Source of Funds Rule
Because a single piece of property may be acquired over a period of time
both prior to and during the parties' marriage, such as stocks in
an investment account, there may be both marital and separate ownership
interests in that property. North Carolina has adopted a source of funds
doctrine under which both the marital and separate property receive a
pro-rata and reasonable return on investment.
The courts have adopted the “source of funds” theory to distinguish
between marital and separate contributions to a single asset. Under this
theory, the particular asset is apportioned according to the source of
funds (marital or separate) which have been used to acquire the property.
This rule then has to be balanced against some of the above presumptions,
such as jointly titling a house, which would make the house fully marital
and not subject to the source of funds rule.
Tracking the source of funds is most often seen in retirement accounts,
but the process can be applied to almost any asset. Keep in mind that
the source of funds rule does not mean that the courts will consider which
party paid for things during the marriage- this rule only applies to pre-marital
or non-marital funds. This is an area that is often hotly contested in
a divorce proceeding. If you think you have a claim that falls under the
source of funds rule, make sure to consult one of our qualified attorneys
to make sure your claim is pursued to the fullest extent possible.