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Legislative Actions

By Ertel Berry

A new category of marital property heads the list of family law reforms approved by the House last week.

The legislative package, which would also change the division of some pensions and rewrite the doctrine of necessaries, had to clear one chamber of the General Assembly to stay alive.

The measures introduced by Rep. Joe Hackney, D-Orange, carried the recommendation of the NCBA’s family law section (see Feb. 3 Lawyers Weekly). They must still by approved by the Senate to become law.

Among the proposals:

* Divisible property. If it clears the Senate, HB 533 would add divisible property as a new equitable distribution category. That would cover changes in value between the date of separation and the date of distribution.

The bill would also allow trial judges to consider valuations before and after the parties split and encourage interim distribution of the parties’ assets or debts.

Under current law, increases or decreases after the date of separation don’t count as either marital or separate property. They operate only as distributional factors.

“There was a gap in the original act,” said Hackney. “The Court of Appeals had filled it in by treating postseparation events as a factor that allowed the unequal division of marital property.

“But that created a very cumbersome procedure. With divisible property, things should function very smoothly.”

The reform bill requires the trial judge to divide marital property and divisible property, which is defined as all real and personal property of the following kinds:

* “All appreciation and diminution in value of marital property and divisible property of the parties occurring after the date of separation … except that … value which is the result of postseparation actions or activities of a spouse shall not be treated as divisible property.”

* “All property, property rights, or any portion thereof received after the date of separation but before the date of distribution that were acquired as a result of the efforts of either spouse during the marriage and before the date of separation, including, but not limited to, commissions, bonuses and contractual rights.”

* “Passive income from marital property received after the date of separation, including, but not limited to, interest and dividends.”

* “Increases in marital debt and financing charges and interest related to marital debt.

Subject to the general presumption that an equal division is equitable, the trial judge would also presume that an in-kind distribution of marital or divisible property was equitable, according to the bill.

That presumption could be rebutted by evidence that the property was a closely held business or wasn’t susceptible to being divided.

At any time after an ED claim was filed, the court could split a portion of the parties’ marital or divisible property, unless good cause was shown.

The amendments would become effective Oct. 1, 1997, according to the bill.

Necessaries Doctrine

HB 534 would limit the common law necessaries doctrine which holds each spouse responsible for certain debts incurred by the other, such as medical bills.

In 1996, the Supreme Court extended that rule to separated spouses in Forsyth Memorial Hospital, Inc. v. Chisolm, 342 N.C. 616, 467 S.E.2d 88.

The bill would overrule that case, stating that the doctrine doesn’t apply when spouses are living separate and apart, unless:

* The nondebtor spouse has willfully created the appearance of not being separated.

* The debt is for medical expenses and the nondebtor spouse carries medical insurance on the debtor spouse, “provided that the nondebtor spouse shall be liable only for the debt that is or will be discharged under the terms of the medical insurance.”

Other provisions of HB 534 would allow enforcement of child support obligations by transferring the obligor’s title to real property.

Alimony and post-separation support would also be enforceable by real property transfer, as well as income withholding, under the bill. Income withholding could not exceed the amount allowed under the federal Consumer Credit Protection Act.

This bill, if enacted by the Senate, would take effect on Oct. 1, 1997.

Nonvested Pension Rights

Nonvested rights under pensions, retirement plans and deferred compensation schemes would be counted as marital property under HB 535.

The marital property definition already includes vested retirement rights.

The bill states that the other parties’ cut could not exceed 50 percent, subject to several exceptions. Among them:

* Other assets subject to equitable distribution are insufficient.

* There is difficulty in distributing any asset or interest in a business, corporation or profession.

* It is economically desirable for one party to retain an asset that is free and clear from any interference from the other party.

* Both parties consent.

Contributions made after the date of separation would not be included in the award, according to the bill, which would affect ED actions filed after Oct. 1, 1997.

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