Divisible Property and Equitable Distribution

There are multiple classifications of property in an equitable distribution matter. Some of the terms for property are relatively well-known, like marital property and separate property, but there is also another type of property that is not as commonly understood – divisible.

What is Divisible Property?

The statutory meaning of divisible property is somewhat complex and includes multiple criteria that could qualify an asset or debt as divisible¹, including:

Property received after the date of separation but before equitable distribution
Passive income from marital property received after separation
Changes in marital debt, finance charges, and interest

Change in the value of marital or divisible property that occurs after separation may also be eligible for distribution.

Another key element of divisible property is the date used to valuate it for purposes of distribution. Divisible assets and debt are valued as of the date of distribution, unlike marital property, which is valued as of the date of separation. This can make a substantial difference in the monetary value of property, especially if a divorce proceeding takes years to resolve.

LLCs as Divisible Property

In Corning v. Corning², one spouse’s companies became the main focus of an appeal, with Plaintiff asserting that the trial court erred in its valuation and distribution of Defendant’s LLC and corporation. The trial court used the date of separation debt and the date of distribution fair market value to determine the value of Defendant’s LLC. Plaintiff argued that the debt as of the date of distribution should have been used for these calculations instead.

The Court of Appeals disagreed with Plaintiff due to the statutory element that requires a spouse’s post-separation actions that cause appreciation or diminution in value to be exempt from divisible property. Because Defendant was actively making payments on the LLC debt, which resulted in the change in debt value, this change was not considered divisible property for purposes of the valuation. Ultimately, the appeals court affirmed the trial court’s order in Corning v. Corning.

This case clearly shows that applying the law to an individual case is rarely straightforward. The Woodruff Family Law Group is familiar with North Carolina laws and how they can affect a myriad of divorce and equitable distribution matters. We have a highly qualified team of divorce lawyers with a diverse set of representation styles, and you are sure to find an attorney that is an ideal fit. Contact us today if you are looking for Greensboro divorce lawyers serving the Piedmont Triad area.

¹ North Carolina General Statute § 50-20.
² Corning v. Corning. 771 S.E.2d 633 (N.C. App. 2015).