Two’s Company and Three’s a Crowd: Third Parties in Family Law Cases By Amy A. Edwards Family law cases can be contentious enough with two people, but when there’s a third-party, it gets even more contentious and complicated. Third parties occur most frequently when marital property is at issue, and when there is a custody battle underway. Third Party Rights Once a third-party is named as a party in the lawsuit, he or she is entitled to the same rights as the other named parties in the lawsuit. But in an equitable distribution case, those rights extend only to the asset. Third parties have the right to call witnesses to testify, perform depositions, serve discovery, file motions, present evidence to the court, etc. Equitable Distribution: Co-owners of Property Most couples own property either in their joint names together or individually. But sometimes, a couple owns assets with a third-party who is a co-owner (CO). For instance, when a couple purchases a home, the in-laws might co-sign the mortgage note so the couple will qualify for the loan. Since they share legal responsibility for the mortgage debt, the in-laws might then want their names added to the deed. When a spouse files a lawsuit for equitable distribution, the division of marital property, the court makes a ruling on ownership of assets and debts. In that scenario, four people would be COs even though the younger couple would be the only residents living in the home. The law requires COs to be joined as parties to the case so they can protect their ownership interest. If the third-party COs are not included as parties to the lawsuit, the court does not have jurisdiction over that property. In the recent Carpenter v. Carpenter, the NC Court of Appeals vacated a court order because the lower court made a ruling on an investment account without naming the child as a third-party because the child was listed as an owner of the account. In another recent case, Nicks v. Nicks, the same result occurred when there were ownership interests in a business, but the business was not joined as a third-party to the lawsuit. Child Custody Cases Both parents have a constitutional right to the care and custody of their children. When it comes to non-parents, third parties have a heavy burden to bear if they ask the court to...
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How Do I Get My Name Off the Mortgage? To answer this question, you must understand the basic definitions and differences between property ownership and liability for mortgage debt. These terms are easy to confuse because, very often, the same people who are joint owners are also liable for mortgage debt. Ownership: Deeds A deed is the document that most typically transfers ownership of real property. Other times, a Last Will and Testament or even court order will convey an ownership interest. Ownership may be conveyed solely to one owner of the property; other times ownership is conveyed to multiple owners, as is often the case when two married people own a home together. A deed means ownership of real property. Liability: Mortgage Debt Just because you are a joint owner of a residence doesn’t automatically mean you are also jointly responsible for the mortgage debt. There are occasions where only one owner is liable for the mortgage debt. When one of the property owners is self-employed, for example, the mortgage lender might approve the loan based only on the income of one spouse who has income that’s easily verified by a W-2 statement. If you sign the promissory note (i.e., the mortgage debt), you are responsible for repayment of the debt. If you didn’t sign the note, you generally have no responsibility to pay it unless there is a court order or separation agreement that requires you to pay it. Additionally, even if you did not sign a promissory note, you probably signed a document that allows the mortgage to be a lien on property in which you have an ownership interest. How Do You Remove Your Name? Let’s assume the property owners are married and they both signed a promissory note for the mortgage debt. If they sell the residence, the mortgage is satisfied (paid off) and neither spouse’s name remains on the mortgage. If one spouse keeps the residence, the other spouse will typically want his or her name “removed from the mortgage.” For our purposes, that means the spouse keeping the property will refinance the mortgage debt, acquiring a brand new mortgage debt in his or her individual name. When the new mortgage debt becomes effective, the old mortgage debt that was in both names will then be satisfied. If the mortgage debt is already in the sole name of the person who keeps the residence, there would be no...
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Businesses in NC Marital Property Division Cases By Amy A. Edwards In equitable distribution cases when the court divides marital property, a business ownership interest is an asset to be identified, classified, valued and distributed to (usually) one of them. Like any asset, it might be marital property or separate property and it may be distributed to either spouse if it is marital. The scope of this topic is very broad and cannot be fully addressed here. This article is a brief overview of the things experts, such as CPAs, might consider when performing a business valuation. Business Entity: What is the Structure? The way a business is organized impacts the value of it and the manner in which the business is taxed. Sole proprietorships are businesses owned and operated by an individual, created without filing any formal paperwork. Other businesses are created formally by paperwork filed with the NC Secretary of State. LLCs (limited liability companies) are more suited to ownership by an individual or a few people, and they usually require less paperwork. Corporations (designated with “Inc.”) are formal, and require special paperwork to be annually maintained, corporate officers to be elected and formal bylaws to be followed. Why the Business Structure Matters There is value added or subtracted from the value of a business based on many factors, including whether the business is publicly traded or owned by a few people as a closely held corporation (CHC). CHCs owners are often family members who sign buy-sell agreements that require the co-owners to give each other the first right of refusal if one chooses to sell his or her share of ownership. The ability of an owner to sell his or her ownership interest is key because market value is based on what a willing buyer would pay a willing seller. In CHCs for example, willing buyers might require that only a few people, such as family members or business partners, get the first right of refusal in the event a spouse wants to sell. This can reduce the value of the business. If the business owner is a licensed professional, such as a doctor or lawyer, who works alone as a solo practitioner, the value is limited because the value of the practice depends on that one person whose license isn’t transferable. While a business or practice has a value, the actual professional license or business license...
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