In the United States, there are two ways property is divided in a divorce, community property division and equitable distribution. Community property division is the rule of law in the following states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

In a community property state, the rule of law is that both spouses own all income and assets earned or acquired during the marriage.  Both the husband and wife equally own all money earned by either one of them during the marriage, even if only one spouse worked. All property acquired during the marriage with "community" money is owned equally by both, regardless of who paid for it.   The same is true of debt, both spouses own an equal amount of any debt accumulated during the marriage.

All other states, including North Carolina, follow equitable distribution laws.

Read the North Carolina law regarding equitable distribution.

In equitable distribution states, when the spouses are unable to resolve property rights on their own, the Court determines what is a fair and reasonable for each spouse. It does not matter who bought the property - if it was purchased during the marriage it is considered "marital property" (property owned by both spouses). It is important to understand that equitable does not mean equal, however the law assumes that an equal (50/50) division of the marital property will be equitable unless factors exist to disprove that (see below for factors). Equitable Distribution states also recognize separate property, which is property that belongs to one spouse and not the other. 

 Separate property includes:

• Inherited Property (such as money or real estate);
• Property acquired prior to marriage (such as an engagement ring);
• Gifts to one spouse by a third person - Gifts from one spouse to the other are marital assets.

If an asset was acquired prior to the marriage and there is an increase in value because of work by the other spouse, the increase in value may be considered marital property, but the asset itself remains separate property.  Separate property can become marital property. For example, if it is used to benefit both spouses, it may then considered a gift to the marriage. Another important consideration in equitable distribution is retirement income, such as IRA's, pension plans and 401(k) Plans.

There are several factors the Court uses to determine what is equitable - among them are:

• How long the couple was married
• The age, physical and emotional health of each
• The income or property each spouse brought to the marriage
• The standard of living during the marriage
• Economic circumstances of each party at the time of division
• Income and earning capacity of each, including education and training
• Direct contributions to increased value of separate property
• Tax consequences for each party
• Present value of property
• Needs of the spouse who has physical custody of children
• Support obligations for prior marriage
• Expectation of retirement benefits which are separate property
• Expectation of retirement benefits which are marital property
• Liquid or non-liquid nature of property
• Difficulty in valuing interest in a business
• Conduct by one party that relates to the economic condition of the marriage - economic fault (see below)
• Any other factors which the court may deem relevant.
   

Behavior such as adultery, domestic violence, abandonment, alcohol and drug abuse is not relevant in determination equitable division of marital property. Even if a spouse admits to having engaged in all these behaviors, he or she would still be entitled to a 50% share of the marital property. Economic behaviors (economic fault) are relevant. For example, if a husband transfers marital property to his mistress immediately before separating from his wife, the law says this is economic fault, and this conduct is considered by the court in deciding on a fair division of property.

Read more about Equitable Distribution and retirement income.