Subscribe
Share
Share
Embed
A board-certified family law attorney, Jaime Davis and her guests provide information and tips for getting through a separation and divorce without destroying family relationships or finances. From marriage therapists and financial planners to private investigators and parenting coordinators, learn how to navigate divorce without destruction.
Jaime Davis - 00:00:05:
Welcome to A Year and a Day. I'm Jaime Davis, board-certified family law attorney at Gailor Hunt. On this show, I talk with lawyers, psychologists, and other experts with the goal of helping you navigate divorce without destruction. In this episode, I'm talking with Melissa Essick board-certified family law specialist and fellow family law attorney at Gailor Hunt. Melissa has significant experience handling complex equitable distribution matters, and she is joining us today to talk about equitable distribution, including some common misconceptions. Thanks for joining me, Melissa.
Melissa Essick - 00:00:39:
Thanks for inviting me.
Jaime Davis - 00:00:41:
So Melissa, at a very basic level, what is equitable distribution?
Melissa Essick - 00:00:45:
So equitable distribution is the process of dividing your assets and your debts Um, while you're going through a divorce. That's very basic.
Jaime Davis - 00:00:55:
So are there certain types of property that the court will divide, or will the court divide all of the couple's property?
Melissa Essick - 00:01:02:
So the court is going to be dividing what we term marital assets and marital debt. And that means anything that was acquired during the marriage, from the date of marriage until the date of separation. That's going to be considered marital. There are a few exceptions though, and those exceptions could be inheritance if someone receives inheritance during the marriage or gifts during the marriage or any asset that you had prior to the date of marriage. So the court's really mainly looking at just the marital assets and the marital debts. And what they do there is they're going to first classify them as marital. And if they are marital, then they're going to value them and then distribute them to either party.
Jaime Davis - 00:01:39:
What are the key factors that courts typically consider when determining how to equitably distribute these marital assets?
Melissa Essick - 00:01:48:
Well, there are a long laundry list of factors that the courts can consider. So they're going to be looking at whether or not there might've been marital waste during the marriage. They're going to look at the age and the physical health and mental health of parties. They might look at one spouse's contribution to the other spouse's career. They could look at whether or not there are children, whether or not there's a need for the marital residence to be distributed to one or the other. A long laundry list of factors.
Jaime Davis - 00:02:17:
If one of the spouses has a significant separate estate, let's say that they came into the marriage with a lot of money, or perhaps they are the beneficiary of a trust or something like that, will that also be considered in the distribution?
Melissa Essick - 00:02:30:
Absolutely. That's one of the factors that the courts could look at, especially if there's a significant amount of investment incomes from that separate property. So, yes, that's one of them as well.
Jaime Davis - 00:02:40:
In your experience, are there any common misconceptions about equitable distribution that you often encounter among your clients?
Melissa Essick - 00:02:48:
I think, one of the biggest ones is title control. So a lot of people will come into our office and we're in a consultation and they talk about, my money or her money or my income and their income. And they think if it's in their account and an individual account in their individual name, that it's their money. They don't realize that title does not control. So it can be an individual accounts. It can be an individual retirement accounts or joint accounts, but anything that was acquired during the marriage, it's really the source and the timing. And so if it was acquired during the marriage, earned during the marriage, it's going to be considered marital no matter what the title states.
Jaime Davis - 00:03:25:
Yeah, I hear that a lot. And, you know, I often say to my clients, well, did one of you earn it from working while you were married? And they say, yep, sure did. It's in my bank account. And I was like, well, actually, that's marital property.
Melissa Essick - 00:03:35:
Right, exactly. And some of them are happy to know that and some of them are not.
Jaime Davis - 00:03:38:
I guess it just depends whose account is bigger. Exactly. Do you think about when the property is valued? Do you think there's ever any misconception about what the court is going to do when it values the property?
Melissa Essick - 00:03:50:
Yes. The court values the property as of the date of separation. So I kind of tell my clients to think about it as like a snapshot view of what assets and debts did you have at that time. There's other things to consider though. And so if assets are earned passively, so if there's passive growth on assets from the date of separation to the date that the assets are distributed, the court obviously is going to view them and classify them as marital as well. And so you really have to look at from the date of separation until the date of distribution, how were those assets acquired?
Jaime Davis - 00:04:24:
And so when you talk about passive growth, are you talking about like, for example, changes in a brokerage account because of the market fluctuation?
Melissa Essick - 00:04:32:
Absolutely. Yes. If there's a brokerage account, a retirement account, we could also be talking though about appreciation of real property that could be passive, assuming there's no significant improvements that would change the actual appraisal value. But if it's just, because the real property appreciated, that also would be passive.
Jaime Davis - 00:04:50:
Yeah. In this market, that's been a big issue in a lot of my cases.
Melissa Essick - 00:04:53:
It has. Typically, we can get one appraisal as of the date of separation, and it's pretty spot on, even if it's three, six months later. But in this market, we actually have, in my cases at least, I've been encouraging people to get appraisals even after three or six months because of the change in the market.
Jaime Davis - 00:05:09:
Oh, yeah. Especially if they've been separated for a long time. I mean, you know, as most folks know, you do have to be separated for a full year and a day before you can get divorced. And so, if your property is pending with the court but hasn't been settled by the time you get divorced and it's been over a year, you probably are going to want to think about a second appraisal.
Melissa Essick - 00:05:26:
Yes, absolutely.
Jaime Davis - 00:05:28:
So what about marital misconduct? I get that a lot too. You know, somebody will come in and say, hey, my spouse cheated. Do I get everything?
Melissa Essick - 00:05:36:
Right. I want to take them to the cleaners. Really, adultery only comes into play with alimony. In North Carolina, for equidistribution purposes, we're a non-fault state. And so presumably everything is going to be divided 50-50. That's what's considered presumably. Quote, Fair. It can be a factor if there's economic influence on the adultery. So for example, let's say that a spouse purchases a car for their girlfriend or boyfriend, and it was $10,000. Normally that wouldn't be considered as part of equal distribution. But in this situation, because it's financial, the other spouse can ask to kind of claw back that money and kind of repay the marital account because it was used for a non-marital purpose, not for the benefit of the marriage.
Jaime Davis - 00:06:25:
Right. Like even though the money is technically gone, it's like you can credit that person with having already received it, which means that you would then get more of something else to make up the fact that they already got that money.
Melissa Essick - 00:06:37:
Right. Like an advancement, so to speak.
Jaime Davis - 00:06:39:
Yeah. That's a good way to think about it. And it's not just adultery, right? Like, there's other kinds of marital misconduct. I mean, maybe somebody has a gambling addiction or a drug or alcohol addiction, and they're spending significant amounts of the marital money on these things that you didn't know about. I mean, you can absolutely make an argument, at least, that this money should be credited back to the marital estate, as we say, and that it should be considered that the other person already got it.
Melissa Essick - 00:07:05:
Right. And that's one of the factors. I didn't state that earlier, but that is another factor that the courts can consider that's in the statute, is whether or not there was marital waste on one party or the other.
Jaime Davis - 00:07:16:
So what happens, I think this is another misconception, if coming into the marriage, let's say somebody had $100,000. It's their separate money. It's in an account just in their name. But they and their new spouse decide that they want to buy a house together, and they do. And the person uses their $100,000 as part of the down payment. And then when they buy that house, they title it to both spouses jointly. That person get their money back if they get separated?
Melissa Essick - 00:07:43:
I think people are most surprised to learn that in North Carolina, if you use your separate assets and you use it as a down payment and you title the house jointly, tenants by the entirety during the marriage, that that is presumably a gift to the marriage. And it could be a factor that the courts could consider when determining whether or not to award an unequal distribution. However, I've never seen a scenario in which someone gets a hundred percent dollar for dollar credit back for that money.
Jaime Davis - 00:08:12:
Right. So, I mean, technically it is a rebuttable presumption, right? That it's presumed you've made this gift to the marriage. I mean, I guess if there's a case where there is some writing where it's like, and both people have signed it that says, I acknowledge you're using your separate $100,000 for the house. And if we get separated, I intend for you to get your $100,000 back. I mean, I think that would be some evidence to rebut that presumption, but I agree with you in most cases. That's not going to happen. And the only way to try to get any of that money back is to ask for an unequal distribution.
Melissa Essick - 00:08:45:
Right, right. And— I think it's very unusual that we see that happen. And a lot of people will say, why isn't that something that I knew before I got married? Or why isn't that something that, you know, that more people know about? And, and yeah, that's. That's why it's a misconception.
Jaime Davis - 00:09:02:
Well, and what's even crazier, and who knows if this is true or not, and I hear it less and less these days than I used to, but I'd have folks come in and say, well, the closing lawyer told me I had to put both names on the deed. And I'm like, well, technically you didn't, but that's also an issue.
Melissa Essick - 00:09:19:
Yeah, that's what I explained to them too. I'm sure they needed you to sign the deed of trust, the security instrument, but you don't have to be on the deed itself. But I think people confuse the term deed and deed of trust.
Jaime Davis - 00:09:28:
Yeah, I agree. All right. So when the court is thinking about, and again, we're talking about going to court because that's what folks are left with if they can't agree. But in all of these cases, these issues can be resolved by a separation agreement. But, in the event that they can't and we're left going to court, is the court going to divide each individual asset 50-50? Or is the court going to look at the total of the assets and try to make sure everybody gets an equal amount?
Melissa Essick - 00:09:57:
Well, it depends. I think there are certain times where an in-kind, that's the term that we use a lot, is an in-kind distribution. And sometimes that's the easiest way to do it. For example, a retirement account. Where after the date of separation, someone has continued to contribute assets to that account. And so it's difficult to determine what's the passive growth, what is the contributions, what's any active, if there's movement in that account. And so sometimes they'll do an in-kind distribution for retirement accounts especially. But most of the time, we think about this as like a big spreadsheet. And we put all of the assets and the debts in one column. We have husband's column and wife's column. And then you can distribute what assets to which party. And at the end of the day, we look at the total. And if one's more than the other, that person's going to owe the other person what we call a distributive reward to equalize the entire marital estate.
Jaime Davis - 00:10:47:
And so typically when those assets are being divided, do you put the retirement accounts in the same mix with the house, the bank account, the cars, and those sorts of things?
Melissa Essick - 00:10:55:
I do not because of the tax implications associated with the retirement assets. It's very different than cash in hand and a checking account is very different than retirement assets because once you liquidate those retirement assets, you're going to have to pay taxes on it. The good news is in the divorce process, you can transfer retirement funds from one party to the other without any tax implications. It's just a transfer and we do it by qualified domestic relations order. And you can transfer those assets to the other person, no tax implication until that person then later withdraws those funds.
Jaime Davis - 00:11:29:
Right, and then those tax implications are on the person that withdrew the money, not necessarily on you who rolled the money to that spouse, right?
Melissa Essick - 00:11:36:
Exactly. And there's no 10% penalty because if you liquidate your retirement, I think it's before 59 and a half. If you liquidate that, typically there's like a 10% penalty. Again, with a divorce, you don't have that penalty.
Jaime Davis - 00:11:49:
Yeah, and I think that depends too on the timing. So absolutely consult with the CPA if that's something that you're thinking about doing because we're just lawyers. We can't really talk to you about tax consequences.
Melissa Essick - 00:11:58:
That's exactly right.
Jaime Davis - 00:11:59:
What about inheritances? Like, are there any misconceptions about an inheritance that one of the spouses receives during the marriage?
Melissa Essick - 00:12:06:
Well, inheritance is one of those exceptions that, you know, take it out of the marital classification. And so an inheritance is typically considered separate property of whoever is receiving that inheritance. The key, though, is being able to prove that. And a lot of the times I have clients that come in that have, let's say, for example, received $50,000 in inheritance, and they've co-mingled it with another account. If you can trace it, great. Again, title does not control. So if you can trace and show that this is the $50,000 that you inherited, then that's still going to be classified as separate. However, if you put it into that joint account, and you guys have continued to withdraw funds, transfer funds, contribute funds, and there's no way to know which asset is that, you know, which chunk is the actual $50,000.
Jaime Davis - 00:12:55:
What money came out first when you were spending it?
Melissa Essick - 00:12:58:
That's right. That's right. And so in that situation, you know, the inheritance could be classified as marital.
Jaime Davis - 00:13:05:
Is there any implication with like using, I don't know, money from a trust or money from inheritance to fund living expenses? Does that ever come into play?
Melissa Essick - 00:13:15:
Possibly. Sometimes if someone can show that it's regular and reoccurring and that they've actually throughout the marriage have used these funds and depended on these funds in order to, you know. Keep up their lifestyle, it could be considered income for purposes of child support or purposes of valid money. So you need to be careful there. What kind of precedent you're setting throughout the marriage.
Jaime Davis - 00:13:37:
Right. I mean, I always tell clients, if your intention is to keep your separate property separate, If you get an inheritance or a gift from a third party like your parents, you just really need to make sure you put that money in an account just in your name. And only move to a joint account what it is that you intend to use for a particular purchase or something like that.
Melissa Essick - 00:13:57:
Yes, exactly. That's the cleanest, easiest, safest way.
Jaime Davis - 00:14:01:
In your experience, what types of cases do you find to be the most challenging?
Melissa Essick - 00:14:07:
A lot of people would assume that it's cases with high net worth. And a lot of the times it's not. A lot of the times it's when people have a significant amount of debt or when they have with the marital estate, you know, only the marital home is the only equity or the only asset they really have. Because at that time, in those situations, there's no other asset to offset the equity in the home. And someone's forced to sell the home or forced to do some sort of refinance cash out, which with the interest rate these days, that can be very difficult and also can put you into a position where you're then no longer able to pay the mortgage. And so I find most of the hardest cases are cases with a lot of debt or where there's only one asset that controls.
Jaime Davis - 00:14:51:
Yeah, I agree with you. Those cases can be really tough to get resolved. I mean, when you're just dividing debt and you're trying to figure out who's going to take what debt, and, you know, there's barely enough money to go around anyway, and it certainly costs more money to run two households than it does one. I mean, what do you do with that? And what if they're joint credit cards? And we all know the credit card company wants to keep both people liable, but you really don't want your credit score affected by your ex-spouse. I mean, that can be a really tough case to get resolved.
Melissa Essick - 00:15:21:
Yeah, absolutely. And I've had some people that have come in to the office that just have decided that now's not the right time to separate and that financially they're not in a position that they can separate. I will tell you another difficult case or type of difficult case is when someone has been separated for a long time. Because as we talked about earlier, you're looking at the assets and the debts as of the date of separation. But we also consider what's going on between the date of separation until when you distribute. And so we got to look at passive gains. We're looking at contributions. We're looking at active efforts of the parties. And so, you know, if someone's been separated for five or six years, it just makes it significantly more difficult to trace assets and to ultimately get them distributed.
Jaime Davis - 00:16:05:
Well, and trying to figure out like, who has used what money since separation can be so difficult. I mean, if they're still using a joint account and people are still putting paychecks, you know, money they've earned since separation in that joint account. Well, that money is technically their separate money. And so, you know, is there a support obligation or should the other spouse have not been using those funds for expenses? I mean, it can get really tricky.
Melissa Essick - 00:16:27:
One of the. Longest cases I had, I think it was a seven-year case. It took us seven years. It was a situation just like that where they both continued to put their paychecks into a joint account. They both continued to use the money. And then, of course, when it's time to go to court, they're each pointing the finger at the other saying, he spent more, she spent more. And she's saying, well, I was able to spend more because you owed me support. And so you can imagine how difficult. That can be.
Jaime Davis - 00:16:55:
Right, yeah. I mean, lesson learned. Like, to the extent you can get these matters resolved sooner rather than later, it could be more cost-effective for you in terms of legal fees. And also just the headache, you know, of getting it done.
Melissa Essick - 00:17:09:
And the sooner I think that you can separate your assets, the better. Even if you don't have a formal separation agreement, a lot of the times people make agreements to, go ahead and divide the checking account and close the joint checking account. And they individually start their own moving forward after the date of separation, where it just makes it cleaner. You still may have arguments that someone wasn't paying sufficient support. Or someone was continuing to pay a marital debt that they need to get credit for. But those arguments are much easier to make than going back several years and tracing assets.
Jaime Davis - 00:17:41:
So we talked about how like, cases where there is a lot of debt, those cases can be very challenging. But, you know, on the other end of the spectrum, do high net worth cases pose any unique challenges in your experience?
Melissa Essick - 00:17:53:
Absolutely. A lot of the times, most of our high network cases involve some sort of business. It can be just a real estate holding business, or it can be someone self-employed. And anytime there's a business involved, it gets a little bit complicated because we have to get business valuations, and those can be expensive and those can be timely. Um, also issues with taxes, you know, with high net worth cases can be problematic. And so a lot of the times it's just, we have to get in third parties, um, to assist in the case, either CPAs or we have to get someone to, you know, that's a business evaluator to, to get involved.
Jaime Davis - 00:18:27:
Well, and two, if, you know, it's an executive that has some weird executive compensation, I mean, we get into stock options and RSUs and all of those things.
Melissa Essick - 00:18:38:
And whether or not they're transferable or whether or not they need to be held in trust.
Jaime Davis - 00:18:41:
Yes. So, that can complicate things as well.
Melissa Essick - 00:18:43:
Absolutely.
Jaime Davis - 00:18:45:
So earlier when we were talking about distributional factors, I don't know that we touched on these, but I sometimes get questions about, like, how do non-monetary contributions like homemaking or raising children factor into the ED process. And when I say ED, I mean equitable distribution.
Melissa Essick - 00:19:01:
Right. It is one of the many factors that you'll find in 50-20, which is the equitable distribution statute in North Carolina. And so, you know, the court recognizes the contributions of a homemaker, and they recognize the fact that, you know, but for the contributions that they were making at home and either with the home itself or with the children and raising the children, you know, a lot of people wouldn't be as successful as they are in their career. And so the court does put, you know, significant value on their contributions.
Jaime Davis - 00:19:33:
Well, and that actually makes me think of something else. So folks will sometimes ask about sweat equity. What does that get me, right? And kind of what I'm thinking about is let's say one of the spouses had a piece of separate real estate. Maybe they used it as a rental property or something, but the other spouse during the marriage, maybe he was a contractor and he went in there and did lots of improvements and kept the property up and maintained it, maybe even did the property management, right? Like finding tenants. I mean, is there any sort of credit for that type of work if the property is originally the separate property of the other spouse?
Melissa Essick - 00:20:07:
Yes. I mean, I think a court would be sympathetic to someone that was actually not only supporting, you know, indirectly, but directly supporting and actually increasing its value. I think that would certainly be given some significant wait.
Jaime Davis - 00:20:20:
Yeah, I mean, I think there we could maybe argue that it's like an active increase in the value of separate property and maybe even try to get some sort of marital interest in that property.
Melissa Essick - 00:20:29:
Yeah, and I think that is another factor, the contributions, you know, someone's contributions to someone else's separate asset. And so, yeah, I think the court would absolutely consider that.
Jaime Davis - 00:20:39:
We talked a little bit about marital debt earlier when we were talking about the more challenging cases. How are marital debts handled in the equitable distribution process, and what impact can they have on the division of assets?
Melissa Essick - 00:20:53:
They are divided 50-50, presumably, just as assets are. A lot of the times what happens, though, is the debt that you take on just offsets the asset. And so when we look at it as a whole, then it's just, you know, they're going to equalize the marital assets and the debts. But they're divided 50-50 just like an asset would be divided.
Jaime Davis - 00:21:13:
What if you just have a bunch of credit card debt? Like it's not secured by a car or house, but let's say, you know, the people have two or three pretty big credit card debts. What do you do with those?
Melissa Essick - 00:21:22:
It's really challenging if it's in joint names.
Jaime Davis - 00:21:25:
Yeah, absolutely.
Melissa Essick - 00:21:26:
Because obviously the credit card company is not going to allow you to remove the other person that's responsible, and they're not going to allow you to close the account. So the account remains open, and you're really just hoping that the other spouse does what they're supposed to do. You know, even if the separation agreement says, you know, husband is going to pay off the city credit card and indemnify and hold them harmless, you know, ultimately, if he doesn't. The credit card company still could come after wife, and certainly wife's credit could still be affected. And so I try to use assets, especially if there's a joint account, I try and use assets to pay off the joint debt so that everyone can kind of go clean and free whenever all assets and debts are distributed.
Jaime Davis - 00:22:11:
I don't know about you, but I get a lot of clients who come in and they say, well, I didn't know about the credit card debt. I didn't know my spouse was out spending money on whatever the things are. And so then I say to them, well, okay, well, let's look at those statements. What are they spending the money on? And it looks like it's just regular old living expenses, right? It's fast food, it's furniture, it's clothes, it's kid stuff. I mean, that's marital. It's marital debt. I mean, to be marital debt, the debt has to be incurred during the marriage for a marital purpose. And just because you didn't know they were using their credit card is not enough to make the debt not marital. And I think people are surprised to find that out.
Melissa Essick - 00:22:50:
I think so too, absolutely. Or even better when you've got someone that's spending it on something that's really individual.
Jaime Davis - 00:22:56:
Yeah.
Melissa Essick - 00:22:57:
A lot of like golfing trips, for example, or there's someone that's going to the spa a lot.
Jaime Davis - 00:23:03:
Lots of skincare.
Melissa Essick - 00:23:03:
Lots of skincare, vitamins. Those are the ones I think that surprise most people because they say, well, that didn't benefit me. I wasn't going on the golf trips. I wasn't getting my massages. Well, it's still for the benefit of the marriage in those situations. There are cases where it's not, obviously. And I think we talked some about that. But if someone has some substance use disorder or if there's a situation of gambling or something like that, But most of the time, If it's acquired during the marriage, we can find, or most people can make an argument that it should be marital.
Jaime Davis - 00:23:36:
And going back to your spreadsheet example earlier, you know, practically speaking, where did the debts go on the spreadsheet? And how are they, you know, figured in on that spreadsheet?
Melissa Essick - 00:23:49:
I like, some people do it differently, but the way I like to do it is I like to net out the asset. So for example, if you've got a vehicle that's valued at $50,000 and you've got a vehicle loan for 20, I like, you know, in my mind and on my spreadsheets classified as the fair market value is 30 because I net it out. But there's lots of different ways to handle it. But I normally just tie it to the asset that it's, if it's secured debt, if it's unsecured debt, then it just depends on, you know, whose name it's in and who it's going to be distributed to.
Jaime Davis - 00:24:17:
And then at that point, they're just getting a negative number in their column, which is just going to reduce the amount of property they're receiving so that they need to get more of something else to help make it equal with the other person.
Melissa Essick - 00:24:27:
Exactly.
Jaime Davis - 00:24:28:
How do prenuptial and postnuptial agreements influence the equitable distribution process? And what should individuals consider when entering into these types of agreements?
Melissa Essick - 00:24:40:
Typically, prenuptial agreements will have a waiver of equitable distribution. And in the agreement itself, it will specify how you classify separate assets, how you classify marital assets. And if something is classified as a marital asset, the contract itself states how that asset will be distributed. And so you're not going through the courts. You're not going through the equitable distribution process at all. It just takes the court out of it.
Jaime Davis - 00:25:05:
I mean, the beauty of a prenup is you can basically rewrite Chapter 50, which is our equitable distribution statute, to fit your marriage. And, you know, you can define marital and separate to be whatever you want them to be.
Melissa Essick - 00:25:18:
Something that I see most often that our statute will not allow is a provision in a prenuptial that says income earned during the marriage is that party's separate asset. Because, you know, as we discussed, marital assets just by definition are anything that's acquired during the marriage. And so, income earned by one party or the other would be under equitable distribution, would be classified as marital. But prenuptial agreements, most of the time, have a provision that states that it's the individual parties.
Jaime Davis - 00:25:48:
So that's a great point. And a lot of the prenups that I see also have a provision that title controls what is marital and what is separate, which is the complete opposite of what the statute would do. You know, a lot of prenups will say if it's in the joint names of the parties, it's marital. But if it remains in the name of one of the parties, it's that person's separate property, which, again, is completely contrary to what the statute would do for you.
Melissa Essick - 00:26:11:
Right, exactly. But it's allowing each party during the marriage to make a conscious, intentional transfer. And so I think that's the purpose of it is to say, look, we're not going to have these accidental gifts to the marriage like some of our case law might state. But if you intentionally and purposefully title it in the other person's name, then that in of itself will be shown as the gift to the marriage.
Jaime Davis - 00:26:33:
But see, with that, I think you have to be careful if you are going to set yourself up to be a spouse who doesn't work outside the home. Because then if you have one spouse who is earning all of the income or 90% of the income and it's separate because your prenup says it's separate. And then they never deposited it into a joint account, you could be setting yourself up for a really tough situation in the event you separate.
Melissa Essick - 00:26:54:
Yeah, and sometimes prenuptial agreements will address that and have a separate provision. If there is one party that's going to be a homemaker, how is that handled? Are they somehow compensated in some other way in the event of a divorce?
Jaime Davis - 00:27:07:
So this episode is about equitable distribution, but I'm going to throw you a curveball, and I'm going to ask you about spousal support. How does the awarding of spousal support or alimony relate to the equitable distribution of assets. And what considerations should we take into account?
Melissa Essick - 00:27:23:
Well, in a perfect world, equitable distribution would be determined and decided prior to any alimony hearing if we were in court. And the reason being is because certain assets may generate significant income. And if they do, obviously that is going to affect someone's need or potentially someone's ability to pay. And so the court likes to look at what assets you hold and what income is being generated from those assets when determining what's needed for alimony. Our statute allows you to actually go back and revisit alimony. So in the event that you have an alimony hearing first, alimony is awarded, and then you have an equitable distribution hearing, property is distributed, you're allowed to go back and revisit alimony in the event that the distribution of your assets has significantly changed your need or your ability to pay.
Jaime Davis - 00:28:13:
Yeah, I think this is one of the unique challenges of a higher income, higher asset case. I mean, if you're talking about a multimillion dollar case and 50% of those millions are going to the dependent spouse, you know, those assets can absolutely generate income and can be used by the dependent spouse to help defray their expenses. And so then...
Melissa Essick - 00:28:34:
Even such that they wouldn't be classified as a dependent spouse.
Jaime Davis - 00:28:37:
Potentially, absolutely.
Melissa Essick - 00:28:39:
And I've had judges before, some judges will actually hear both equitable distribution and alimony at the same time because some of the evidence is going to be repetitive, basically, and duplicative. But I've had judges that say, absolutely not. You're going to try your equitable distribution case. I want an order in place so that I can rely on it when I'm looking and considering alimony because they don't want a situation where. We're coming back to court to revisit alimony. It's just a waste of the court's resources.
Jaime Davis - 00:29:04:
Well, and people's money in terms of attorney fees, quite frankly.
Melissa Essick - 00:29:07:
Absolutely.
Jaime Davis - 00:29:08:
For individuals going through a divorce, what practical advice can you offer to help them navigate the equitable distribution process and achieve a fair outcome?
Melissa Essick - 00:29:17:
I think the first step is just making sure your ducks are in a row. So go ahead and gather all of your financial documents. And, you know, some people are old school. Some people have everything is in, you know, in a file cabinet in their home. And if that's the situation, you need to go ahead and get that together and get copies of those before, let's say, someone removes them or before you move out of the home. And so I always tell people, you know, before you even talk to your spouse about separating, go ahead and gather your financial documents and get everything together. Because that's going to be the first step when you go meet with your attorney that the attorney is going to want. They're going to want those documents in order to analyze the estate and be able to advise you.
Jaime Davis - 00:29:54:
Well, and if you don't have a prenup and you came into the marriage with substantial assets, and let's say you're recently married, go ahead and get yourself copies of those date of marriage statements because most financial institutions don't keep records back farther than like seven years or so. And so if you get separated and divorced 25 years from now, you're not going to be able to send a subpoena to the bank for those statements. You're going to really be happy that you had them. So not that you necessarily need to keep every statement for every month that you're married, but at the very least, the ones from when you got married.
Melissa Essick - 00:30:26:
Yes, the ones from when you got married. And ideally, maybe even just like an end of the year statement. Because the end of the year statement will show rate of return for that year in the event that we're trying to calculate, you know, the passive growth on that date of marriage value.
Jaime Davis - 00:30:39:
Yeah, great point. And also, consult with a lawyer. You know, you don't necessarily have to hire a lawyer if you don't want to, but at least consult with one and get some very basic advice about equitable distribution so that you know what you'll be getting yourself into.
Melissa Essick - 00:30:53:
Right. I have a lot of people that come to consult with us that you know, we'll mention the term mediation. And the idea is that they're just going to go to mediation. They don't need to hire a lawyer. And... And that might be fine in some situations, but just remember that the mediator, him or herself, cannot give legal advice. So if you are going to go through the mediation process and you're not going to technically retain or hire a lawyer to go with you, consulting with the lawyer, at least at the very front end, to understand what your legal rights are and what the law would provide for you, I think is bare minimum.
Jaime Davis - 00:31:24:
Yeah, or even in negotiations with your spouse. I mean, there are plenty of folks who are amicable enough that they can try to negotiate some of these issues between themselves. But it could be helpful to kind of use the lawyer as a quarterback and to come to them with your financial documents and say, all right, this is what we've got. This is what I'm thinking about proposing to my spouse. What do you think? And just get some basic advice about whether or not it looks like a fair split of the property.
Melissa Essick - 00:31:48:
Absolutely. And, you know, some of the most expensive cases I've had are when people are actually trying to draw up their own separation agreement, their own legal document. And so, you know, even if the two of you are able to reach an agreement amongst yourself and you guys have a deal, I would encourage people to take that deal to an attorney and have an attorney actually draft the contract, the separation agreement to make sure that it is enforceable and binding.
Jaime Davis - 00:32:12:
Absolutely. Well, thank you, Melissa, for joining us.
Melissa Essick - 00:32:15:
You're welcome. Thanks for having me.
Jaime Davis - 00:32:22:
Thank you for listening. If you liked this episode, be sure to follow the show wherever you get your podcasts so you don't miss the next one. While this information is intended to provide you with general information to navigate divorce without destruction, this podcast is not legal advice. This information is specific to the law in North Carolina. If you have any questions before taking action, consult an attorney who is licensed in your state. If you're in need of assistance in North Carolina, you can contact us at Gailor Hunt by visiting divorceistough.com. I'm Jaime Davis, and I'll talk with you next time on A Year and a Day.