Category: The Court Process

Retirement as Marital Property

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Retirement benefits are often the most valuable asset a couple owns.  Pensions are essentially promises to pay the employee when the time arrives, based on a formula calculated on the years of employment and other factors. A defined contribution plan, like an IRA or 401(k), is an actual account containing various investments. It has an exact value at any given time. Retirement is intended to be used for income upon retirement, and there are severe tax penalties if you use or withdraw funds if you have not reached a certain age, on top of the funds being considered income.

Who Decides The Amount Each of Us Gets?

When a couple separates, they may choose to enter into a contract called a separation agreement, which usually resolves all of the marital property issues.  Yet another way to finalize the property is through mediation or some other type of alternative dispute resolution. You or your spouse may file a lawsuit for equitable distribution and ask the court to make the decisions about who keeps what.

The Nuts & Bolts

In North Carolina, as part of the claim for division of marital property (called equitable distribution), the retirement must be classified, meaning it will be considered marital, separate or mixed (part separate and part marital) property.  Next, a value must be agreed upon or ruled upon by the court.  CPAs or other financial professionals will give expert opinions when disputed, such as the exact value of a pension plan when the person has not yet retired. The court will also rule on the plan value for funds earned before the marriage, if any, and the value based on any funds contributed after the separation.  Matters become more complicated if there are required minimum distributions (RMDs) based on age after the separation, withdrawals after separation (thereby reducing the overall value), roll-overs or multiple companies managing the plan if the company has changed or been merged with other companies over the years.

How Are the Benefits Actually Divided?

When a pension must be divided, there is typically a court order directing the plan administrator to send two checks each month when the benefits are paid, one to you and one to your former spouse. This order is called a QDRO (qualified domestic relations order), or sometimes just a DRO, depending on whether the account is subject to a federal law called ERISA. For military accounts, a MPDO (military pension division order) is the type of court order that accomplishes a division of benefits. Done properly by your attorney, the division of benefits does not create a taxable event. Some retirement benefits, IRAs for example, are divided by a roll-over transferring a portion of the account to the other person’s account and the process is completed. Another consideration to take into account is how death benefits are assigned, and who any beneficiaries will be. If there are any outstanding loans against the account, the court or the parties must determine how that debt will be treated.

Financial Fault in North Carolina Property Division

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Traditional marital fault, such as abandonment or adultery, does not matter when the judge divides marital assets in North Carolina. Generally speaking, equitable distribution of marital property is strictly a math calculation, similar to a business transaction. There is a very strong policy for the courts to divide the marital estate equally unless there is some special reason why the marital assets are not equally divided. Although marital fault does not apply in property cases, the court may consider financial fault. When one spouse wants more than 50% of the marital property, he or she has the burden of proving a special reason or factor applies.

What Counts?

Sometimes, the same behavior that is considered marital fault is also coincidentally the same behavior that constitutes financial fault. Some of the special reasons (called factors) the judge can consider when deciding whether to divide marital property unequally based on financial fault include:

(1.)  Acts to maintain, preserve, develop, or expand marital property.

(2.)  Acts to waste, neglect, devalue or convert the marital property.

(3.)  Any other factor the court decides is just and proper.

Examples

A spouse can argue the first two reasons listed above would apply when the other fails to maintain and repair a residence or other property, changing title of property to someone else trying to conceal it, or mismanagement of assets. Another situation falling into the category is a spouse hiding debts and the unintended consequences that impact the other spouse. Spouses may find out too late that the other must file bankruptcy on joint debts, leaving him or her holding the bag for those debts, or that there are lawsuits that could result in judgments that may be liens on the family home in some cases. Another situation allowing a judge to consider giving one spouse more than 50% of the marital estate is when one can’t pay a marital debt and the other intentionally refuses to pay the marital debt, such as a mortgage, and perhaps choosing to let a home go into foreclosure rather than have it awarded to the other spouse.

The Catchall

The last reason above, labeled “any other factor,” can be anything the judge determines is important after hearing evidence from both sides. This is a catchall for a party to ask the court to divide the marital assets unequally. Although it is not specifically listed by the statute, gambling away substantial marital savings could be an example of financial fault. One North Carolina Court of Appeals case found financial fault when the wife removed truckloads of marital property from the marital home immediately before they split. Another case found it when the husband was in a bigamous marriage and had a secret family. When someone spends substantial money buying a significant gift for the person with whom he or she is having affair can be financial fault, as well as marital fault.

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.

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.

Hired Guns: Experts in Family Law Cases

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In cases of marital property, child support, alimony and even child custody cases, an attorney may advise a client to hire an expert.  In these types of cases, there are two types of experts, those who act as a consultant for the attorney and client, and those who testify in depositions or court as expert witnesses. Typical experts in family law cases include CPAs, business valuators, medical doctors or psychologists, appraisers or any number of professionals to shed light on the situation at hand.

Consulting Experts

When one or both parties are self-employed, a CPA might review the case and advise the attorney what the true income is. Income for support is usually quite different from incomes claimed on tax returns, even when the tax returns are perfectly legitimate. The IRS looks at the tax code at things like deductions and depreciation. However, the judge in a support case is looking at the true income available to a party, which might include non-cash compensation such as a company car or other expenses paid by the company. Appraisers are not just used to value homes, but for anything from jewelry and collections of guns, to paintings or baseball cards. Occasionally, both parties may reach an agreement on a value when the expert gives his or her opinion. Other times, there is no agreement on what the expert says, so a trial is necessary.

Expert Witnesses

Non-expert witnesses testify about facts based on what he or she has seen or heard, and cannot give their opinion on those facts. By contrast, an expert gives his or her opinion about something. Although there are many types of experts, all must have “scientific, technical or other specialized knowledge” to help the judge understand the evidence.  The expert generally has special skill, experience, training, or education. See Rule 702 of the NC Evidence Code.

For example, a psychologist may qualify as an expert to testify about what he or she believes is in a child’s best interest in a child custody case. The psychologist meets with each of the family members several times and performs psychological testing on them before he or she prepares a report for the judge known as a child custody evaluation. It is then given to both parents so their attorneys can ask the expert questions or cross examine the expert in court. Parents can request a child custody evaluation for any reason but they often request one when the child or parent has medical problems, anxiety, depression, substance abuse, or other mental health concerns. Expert witnesses may be chosen by agreement of the parties or one party may file a motion requesting the judge to appoint an expert by court order.

What is perjury?

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Perjury was deemed illegal by inclusion in the Ten Commandments, the first legal system, in Exodus 20:16. According to the Oxford Dictionary, the word perjury comes from the Latin word perjurium meaning false oath. In our state, perjury is defined as an intentional false statement under oath in court, in a deposition, or in matters the law requires a witness to be sworn.

Swearing or Affirming (Administering Oaths)

The person testifying in court swears to “tell the truth . . . so help me God.” Some people interpret the Bible as forbidding swearing.  As an alternative to swearing to tell the truth, a witness may choose to be affirmed. The oath is given exactly the same except that the word “affirm” is substituted for the word “swear” and the words “so help me God” are deleted. In our state, the law allows judges, clerks of court, notaries public and a few others to swear in or affirm a witness (i.e., administer an oath).

When Does Perjury Happen?

Most people know that when they appear to testify in court, they must tell the truth, the whole truth and nothing but the truth, but what does the rest of this definition for perjury mean and what are the other types of perjury? In a deposition, a witness is subpoenaed to a location outside of court to give testimony that will be typed up by a court reporter. Such a report may be used in court, and is treated the same way as courtroom testimony when it comes to perjury. Another way someone commits perjury is when the law requires something to be sworn. Frequently, this is when a statement is made in writing that is signed under oath, administered by the notary public. For example, in a lawsuit for marital property division or alimony, the documents filed at the courthouse require a notarized signature.

What Does This Have To Do With My Case?

The most important consequence of perjury is that it is a felony. NC Gen. Stat. §14-209 (as of the time of writing this article).  In fact, an attorney is an officer of the court who has taken an oath. When an attorney learns of the perjury, he or she has a legal duty to the court to immediately address it in court. The attorney may ask for a recess to speak to the client, or might have to make an emergency motion to withdraw as counsel, which indirectly tells the judge perjury is an issue. Aside from risking a felony conviction or your attorney making an emergency motion, your case is likely ruined.

People sometimes forget the judge hears testimony all day every day and is uniquely positioned to notice body language and other indirect or subtle signs of deception. Like judges, the attorney makes a living evaluating the truthfulness of a witness. He or she may cross examine you based on the lawsuit paperwork you have signed under oath. There may be a document or other proof he or she may ask you to read on the stand that is proof you are not being truthful. One consequence of untruthful testimony is that you lose your credibility and the judge will give the other party the benefit of the doubt. You lose.

 

What is a Deposition?

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What is a Deposition?

A deposition is essentially when a person testifies outside of a courtroom. The witness, who may be subpoenaed, is usually required to go to the office of one of the attorneys where a person called a court reporter also attends. The reporter prepares a written statement to be distributed to both sides. Each party must pay for a copy, which is usually charged at a rate per page, along with a sitting fee. The transcript prepared by the court reporter functions as sworn testimony.  It is sworn because the witness swears to tell the truth, the whole truth, and nothing but the truth. Rarely can anyone tell how long the deposition will last unless special arrangements have been made in advance by the attorneys.

Although the atmosphere is relaxed compared with the courtroom, the deposition cannot be underestimated. The written statement of testimony may be used for many purposes, one of which is court.  It can make or break a case.  Lawyers also get a preview of how the person will testify, and whether they seem to be credible or articulate. Like court, depositions are subject to many rules.  Most of the time, the objections must be addressed at the time of the trial.