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How Are Marital Assets Valued in Court?

How Are Marital Assets Valued in Court?

How Are Marital Assets Valued in Court? By Amy A. Edwards In equitable distribution marital property cases, the court has a legal duty to identify assets and classify them as marital, separate, divisible or mixed assets (part marital and part separate). Parties are always free to stipulate or agree that assets have certain values, but if they cannot, the judge must make the decision on what each asset is worth. What Does the Law Say About Value? For marital property purposes, the value of a marital assets is fair market value, “the price which a willing buyer would pay to purchase the asset on the open market from a willing seller, with neither party being under any compulsion to complete the transaction.”[1]  The court must use the net value of marital property, meaning the fair market value minus the outstanding debt at the time the parties separate. [2] If the court finds that a property is worth the same thing as the outstanding debt, the value is zero. Courts also assign negative values to assets worth less than the outstanding debt. New vehicles often fall into this category when the down payment is not substantial. Valuing Marital Assets is Mandatory Only if an asset, or part of an asset, is marital does the court then have to make a ruling on the value of it. It sounds like common sense but if neither of the parties presents evidence to the court of the value, the court cannot just make up a value. In one case[3], a couple owned a gas station, and the business was in the husband’s name. Although the wife proved that the business was established after marriage and before the separation, she failed to offer any credible evidence on the value of the business. The court must value an asset in order for it to become a marital asset. Therefore, the court had no choice but to award the business as his separate property.  Property Appraisers The most obvious way to prove the value of an asset is by an appraiser who has special skill and experience with the asset at hand. People frequently have appraisals performed for jewelry, real estate and antiques. Often, the appraiser is hired by one or both of the parties to prepare a report for the court, to be used during the trial. Appraisers value marital property and the increases in value of separate property when the non-owner says there...

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Forgive and Forget: Condonation in North Carolina

Forgive and Forget: Condonation in North Carolina

Forgive and Forget: Condonation in North Carolina By Amy A. Edwards Judges have a good deal of leeway in deciding what to do about marital fault and defenses when they are proven in court. Traditional sex roles are rapidly changing in some ways but not in others, and judges react differently to the behavior that constitutes marital fault. Some think fault is very important, but others do not. Marital fault relates to alimony, not equitable distribution, which is the division of marital property. What Are the Marital Fault Grounds? A spouse commits marital fault if he or she abandons the family, commits adultery, “maliciously turns the other out of doors” or “by cruel or barbarous treatment endangers the life of the other.” If a spouse “becomes an excessive user of alcohol or drugs so as to render the condition of the other spouse intolerable and the life of that spouse burdensome” that is also marital fault. The last ground of marital fault, known as indignities, is a catchall for bad behavior generally. It occurs when a spouse “offers such indignities to the person of the other as to render his or her condition intolerable and life burdensome.” NC Gen. Stat. §50-7. Consequences of Marital Fault Marital fault is not a requirement for alimony. But if someone commits marital fault, the judge can financially penalize the person receiving or paying support. In cases of adultery, the financially-dependent spouse who cheated cannot receive alimony, and the supporting spouse who is the bread-winner must pay alimony if he or she cheats. The policy is based on the historical tradition of an innocent dependent spouse who was left financially stranded by the other, who left for greener pastures with another romantic interest, for example. What is a Defense to Marital Fault? A defense means that you can be shielded from the consequences the marital fault that you committed. A defense excuses the bad behavior (i.e., the marital fault) and gives the spouse at fault a “clean slate” legally. From our example above, if you are an adulterous supporting spouse without the legal defense of condonation, you are automatically required to pay alimony. The only remaining questions at the point is the amount of alimony to be paid, and for how long. The Defense of Condonation Condonation, condoning bad behavior, is as a defense to a spouse’s marital fault. Black’s Law Dictionary defines condonation...

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Checklist for Hiring a Family Law Attorney

Checklist for Hiring a Family Law Attorney

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When Does Child Support Stop in North Carolina?

When Does Child Support Stop in North Carolina?

When Does Child Support Stop in North Carolina? By Amy A. Edwards Each state specifies the age at which child support ends. In North Carolina, NC Gen. Stat. §50-13.4 requires child support to be paid until a child is age 18 or graduates from high school, whichever is longer. Support may end sooner than that if a child becomes emancipated. There is a legal proceeding that allows a minor who is at least 16 years old to file seek a decree of emancipation from a judge. But most commonly, a minor is automatically emancipated when he or she marries or joins the military. Unless parents have agreed otherwise in a separation agreement or consent order, if parents have multiple children, support does not automatically drop by 50% when another child graduates or reaches 18, etc. Instead, child support is recalculated based on the child support guidelines and the remaining child or children if a parent files a motion to modify support. Ages 18 to 20 Support may last longer than age 18 or graduation if the 18-year-old is still in school after reaching age 18 but hasn’t graduated. In that event, child support continues until he or she quits high school, fails to attend school on a regular basis or make satisfactory academic progress towards graduation, or reaches age 20, whichever is first. “If the child is enrolled in a cooperative innovative high school program . . . then payments shall terminate when the child completes his or her fourth year of enrollment or when the child reaches the age of 18, whichever occurs later.” NC Gen. Stat. §50-13.4(c)(3). Past Due Support There is one big exception to the general rule. If a parent owes outstanding child support when the payments would usually terminate, the payments will continue in the same amount, to be applied to the outstanding support until the balance is satisfied.  Support from Grandparents When a minor has a baby, the grandparents have primary liability for the support of the grandchild. However, even though the parent of the baby is a minor child, he or she is secondarily liable for the baby’s support. The court determines the proper share of financial responsibility for the baby. A grandparent’s responsibility for child support ends for both the parent and the grandchild when the minor parent reaches the age of 18 or becomes emancipated. If only one of the baby’s parents was a minor...

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Free-Trader Agreements in North Carolina

Free-Trader Agreements in North Carolina

Free-Trader Agreements in North Carolina 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. It 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? Many couples own real estate when they separate. After time passes but before the divorce is granted, some people consider home ownership. 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 require parties to sign an FTA, which is an agreed-upon right to buy (i.e., trade) freely (i.e., without interference). Mortgage lenders lend money to buy a home that will be theirs if they foreclose on the loan. They don’t want to share any ownership of the home with the surviving spouse (who isn’t obligated to make mortgage payments). The purpose of an FTA is for the spouse who is not buying the home agrees to waive all claim to it, including inheritance and/or survivorship rights. Usually recorded on public record at the office of the Register of Deeds, these contracts clarify that the spouse buying the home has exclusive ownership of it, even though he or she is married. Because the FTA is a contract, 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...

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