals having a meaning greater than the coffee table or some other piece of property, even if the trend starts with baby steps.  In child custody cases, a judge may require the pet to go back and forth with a child for visitation at each parent’s home, which is presumably done because that would be in the child’s best interest. North Carolina has created very specific legislation to allow the court to consider the pets when there is domestic violence in a family, even where there are no minor children. NC Gen. Stat. §50B-3 says the court may “Provide for possession of personal property of the parties, including the care, custody, and control of any animal owned, possessed, kept, or held as a pet by either party or minor child residing in the household.”

Options?

Most of the time, people can reach some agreement about who keeps the dog or the cat. It is uncommon for people to leave it to the judge to award a pet to one spouse or the other.  But what can pet owners do to resolve these disputes based on what they think is in the pet’s best interest?  If both people agree, they can enter into a contract concerning their pets. They can specify where the animal(s) will live or be pastured, set aside regular visitation times for each person to see the pet, and even arrange for the costs and medical care. The great thing about a contract is people can customize it to fit their needs instead of relying on a judge and the law.

What is a Separation Agreement?

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A Separation Agreement and Property Settlement is a voluntary contract between a husband and wife of ex-spouses. It may be signed no sooner than separation, and may be signed at some later date, even after the parties divorce. The parties can settle some or all of the issues, including child custody, spousal support (alimony), child support, and division of marital property and debts (equitable distribution). The laws are written to encourage settlement instead of litigation. Therefore, a properly drafted separation agreement is extremely difficult to change or void.

What Things Can We Include in the Agreement?

Because they are contracts mutually agreed upon, separation agreements can include just about anything. One of my favorite war stories involved a case where we agreed on horse custody and visitation. We even included terms for which farm the horses would stay and whether each “horse parent” would be entitled to allow future romantic partners to ride the horses. That type of outcome will never happen in court. In our state, horses are legally treated as personal property no different than a television or set of china.

Express Lane: Is There a Form I Can Use?

Even some attorneys who don’t handle family law cases, or just  dabble in family law, do not realize there is no “boiler plate” form.  In fact, separation agreements are popular because they can be customized to whatever terms agreed upon by the parties. Imagine going to a mechanic and asking for “the standard repair.”  All cars have tires and a steering wheel, but a Corvette and a VW Bug don’t call for the same repairs.  It is no different with attorneys who draft separation agreements. Some are very complex, but others might not be.

While separation agreements do have certain magic words for the more routine things, such as jurisdiction of the court to interpret the agreement for example, a good attorney will address dozens of other issues specifically. For instance, the agreement might include a disclosure paragraph that dictates whether the parties are obligated to tell each other about hidden assets, inheritance rights, or address certain significant tax consequences.

Buyer’s Remorse: Enforcement

Separation agreements can be written to spell out the types of enforcement mechanisms that will be used if it is violated. The agreement may be treated like a contract, which is enforced by a lawsuit based on breach of contract. Other times, the agreement may be drafted to become a court order at some later date, enforced directly by the court. The agreement can say that violations will trigger certain consequences. Or, it may dictate when and how child custody and/or support lawsuits can be filed at some later date. All of these enforcement options are another example of ways attorneys draft agreements based on each client’s specific needs and priorities.

Free-Trader Agreements in North Carolina

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When a married couple separates, if they can reach an agreement on all of the issues between them, they may choose to sign a separation agreement. A separation agreement is a contract that says how they have agreed to divide property and debt, how family support will be provided, if any, and what they will do about parenting time if they have children together. One of the usual terms contained in it is a free-trader-agreement (FTA). If there is no separation agreement, an FTA can be a short contract by itself.

What’s the Problem?

When married couples acquire a mortgage loan, both usually sign the promissory note, which means they both have a legal obligation to make mortgage payments. That’s pretty straightforward. But when only one spouse signs a promissory note, only he or she owes the money. To oversimplify the problem, if the home-owner dies before becoming divorced, the surviving spouse has no legal responsibility to make the mortgage payments. But regardless of the fact that a married couple is separated, as a spouse, the non-home-owner would still have certain inheritance and survivorship rights to the property.

Remedy #1 – Free Trader Agreement

Mortgage lenders regularly require separated parties to sign an FTA, which is an agreed-upon right for each spouse to buy (i.e., trade) freely (i.e., without interference from the other) before they lend money to buy a home. The mortgage company will own the home if they foreclose on the loan. They don’t want to share ownership of the home with the other  spouse who isn’t even obligated to make mortgage payments. The purpose of an FTA is make sure the non-buying spouse waives all claim to the house, including inheritance and/or survivorship rights.  These agreements clarify that either spouse is free to get a mortgage in his or her name individually, without the signature of the other spouse. FTAs are recorded at the office of the Register of Deeds, which makes them public record. With the agreement, the spouse buying the home has exclusive ownership of it (and the responsibility of paying for it) even though he or she is married. Like all contracts, both parties must voluntarily agree to sign it.

Remedy #2 – The Divorce

When a divorce decree is granted, the other person is no longer a spouse, so the mortgage lender no longer has the problem of an ex who is still a surviving spouse even if they were separated for some time when the home was purchased. However, in North Carolina, a spouse can’t even file for the divorce until he or she has been separated for at least one full year. When a spouse files for a divorce, it can take two to three months before the divorce decree is granted. When the other spouse refuses to sign an FTA, the only remedy is the divorce, which is nearly impossible to contest because it is based on a one-year separation.

 

Post-nuptial Agreements

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Marital contracts are signed by parties who choose to clarify what they desire to happen in various situations, instead of having issues decided in court.  The requirements for marital contracts are quite different.  Prenuptial or premarital agreements are subject to the Uniform Premarital Agreement Act, and only becomes effective if and when the parties marry. These agreements cannot address any future children and there are some restrictions about alimony.

On the other hand, separation agreements can generally only be signed after the parties separate, meaning they no longer live together. Separation agreements are made between people whose positions are clearly adversarial. These agreements are very broad and can include agreements on almost any subject matter, including alimony, equitable distribution and all matters related to children.

In between premarital agreements and separation agreements, there are post-nuptial agreements, which may be signed after marriage but while the two spouses live together. Post-nuptial agreements are still somewhat exotic, and they are more limited than a separation agreement. They cannot cover all of the subjects found in separation agreements. This is because courts have a public policy concern that these post-nuptial agreements interfere with the marital relationship while the spouses are in the same home. In those cases, the fear is that one spouse will manipulate the other so he or she will stay in the relationship. Contrast this with the notion that people who have already separated are on notice not to trust the other who is now not looking out for the person’s best interest.

 

What Are Divorce Papers?

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People frequently contact an attorney when they receive documents from an attorney or their ex. When someone uses the term divorce papers it can mean a variety of things. Although there are other possibilities, the overwhelming majority of people who receive what they call divorce papers have received one of two things: a proposed contract or a lawsuit. These two things are completely different, and anyone who receives divorce papers from an attorney (or the ex) should immediately consult with an attorney. The attorney will explain what the documents actually are, and advise you of your rights and responsibilities.

Separation Agreements

When spouses can agree about dividing debts and property, alimony if applicable, or child support and custody, they may sign a Separation Agreement and Property Settlement. Attorneys sometimes send a proposed Separation Agreement to the other party to see if there is room to negotiate an out of court settlement. A Separation Agreement is a contract, not a court order. Because it is a contract, a person who violates it can be liable for breach of contract. Contrary to what most people think, there is really not a “standard separation agreement” although there are several paragraphs that are almost always included in most separation agreements.

Like all contracts, the parties must agree to be bound by the terms of the contract, and properly sign or “execute” it and any related companion documents such as deeds or car titles. There is no way to force the agreement if the other person is unwilling to negotiate. No contract can create an actual divorce, which must always be granted by a judge after a lawsuit is filed, even if the divorce is uncontested.

Lawsuits

When people say they are going to get divorce papers that definition might mean they are filing a lawsuit and asking the court for any number of things. A lawsuit might be one for divorce after a separation of at least one year, an emergency domestic violence order, an order for alimony or child custody and support, or equitable distribution, which is the division of property and debts.

When there is no agreement on financial matters or issues concerning children, the only way to force a resolution is to file a lawsuit. In our state, divorce papers for a lawsuit consist of a complaint, which is the document that activates a lawsuit, and a summons. The summons gives the court jurisdiction or the right to order you to do something or stop doing something, like pay child support or divide property by signing a deed or paying a debt.

In family law cases, unlike criminal court, it does not matter if you are the plaintiff or the defendant. You will be asking the court to do the same things regardless of whether you file the lawsuit first. Lawsuits may or may not be related to the divorce itself, although a divorce operates as a deadline for certain claims. Unlike contracts, lawsuit documents must be “served” on the other person. Service is the act of a sheriff handing documents to you, or a few other alternatives. If you are served with a lawsuit, you have a specific deadline to respond. If you fail to act on the documents served upon you, or if you wait too long to act, you risk forever losing the right to file your claims or certain defenses.

Prenuptial Agreements (Also Known as Premarital Agreements)

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An engagement is a happy occasion. In the excitement about their wedding, people sometimes overlook the fact that marriage automatically changes your legal rights. These rights include inheritance rights, marital asset and debt rights, and alimony. In legal terms, these rights and responsibilities are called incidents of marriage, meaning the burdens or benefits of marriage.

What is a Pre-nuptial Agreement?

A pre-marital agreement, sometimes called a pre-nuptial agreement, is a contract between two unmarried individuals. It only becomes effective if there is a marriage. Otherwise, these contracts have no legal effect. Some people think it is unpleasant to discuss the subject of pre-marital agreements. But it is worse to wait, perhaps decades, to find out your gamble to roll the dice and see if you can avoid dealing with a pre-nup was unsuccessful? I tell clients a pre-marital agreement is like home owners insurance; you hope that you never need it, but after a fire (or in this case divorce/death) burns your house to the ground, you sure are glad you have it.

What Topics Does a Pre-nup Cover?

The statute[1] clearly says “[t]he right of a child to support may not be adversely affected.” Otherwise, couples are free to contract about alimony, property and debt, and even inheritance rights. These agreements are popular among people who have been married before, or people who have property, such as a home, when they get married. When people marry later in life, they usually want to protect their adult children in the event of their death or divorce.

A pre-nup can be as simple or complex as is necessary. These agreements are not usually boiler plate documents. Sometimes people merely want to clearly identify their separate property before they marry. Other times, someone may have substantial debts, such as huge on-going medical bills, and want to shield the other person from them. A common circumstance is when a wealthy person (sometimes at the request of his or her parents) marrying a person of modest means.

Why Have a Pre-nup?

Protecting property (i.e., their separate assets) is the most common reason for having a pre-nuptial agreement. Property you bring to the marriage may grow in value, such as retirement investments or a pension. Do you understand the impact of marriage is on these assets or debts?  Most people don’t realize it, but property may be mixed, meaning separate property someone brings to the marriage may become partly marital. No widow or widower wants to own property with their spouse, only to find out after his or her death, the property is now owned 50/50 with the adult children of the late husband or wife. This can be an unintended consequence of failing to properly plan events before marriage.

Estate rights may also be included in a pre-nup. If someone does not have a will, the state will determine who inherits the estate, and in what percentage. Having a will generally gives you the flexibility to name anyone you choose to inherit from, but without a prenuptial agreement, you cannot “disinherit” your spouse. Otherwise, without a pre-nuptial agreement, by law, a spouse cannot be ignored or left out. A pre-nup can set out the wishes of the parties in the event of their deaths, in any way they choose.

Alimony is another reason pre-marital agreements can be useful. There is no formula or guideline for determining the proper award of alimony a dependent spouse will receive in North Carolina. However, parties may choose to do so in a pre-marital agreement. For example, the amount of alimony may be awarded based on the number of years they remain married.

One spouse may want to avoid alimony altogether, and the other may want to be sure it is specifically included. For example, if you are young and anticipate being a stay at home mother (or father), think about the financial impact that would have on you.  After being out of the workforce for what may be years, it may be difficult to get back into the workforce, especially if you separated suddenly, or your spouse leaves you. Every year a spouse is not employed outside the home is another year he or she is not contributing to their social security retirement. One spouse may be giving up a career to move frequently if the other spouse is in the military or has other employment that requires frequent relocation. Think of your life 20 or 25 years from now, when you don’t necessarily have your whole life ahead of you.

The BIG Mistake

The biggest mistake I see people make is making this decision to have a pre-marital agreement prepared largely as an afterthought. It seems some people spend more time choosing the flowers for the wedding ceremony than thinking about their rights and how they are impacted the day that wedding ceremony takes place. This type of contract will have a major impact on your life, not only if you divorce or die, but even for a spouse who wants to get a mortgage in his or her sole name, without the other spouse’s signature, for instance.

Waiting until a few weeks or even days before the marriage to think about having a pre-marital agreement is a very bad idea. Don’t wait until the last minute to begin the process. Doing so tends to create a hurried and very basic document, which doesn’t include many details. A well drafted agreement that a client has plenty of time to review and ask questions about usually means people are free to enjoy the wedding without bickering about the terms of the agreement, in the midst of being distracted by hurried last-minute wedding planning. Remember, it is your life and failing to properly plan what happens if you separate, divorce or your spouse dies can lead to disastrous consequences. It is much better to consider these things now instead of waiting until a worst case scenario occurs. You will have to deal with the worst case scenario either way. Some pre-nups are just as complicated as separation agreements, and can easily take weeks or longer to prepare and negotiate.

Can We Share an Attorney?

No. Because fiancés are in love and are sharing a joyous occasion, it is difficult to explain that the matters in the agreement create a conflict of interest. An attorney may only represent one person. Usually, what is in your best interest is not in the best interest of the other person, who may be losing assets or alimony in the process. A good attorney is not looking just at the current situation, but years or decades away. In fact, that is the very reason you are entering into a pre-marital agreement, to avoid arguments with each other and family members in the event of divorce or death. It is better for the other person to have his or her own attorney instead of going through the process without an attorney.

Child Custody Evaluations in North Carolina: A Double-Edged Sword

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The vast majority of child custody cases are settled out of court.  Parents or custodians sometimes negotiate on their own with attorneys to reach an agreement. Another way an agreement in custody case can be resolved is by mandatory custody mediation where a neutral mediator and both parents meet in an effort to create an agreed-upon custody order.  The cases that fall outside of the vast majority and are litigated in court are the ones that are most complex. For example, it is difficult to “split the baby” when parents live in different parts of the country and both want to have primary custody.  That usually means that one parent will have most of the school year with the child or children, and the other will have most of the summer vacation. These are the types of cases in which parents often consider having a child custody evaluation performed.

What is a Child Custody Evaluation?

Performed by a psychologist, a CCE results in a written report that is provided to the court. The psychologist evaluator will then testify as an expert witness at the child custody trial. The exact details vary depending on what the expert is appointed by the court to do.  But the evaluator usually administers psychological testing, such a personality test called the MMPI-2, for each parent or guardian. The test results identify the strengths and weaknesses of each parent.  The evaluator typically reviews the medical and mental health records of the family members, meets with the family members separately and together to interview and observe them, and contacts third parties such as teachers or third parties who reside in the home. The evaluator might even do a home visit to each parent’s residence. Based on all of this, the CCE report will make recommendations about what is in the best interest of the child or children.

What Does the CCE include?

The CCE report will usually give the judge insight on what the child actually needs, as well as explain each parent’s parenting styles.  To over-simplify it in an example, if a child suffers from anxiety, he or she might need a very structured routine and one parent might be more decisive than the other.  There is usually a list of these sorts of conclusions, followed by recommendations, which almost always include a course of mental health treatment. That treatment must be referred to a third party professional because the evaluator psychologist is used only for court and is prohibited from treating any of the family members. Another recommendation might be for the court to assign a parenting coordinator, who is authorized to make minor decisions when the parents dispute what the custody order requires them to do. Recommendations are otherwise based on each family’s disputes and needs. These might include the frequency of phone calls with each parent, or who is better suited to make medical decisions if the child has serious medical problems.

What are the Advantages and Disadvantages?

If the report recommends a schedule or a parenting plan that benefits you, congratulations.  You now have a built-in expert witness testifying on your behalf. However, if the report favors the other parent, you are at a definite disadvantage. Overall, judges are inclined to accept the recommendations.  This is less about rubber stamping the report than it is about having an expert with a string of letters behind his or her name tell the judge why he or she should do what is in the report. Unlike a psychologist evaluator, the judge isn’t going to go to your house, give you a personality test, talk to your child (most likely) or observe each of you with your child. Instead, the judge is usually only getting to see you and the other parent for a few hours while you testify in your dress clothes. CCEs can be extremely expensive, and insurance usually does not cover them. One or both parties might choose to have an attorney depose the expert in a deposition, which adds significantly to the cost.  Judges often expect the parties to share the cost when they appoint the expert to perform the CCE.  After the trial, the judge has the authority to assign the costs for CCE, including reimbursement of one party by the other for the full cost, including the deposition and the expert testimony.