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Victorialei
"Nohea" Naka'ahiki, RP
"My Greatest Challenge" |
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The greatest challenge I have had to date has been the transition from working
as a paralegal in a private law firm setting to working as an in-house
paralegal in a corporate setting. As a litigation paralegal working in large
private law firms for nearly 12-years, my work style has always been
quick-paced and constant, like the Energizer Bunny: always going, going, going.
Accustomed to working long hours (sometimes 7-days a week for weeks at a time),
and meeting an annual billable target every year, it has been very difficult
for me to break away from the workaholic mentality that most litigation
paralegals working in a large law firm setting can relate to. |
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Now working as a paralegal for a technology corporation, I have had to learn to
slow down and shift gears. Although I work closely with outside counsel and
still have an active role in the management and organization of cases, the pace
has been much slower than I am accustom to. No billable hours, no overtime, and
no weekend work has been required. Last minute rushes are rare. Having been an
in-house paralegal for the last four years, I’m still working on shifting my
gears. My natural litigation paralegal instincts are to run in high gear, and
go, go, go. The way I see it, until and if I ever return to the traditional
private law firm setting, my greatest challenge will continue to be the
transition from the Energizer Bunny to the easy-going GEICO Gecko. |
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EQUITABLE DISTRIBUTION AND THE PARALEGAL |
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A well-trained paralegal plays a vital role in an Equitable Distribution (ED)
case, from gathering and analyzing financial information, to preparing the
necessary court forms. For the paralegal to understand what information to
gather and how to analyze it, she must also know the underlying caselaw, and
statutes that effect the steps she takes in a case. Knowing the "why" behind
what a paralegal does furthers her ability to anticipate the attorney's needs
and prepare work product that is thorough and well drafted. This manuscript is
not intended to be a thorough discussion of the issues in an ED case, but
rather an overview. The paralegal should talk with their attorney for a more in
depth discussion. |
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In ED cases, the Court must classify (marital, separate or divisible) the
property, value the marital and divisible property and then fairly distribute
the property. Any order issued must have findings of fact showing that these
three steps have been considered. Stanley v. Stanley, 118 N.C. App. 311, 454
S.E.2d 701 (1995). |
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CLASSIFICATION OF PROPERTY |
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The first thing to know in an ED case is the statutory definition of the three
types of property. As set out in N.C.G.S. § 50-20(b), property can be
classified as marital property, separate property, or divisible property.
Property includes all assets and debts. |
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1) Marital property means all real and personal property acquired by either
spouse or both spouses during the course of the marriage and before the date of
separation of the parties, and presently owned, except property determined to
be separate property or divisible property in accordance with subdivision (2)
or (4) of this subsection. Marital property includes all vested and nonvested
pension, retirement, and other deferred compensation rights, and vested and
nonvested military pensions eligible under the federal Uniformed Services
Former Spouses' Protection Act. It is presumed that all property acquired after
the date of marriage and before the date of separation is marital property
except property which is separate property under subsection (2) of this
subsection. This presumption may be rebutted by the greater weight of the
evidence. N.C.G.S. § 50-20(b) (1).
2) Separate property means all real and personal property acquired by a spouse
before marriage or acquired by a spouse by bequest, devise, descent, or gift
during the course of the marriage. However, property acquired by gift from the
other spouse during the course of the marriage shall be considered separate
property only if such an intention is stated in the conveyance. Property
acquired in exchange for separate property shall remain separate property
regardless of whether the title is in the name of husband and wife or both and
shall not be considered to be marital property unless a contrary intention is
expressly stated in the conveyance. The increase in value of separate property
and the income derived from separate property shall be considered separate
property. All professional licenses and business licenses that would terminate
on transfer shall be considered separate property. N.C.G.S. § 50-20(b) (2).
3) Divisible property means all real or personal property as set forth below: |
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a) All appreciation and diminution in value of marital property and divisible
property of the parties occurring after the date of separation and prior to the
date of distribution that was acquired as a result of efforts of either spouse
during the marriage and before the date of separation and prior to the date of
distribution, except that appreciation of diminution in value which is the
result of postseparation actions or activities of a spouse shall not be treated
as divisible property. |
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b) All property, property rights, or any portion thereof received after the
date of separation but before the date of distribution that was 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. |
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c) Passive income from marital property received after the date of separation,
including, but not limited to, interest and dividends. |
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d) Increases and decreases in marital debt and financing charges and interest
related to marital debt. N.C.G.S. § 50-20(b) (4). |
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There are difficult areas in classifying property that can make the paralegal's
job (and the attorney's job) more complicated. What if the separate funds of
one party are used as a down payment to purchase the marital residence? What if
separate funds are used to purchase a jointly titled car? Should the property
be classified as separate or marital? Who has the burden of proof? The answers
to these types of questions are generally going to be found in caselaw. Without
an understanding of the attorney's approach to the case and why that approach
was chosen, the paralegal cannot efficiently do their job and gather the needed
information. The answers to the above questions regarding the purchase of
marital property, partially depend on how the property was titled and what
written instruments were executed at the time of purchase. If the property was
titled in joint names as tenancy by the entirety, the separate funds used to
purchase the home will be presumed to be a gift to the marriage. McLean v.
McLean, 323 N.C. 543, 374 S.E.2d 376 (1988). The party claiming that the
property is separate has the burden to overcome the marital gift presumption
and this can usually be done with a writing at the time of the conveyance which
expressly states that his/her separate contribution was to remain separate and
not be converted to marital property. This is important for the paralegal to
know so that she can work with the client to gather the documentation that the
attorney may need for the ED trial (outside of the Deed and the Deed of Trust). |
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Commingling of funds (separate and marital) is another complication in
classification. Separate funds in a marital account can remain separate
property if they can be clearly traced to a separate source of funds. Tracing
can be a difficult task, especially with a long-term marriage when the
documentation needed pre-dates the marriage. The person who claims separate
funds in a marital account or asset (acquired between the date of marriage and
date of separation) has the burden of proving the separate source of funds to
overcome the presumption that the asset is marital. Fountain v. Fountain, 148
N.C. App. 329, 559 S.E.2d 25 (2002). When the paralegal is aware that separate
funds in a marital account need to be traced with a paper trail, they can
better assist the client with gathering the needed evidence. If the paralegal
did not know that tracing separate contributions was an issue, she would most
likely only ask the client for the date of separation and current statements.
For this reason, regular communication within the paralegal/attorney team
during the document gathering phase of the case is crucial and can often save
time in the long run for both members of the team.
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VALUATION OF PROPERTY |
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Valuation of marital property is generally done as of the date of separation
(DOS), but since the passive gain or loss in the value of marital property is
divisible property, the paralegal must also collect information to show the
current picture. When looking at the value of items that are used as security
for a loan, the paralegal must use the net value taking into account amount
owed on the loan or mortgage. N.C.G.S. § 50-2 |
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c). Fair market value is the standard when valuing household goods and this is
simply what someone would pay today for the item (flea market or garage sale
value). Clients often to want to use the original purchase price or replacement
cost as the fair market value and the paralegal can help by talking the client
through this process and pointing them in the right direction to find the
documentary evidence they may need to prove the value in trial. For example,
telling the client to go to www.kbb.com or www.nada.com to find the trade-in
(not retail value) value for any marital vehicles is important. There are also
quite a few collector's manuals available at the library that may assist the
client in determining a value for any collectibles or artwork. The paralegal
and client should work closely with the attorney during the valuation phase of
any case. |
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DISTRIBUTION OF PROPERTY |
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There is a presumption of an equal distribution unless the Court determines
that is not equitable based upon the factors listed in N.C.G.S. § 50-20(c).
White v. White, 64 N.C. App. 432, 308 S.E.2d 68 (1983). N.C.G.S. § 50-20(c)
states the following: |
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"There shall be an equal division by using net value of marital property and
net value of divisible property unless the court determines that an equal
division is not equitable. If the court determines that an equal division is
not equitable, the court shall divide the marital property and divisible
property equitably." |
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There are numerous factors listed in the statute that the Court can consider
when determining if an unequal distribution is equitable, including, but not
limited to, the duration of the marriage and the physical and mental health of
both parties, the need of a parent with custody of a child of the marriage to
occupy or own the marital residence, the expectation of retirement benefits or
pension, direct or indirect contributions made by one spouse to help educate or
develop the career potential of the other spouse, the liquid or non-liquid
character of marital and divisible property, and tax consequences to each
party. N.C.G.S. § 50-20(c). The burden lies upon the party seeking an unequal
distribution to show the Court why an equal distribution is not equitable.
Armstrong v. Armstrong, 322 N.C. 396, 404, 368 S.E.2d 595, 599 (1988). |
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Gathering and Analyzing Financial Information
Interpretation and Use of Tax Returns |
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When requesting information in an ED case, the attorney/paralegal should
request the last three years worth of tax returns including, all attachments
and schedules. The attachments and schedules can show as much, if not more,
information than the tax return itself. When there is a business involved, make
sure that Schedule K1 is produced which show profit and loss from any business
the party will may own, as well as showing the depreciation of any property
owned by that business (i.e. computers, equipment, autos, etc.). Tax returns
may also show capital gains on any liquidated property, interest and dividends
earned on accounts, stock options exercised, and rental income earned. Pre-tax
income paid toward retirement accounts will also often be shown on the W-2
attached to the return. Be careful though, the tax return may not give the
complete picture of the items listed above, but it can be a good start to
determining what further documents may need to be requested from the other
party. |
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