IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA19-442

Filed: 2 June 2020

Iredell County, No. 16 CVD 3040

SARAH RICHTER, Plaintiff,

v.

ALLEN RICHTER, Defendant.

Appeal by plaintiff from order entered 29 November 2018 by Judge Edward L. 

Hedrick, IV in District Court, Iredell County. Heard in the Court of Appeals 30 

October 2019.

Pope McMillan, P.A., by Clark D. Tew, for plaintiff-appellant.

Lake Norman Law Firm, by Adam G. Breeding, for defendant-appellee.

STROUD, Judge.

At issue is whether the trial court erred in classifying proceeds from a life 

insurance policy on the life of Husband’s former wife, paid to Husband during his 

marriage to Wife, as a gift to Husband and thus his separate property. Based upon 

this classification of the life insurance proceeds, the trial court also classified other 

assets acquired with the proceeds as Husband’s separate property. Where Husband 

did not own the life insurance policy and paid no premiums for the policy during the 

parties’ marriage, the trial court did not err by classifying the proceeds as a gift to 
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Opinion of the Court

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Husband. The trial court’s findings of fact are supported by the evidence and those 

findings support the trial court’s conclusion of law classifying the disputed assets as 

Husband’s separate property, so we affirm the trial court’s order.

I. Background

The parties married on 16 April 2011. Husband had been previously married 

to Jeanne Richter with whom he had two children. Husband and Wife had one child 

in 2012. During the parties’ marriage, Jeanne Richter passed away, and proceeds 

from her life insurance policy in the amount of $500,603.68 were paid to Husband 

(“life insurance proceeds”). Wife filed a complaint in December 2016 with claims for 

child custody and support, divorce from bed and board, postseparation support and 

alimony, and counsel fees. Because the parties had not yet separated, Wife also noted 

her intent to file for equitable distribution after their separation. 

On 10 February 2017, the parties separated. Husband then filed his answer 

and counterclaims for custody, child support, and equitable distribution. On 18 April 

2017, Wife filed an amended complaint including a claim for equitable distribution. 

Both parties sought distribution of their marital property. 

Husband listed the following items as his separate property on his equitable 

distribution affidavit based upon his claim that they were purchased with the life 

insurance proceeds: real property in Mooresville (“Fieldstone house”), a Prudential 

Alliance Account, a Prudential Retirement B Annuity, and a Prudential IRA 
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(collectively, “the disputed assets”). The life insurance proceeds from his former wife 

were initially deposited into the Prudential Alliance Account. Prior to the parties’

separation, Husband transferred money from the Alliance Account to establish the 

IRA and the Retirement Annuity Account. For purposes of clarity and because these 

were the accounts the trial court classified, we will refer to these accounts

respectively as the Alliance Account, the IRA, and the Annuity Account.

In a pretrial order for equitable distribution, the parties listed the Fieldstone 

house under Schedule E, which was defined as “items as to which there is 

disagreement as to whether the item is martial property or a marital debt.” Wife 

alleged the real property was “purchased with comingled funds” and should be 

classified as marital; Husband alleged it should be classified as separate. The IRA 

and Annuity Account were also listed on Schedule E, with Wife alleging they should 

be classified as marital and Husband alleging they were his separate property. The 

Alliance Account was listed on Schedule H, “Items agreed by parties as Husband’s 

separate property” because “Husband acquired during marriage from deceased exwife.”

The equitable distribution claims were heard before the Honorable Edward L. 

Hedrick, IV on 26 and 28 September, and 1 October 2018 in District Court, Iredell 

County. The trial court found the Alliance Account, the IRA, and the Annuity 

Account were established entirely from the life insurance proceeds and were therefore 
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the separate property of Husband. The trial court classified the Fieldstone house as 

part marital and part Husband’s separate property. Husband purchased the home 

with the life insurance proceeds, but the parties made improvements to the house 

during the marriage which increased the value. Wife timely appealed. 

II. Classification of Life Insurance Proceeds

Wife argues the trial court erred in classifying the life insurance proceeds and 

property acquired with the life insurance proceeds during the marriage as Husband’s 

separate property. Husband disagrees with Wife’s framing of the issue as 

classification of the life insurance “proceeds” since some of the proceeds had been 

transferred to other accounts and contends the parties stipulated in the pretrial order 

that the Alliance Account was his separate property, and since the other assets came 

from the Alliance Account, this stipulation resolved the classification of all of the 

disputed assets, including the Fieldstone house, the IRA, and the Annuity Account.

Husband’s argument is logically based upon the evidence and theories presented by 

Wife at trial, but the pretrial order’s stipulation is not so broad as he claims. And 

although Wife’s evidence at trial focused primarily on whether Husband had 

converted separate funds from the life insurance proceeds to marital property by 

comingling assets, Wife is correct that the issue on appeal is “not whether the 

purportedly separate property of the Defendant was, through his actions or 
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intentions, converted into marital property . . . but whether or not the Life Insurance 

Proceeds were the Defendant’s separate property to begin with.”

A. Standard of Review

“Pursuant to N.C. Gen. Stat. § 50-20 [ (2017) ], 

equitable distribution is a three-step process requiring the 

trial court to ‘(1) determine what is marital [and divisible] 

property; (2) find the net value of the property; and (3) 

make an equitable distribution of that property.’” Under 

North Carolina law, marital property is “all real and 

personal property acquired by either spouse or both 

spouses during the course of the marriage and before the 

date of the separation of the parties, and presently owned, 

except property determined to be separate property or 

divisible property[.]” Separate property is that acquired by

a spouse before marriage, or acquired by devise, descent, or 

gift during the marriage. Generally, divisible property 

refers to certain property received after the date of 

separation but prior to distribution.

Crago v. Crago, ___ N.C. App. ___, ___, 834 S.E.2d 700, 704 (2019) (alterations in 

original) (citations omitted), review denied, ___ N.C. ___, 838 S.E.2d 181 (2020). 

Wife challenges some of the trial court’s findings of fact and the conclusion of 

law classifying the assets acquired with the life insurance proceeds. 

On appeal, when reviewing an equitable distribution order, 

this Court will uphold the trial court’s written findings of 

fact “as long as they are supported by competent evidence.” 

However, the trial court’s conclusions of law are reviewed 

de novo. Finally, this Court reviews the trial court’s actual 

distribution decision for abuse of discretion. 

Mugno v. Mugno, 205 N.C. App. 273, 276, 695 S.E.2d 495, 498 (2010) (citations 

omitted).
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B. Effect of Stipulation Regarding Alliance Account

Both parties devote much of their briefs to a dispute regarding the meaning 

and effect of the stipulation in the pretrial order regarding the classification of the 

Alliance Account as Husband’s separate property. Husband contends this stipulation 

covers not only the Alliance Account but also the Fieldstone house, the IRA, and the 

Annuity Account, since funds from the Alliance Account were used during the 

marriage to acquire each of these assets. Wife contends the stipulation does not apply 

to any asset other than the Alliance Account, but she also argues that the trial court 

improperly relied upon the stipulation in classifying the other disputed assets, based 

upon the trial court’s statement in Finding of Fact 30, “This finding is consistent with 

the parties’ stipulation regarding the funds remaining in the Alliance Account 

pursuant to Section H of the Pretrial Equitable Distribution Order.” Both parties 

assign far more importance to the stipulation than it deserves, and, instead of 

simplifying the issues, their arguments regarding the stipulation have made the one 

classification issue presented on appeal more complex.

In the parties’ equitable distribution affidavits, both clearly identified each of 

the disputed assets individually—the Alliance Account, the IRA, the Annuity 

Account, and the Fieldstone house—and stated their contentions regarding the value, 

classification, and desired distribution for each asset. Although the “life insurance 

proceeds” are mentioned as the source of the assets, the life insurance proceeds 
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themselves had been received in April 2014, and Husband used the proceeds to 

acquire or establish the disputed assets. Likewise, in the pretrial order, the parties 

stipulated that “Husband’s Prudential Alliance account” should be classified as the 

separate property of Husband. The pretrial order also listed the other disputed assets 

as individual assets and included the parties’ contentions regarding each one. “It is 

well-established that stipulations in a pretrial order are binding upon the parties and 

upon the trial court.” Clemons v. Clemons, ___ N.C. App. ___, ___, 828 S.E.2d 501, 

505 (2019). Husband argues that Wife stipulated that all property acquired with 

funds originally in the Alliance Account—the entire life insurance proceeds—would 

be his separate property. Thus, he argues that there is no need to consider the 

classification of the Fieldstone house, the IRA, and Annuity Account—all would be 

his separate property because they flowed from the Alliance Account and this was 

stipulated to be his separate property. However, the stipulation regarding the 

Alliance Account was a stipulation only to the classification and value of that 

particular account as of the date of separation. Neither the pretrial order nor the 

trial court’s equitable distribution order classified the life insurance proceeds as a 

discrete asset existing on the date of separation; this is appropriate, since Husband 

received the life insurance proceeds in April 2014 but the parties separated on 10 

February 2017. The trial court is required to classify and value property existing as 

of the date of separation. Robinson v. Robinson, 210 N.C. App. 319, 323, 707 S.E.2d 
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785, 789 (2011). Both the pretrial order and equitable distribution order addressed 

the various assets existing as of the date of separation, including those acquired with 

the life insurance proceeds. Husband is correct that Wife is bound by the stipulation 

as to the classification of the Alliance Account as listed on the pretrial order. But the 

other accounts and Fieldstone house were clearly listed separately on the pretrial 

order and the parties did not agree on the classification of those assets. The 

stipulation regarding the Alliance Account did not require the trial court to classify 

all of the disputed assets as Husband’s separate property and does not prevent Wife’s 

challenge to the trial court’s classification of the Fieldstone house, the IRA, and 

Annuity Account. The stipulation only applies to the Alliance Account, which the 

trial court properly classified as Husband’s separate property based upon the 

stipulation. 

Wife argues the trial court improperly relied upon the stipulation as part of its 

classification of the disputed assets. We will address the classification issue in more 

detail below, but upon consideration of all of the findings in context, the trial court 

did not classify the disputed assets based upon the stipulation regarding the Alliance 

Account. The trial court simply noted the classification of the other disputed assets 

as separate property (or partially separate, as to the Fieldstone house) was consistent

with the stipulation but there is no indication the trial court relied upon the 

stipulation to classify any asset other than the Alliance Account. 
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C. Findings of Fact

Wife challenges several findings of fact regarding the life insurance proceeds 

and properties acquired with the proceeds. The findings address the source of the 

insurance proceeds and then the acquisition of other properties with the proceeds. 

The first finding challenged, Finding 30, includes both findings of fact regarding

Husband’s receipt of the insurance proceeds and conclusions of law regarding the

classification as separate property. We will first address the factual portion of 

Finding of Fact 30, as most of the other findings and conclusions relevant to the issues 

on appeal rely upon these factual findings. The trial court found as follows: 

30. Before Defendant was married to the Plaintiff, he was 

married to Jeanne K. Richter. With Jeanne Richter, the 

Defendant had two children, now aged 15 and 13. On or 

about August 27, 2013 Jeanne Richter executed a will 

acknowledging that she was divorced and leaving all of her 

property to the children of Defendant and Jeanne Richter. 

On or about March 28, 2014, Jeanne Richter appointed the 

Defendant her attorney in fact. On March 31, 2014 Jeanne 

Richter died. Defendant was the beneficiary of a life 

insurance policy on her life and as a result of her death, the 

Defendant received $500,603.88 on or about April 9, 2014 

which was disbursed to a Prudential Alliance Account. 

These funds were acquired during the marriage and some 

of the funds as well as items purchased with the funds 

existed on the date of separation. They were not acquired 

by devise (by will) or by descent (Defendant was not related 

to Jeanne Richter at the time of her death). 

The portion of Finding of Fact 30 quoted above includes findings of fact, and 

these are supported by competent evidence. Indeed, the basic facts as Husband’s 
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prior marriage and divorce, the date of Mrs. Richter’s death, and Husband’s receipt 

of the insurance proceeds are not disputed. It is also undisputed that the insurance 

proceeds were not acquired by will or descent. The dispute is whether the trial court 

erred in classifying the life insurance proceeds as a gift under North Carolina General 

Statute § 50-20(b)(2).

Wife also challenges Findings of Fact 31, 32, 33, 39, 40, 48, 49, and 50. But the 

basis for her challenge to each of these findings is the same as to Finding 30. Findings 

31 through 33 address the marital and separate contributions to the Fieldstone 

house, based upon the prior finding that Husband used his separate funds from the 

insurance proceeds to purchase the house.1 Findings 39 and 40 address the IRA and 

Annuity Account, which were established entirely with funds from the insurance 

proceeds. Findings 48, 49, and 50 include listings of the classifications and values of 

all the parties’ property, including the disputed assets previously addressed in the 

prior findings. Thus, because the factual findings of Finding 30 are supported by 

competent evidence, the remaining findings challenged by Wife are also supported by 

the evidence.

D. Classification of Property

 

1 The trial court held the Fieldstone house was partially separate and partially marital, based upon 

marital contributions to renovation of the house. Wife challenges the findings of fact and classification 

of the Fieldstone house only as to the separate component based upon Husband’s purchase of the house 

with the life insurance proceeds. 
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The remainder of Finding of Fact 30 is actually a conclusion of law, as it 

addresses classification of the assets acquired with the life insurance proceeds. We 

review the conclusion of law de novo. Robbins v. Robbins, 240 N.C. App. 386, 396,

770 S.E.2d 723, 729 (2015) (“Because the classification of property in an equitable 

distribution proceeding requires the application of legal principles, this 

determination is most appropriately considered a conclusion of law.” (quoting Hunt 

v. Hunt, 112 N.C. App. 722, 729, 436 S.E.2d 856, 861 (1993))). “While findings of fact 

by the trial court in a non-jury case are conclusive on appeal if there is evidence to 

support those findings, conclusions of law are reviewable de novo.” Id. at 395, 770 

S.E.2d at 728 (citing Lee v. Lee, 167 N.C. App. 250, 253, 605 S.E.2d 222, 224 (2004)).

North Carolina General Statute § 50-20 defines “separate property” in 

pertinent part as follows:

“Separate property” means all real and personal property

acquired by a spouse before marriage or acquired by a 

spouse by devise, descent, or gift during the course of the 

marriage. . . . Property acquired in exchange for separate 

property shall remain separate property regardless of 

whether the title is in the name of the husband or 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. 

N.C. Gen. Stat. § 50-20(b)(2) (2019). 
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The remainder of Finding of Fact 30 addresses the source of the funds in the 

IRA and Annuity Account and for the purchase of the Fieldstone house and includes 

the trial court’s conclusion of law as to classification of the disputed assets. The trial 

court concluded that the insurance proceeds were a gift to Husband, as follows:

30. . . . However, these funds [the life insurance proceeds]

were acquired by the Defendant by gift. Although the 

actual trigger for the transfer may have been a contractual 

obligation of Prudential to Jeanne Richter; Defendant’s 

position as the beneficiary of the contract was without 

consideration paid by Plaintiff or Defendant to Jeanne 

Richter or to Prudential. This $500,603.68 was received by 

Defendant during his marriage to the Plaintiff from a third 

party without consideration of the Plaintiff or Defendant 

and is therefore a gift and is therefore Defendant’s separate 

property. This finding is consistent with the parties’ 

stipulation regarding the funds remaining in the Alliance 

Account pursuant to Section H of the Pretrial Equitable 

Distribution Order. 

Because this portion of Finding 30 applies legal analysis to the facts and draws 

the conclusion that the insurance proceeds should be classified as a gift to Husband 

and thus his separate property under North Carolina General Statute § 50-20(b)(2) 

we review this conclusion de novo. Blair v. Blair, 260 N.C. App. 474, 478, 818 S.E.2d 

413, 417 (2018) (“[T]he labels ‘findings of fact’ and ‘conclusions of law’ employed by 

the trial court in a written order do not determine the nature of our review. If the 

trial court labels as a finding of fact what is in substance a conclusion of law, we 

review that ‘finding’ de novo.” (quoting Westmoreland v. High Point Healthcare Inc., 

218 N.C. App. 76, 79, 721 S.E.2d 712, 716 (2012))).
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This Court has very recently addressed the issue of classification of life 

insurance proceeds on the former spouse of a party in Crago, ___ N.C. App. ___, 834 

S.E.2d 700. Although the life insurance policy at issue here is different from Crago

because there was no marital contribution to the premiums and neither party owned 

the policy, this Court’s analysis of the question helps highlight the factors relevant to 

the classification of insurance proceeds.

In Crago, the defendant-wife was married previously to Mr. Heintz and they 

had two children. Id. at ___, 834 S.E.2d at 703. In 2004, defendant-wife and Mr. 

Heintz took out a $1,000,000 life insurance policy on his life, naming defendant-wife 

as beneficiary. Id. at ___, 834 S.E.2d at 703. Defendant-wife and Mr. Heintz 

separated and later divorced. Id. at ___, 834 S.E.2d at 703. In 2007, Defendant-wife 

married plaintiff-husband, Mr. Crago. Id. at ___, 834 S.E.2d at 703. The defendantwife continued to pay premiums on the life insurance policy on Mr. Heintz during her 

marriage to Mr. Crago. Id. at ___, 834 S.E.2d at 703. She used marital funds to pay 

the premiums on the life insurance policy. Id. at ___, 834 S.E.2d at 703. In 2015, Mr. 

Heintz died, and defendant-wife received the life insurance proceeds. Id. at ___, 834 

S.E.2d at 703. In 2016, she and plaintiff-husband separated. Id. at ___, 834 S.E.2d 

at 703. In their equitable distribution order, the trial court determined the life 

insurance proceeds were marital property, and this Court affirmed. Id. at ___, 834 

S.E.2d at 710.
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The Crago Court first rejected an “analytic” approach to the classification of 

the insurance proceeds. Id. at ___, 834 S.E.2d at 704. The defendant-wife argued the 

analytic approach should be used based upon the fact that the insurance proceeds 

were intended for the benefit of the minor children of her marriage to Mr. Heintz. Id.

at ___, 834 S.E.2d at 704-05. The Court determined the “mechanistic” approach must 

be used:

North Carolina courts have adopted two different 

approaches for determining what is marital and separate 

property: the “mechanistic” approach and the “analytic” 

approach. In Johnson v. Johnson, our Supreme Court 

described the mechanistic approach as:

literal and looks to the general statutory 

definitions of marital and separate property 

and concludes that since the award was 

acquired during the marriage and does not 

fall into the definition of separate property or 

into any enumerated exception to the 

definition of marital property, it must be 

marital property.

In contrast, “[t]he analytic approach asks what the award 

was intended to replace,” focusing on the purpose of the 

compensation rather than its statutory definition.

In support of her argument the trial court erred by 

not applying the analytic approach, defendant cites several 

cases concerning classification of personal injury 

settlements and disability benefits. However, defendant 

also acknowledges North Carolina courts have never 

applied this approach in the context of life insurance 

proceeds. Nevertheless, she urges us to adopt the analytic 

approach in this case, based on “important public policy 

considerations” surrounding whether life insurance 

proceeds intended to benefit a spouse’s children from 

another marriage should be considered marital property. 

Furthermore, she argues Foster is distinguishable from the 
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present case and therefore should not be binding on this 

Court.

In Foster, the husband and wife had purchased a life 

insurance policy on their children during their marriage. 

After the parties separated, the husband alone paid the 

premiums for the policy. During the separation period, one 

of the children passed away and the life insurance proceeds 

were paid and placed in a trust account. In divorce 

proceedings, the wife claimed the life insurance proceeds 

were a marital asset because some of the policy premiums 

had been paid for with marital funds. We disagreed, 

holding that because the claim for death benefits did not 

arise until after separation, when their son passed away, 

the policy proceeds were the husband’s separate property. 

In making our ruling, we noted that, pursuant to N.C. Gen. 

Stat. § 50-20, “in order for property to be considered 

marital property it must be ‘acquired’ before the date of 

separation and must be ‘owned’ at the date of separation.” 

Defendant argues the present case is 

distinguishable from Foster because that case concerned a 

life insurance policy on the lives of the parties’ own 

children, whereas the policy in dispute here covered the life 

of her ex-husband and was intended to be used to care for 

her children from her prior marriage. However, the 

relevant fact under the mechanistic approach we applied 

in Foster was whether the property was acquired before the 

date of separation, not who the policy covered or what its 

intended purpose was.

Id. at ___, 834 S.E.2d at 704-05 (alteration in original) (citations omitted). 

Here, the trial court stated its rationale as follows:

Defendant’s position as the beneficiary of the contract was 

without consideration paid by Plaintiff or Defendant to 

Jeanne Richter or to Prudential. This $500,603.68 was 

received by Defendant during his marriage to the Plaintiff 

from a third party without consideration of the Plaintiff or 

Defendant and is therefore a gift and is therefore 

Defendant’s separate property. This finding is consistent 
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with the parties’ stipulation regarding the funds remaining 

in the Alliance Account pursuant to Section H of the 

Pretrial Equitable Distribution Order.

The trial court’s finding of fact that the parties paid no consideration for the insurance 

policy is supported by record. There was no evidence any premiums were paid by 

Husband during the marriage, so there was no marital financial contribution to the 

life insurance. This is an important factual difference between this case, Crago, and 

Foster v. Foster, 90 N.C. App. 265, 368 S.E.2d 26 (1988).

In Crago, this Court rejected the defendant-wife’s argument that the life 

insurance proceeds should be classified as partially separate based upon the source 

of funds for the premiums. Crago ___ N.C. App. at ___, 834 S.E.2d at 705. She argued 

that some of the funds in the account she used to pay the premiums were her separate 

property, so the proceeds should be classified as part separate and part marital using 

the source-of-funds approach. Id. at ___, 834 S.E.2d at 706. But the Court rejected 

this approach because the defendant-wife had failed to trace the funds in the account

from which she paid the premiums and thus did not prove she had paid any 

premiums, particularly the “last life insurance premium,” with her separate funds. 

Id. at ___, 834 S.E.2d at 706. Since all of the premiums paid during the marriage 

were from marital funds, this Court affirmed the trial court’s rejection of the sourceof-funds approach to classification of the insurance proceeds. Id. at ___, 834 S.E.2d 

at 706 (“Accordingly, the trial court’s finding that the account ending in 3207 was 
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marital, and thus the funds used to pay the last life insurance premium were marital, 

was not an abuse of discretion.”). 

The analysis of the source-of-funds issue in Crago and its reliance upon Foster

and McIver v. McIver, 92 N.C. App. 116, 124, 374 S.E.2d 144, 149 (1988), shows that 

the holding was based not just upon the fact that the insurance proceeds were 

received during the marriage and owned on the date of separation, but also on the 

fact that the “last insurance premium” was paid with marital funds. Crago, ___ N.C. 

App. at ___, 834 S.E.2d at 706; see McIver, 92 N.C. App. at 124, 374 S.E.2d at 149-50

(“North Carolina has adopted the ‘source of funds’ rule in determining whether 

property is marital or separate. Under the source of funds analysis, property is 

‘acquired’ as it is paid for, and thus may include both marital and separate ownership 

interests. Under the rule, property acquired with separate funds prior to marriage

remains separate, and is not converted to marital property merely because it was 

purchased in anticipation of marriage.” (citation omitted)). Here, Husband did not 

pay for the life insurance policy at all. This factual difference in the payment of 

premiums and policy ownership between this case, Crago, and Foster is essential to 

the classification issue. 

In this case, no insurance premiums on the former Mrs. Richter’s life were paid 

from marital funds or by Husband during the marriage. The trial court found that 

Husband received the life insurance proceeds “from a third party without 
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consideration of the Plaintiff or Defendant.” Husband was the beneficiary of the 

policy but not the owner, and he did not pay premiums on the policy during the 

marriage, so there was no marital contribution to the acquisition or maintenance of 

the policy, as in Crago and Foster. 

This Court also addressed the source of funds in Foster, 90 N.C. App. 265, 368 

S.E.2d 26. It is easy to overlook the portion of Foster which addresses the cash value 

of the policy as of the date of separation, which was only $20.00, but this part of the 

analysis is important. In Foster, a portion of the policy value was classified as marital 

based upon the payment of premiums during the marriage, but as of the date of 

separation, the only value attributable to the marriage was the cash value. Id. The 

insurance policy on the child’s life had a cash value of $20.00 as of the date of 

separation. Id. The insured child died after the parties’ separation, and the husband

was the beneficiary of the policy and had continued to pay premiums after the date 

of separation. Id. The Foster Court noted the fact that the right to collect under the 

policy vested only upon the child’s death, after the date of separation, but did not 

classify the policy as entirely separate. Id. at 268, 368 S.E.2d at 28. Instead, Foster

held that the insurance proceeds had a dual classification. Id. The $20.00 cash value 

was classified as marital, based upon the value of the policy as of the date of 

separation; the $20,000 proceeds for the child’s accidental death were classified as 

husband’s separate property based upon the vesting of the benefits after separation 
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and the husband’s payment of premiums on the policy after separation. Id. The 

Foster Court based this analysis on a comparison to the vesting of stock options:

In Hall v. Hall, 88 N.C. App. 297, 363 S.E.2d 189

(1987), this Court held that stock options which were 

vested prior to separation were marital property but those 

which had not vested prior to separation were separate 

property. In the present case, at the time of separation 

there were no vested rights under the insurance policy on 

the life of Richie M. Foster. The rights only vested at the 

death of Richie M. Foster, and until then plaintiff, as owner 

of the policy, could have cancelled the policy or changed the 

beneficiary. At the time of separation, the cash value of the 

insurance policies was marital property since the 

premiums to that point had been paid for with marital 

assets. The premiums after separation were paid for with 

plaintiff’s assets and therefore the proceeds from the 

insurance policy were separate property of plaintiff.

Id.

Therefore, although life insurance does not fit neatly into the methods of 

classification used for other assets such as real estate, and life insurance policies of 

different types will present different factual issues, it is clear that our Courts have 

applied the same legal analysis to the classification of life insurance policies as other 

assets. In Foster, the vested cash value of the whole life policy as of the date of 

separation was classified as marital, id.; a term life insurance policy normally has no 

cash value. In Crago, this Court affirmed the trial court’s determination that the 

premiums paid during the marriage were paid from marital funds and classified the 

proceeds as marital based upon a source-of-funds approach. ___ N.C. App. ___, 834 
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S.E.2d 700. Although Crago does not address whether the life insurance policy at 

issue was a term policy with no cash value, a whole life policy with a cash value, or 

some other form of policy, Crago rejected classification as separate property of the 

wife based upon a source-of-funds approach because defendant-wife failed to show 

premiums were paid with her separate funds.2 See id.

This case is different from both Foster and Crago because there was absolutely 

no marital contribution to the life insurance policy. It was not an asset purchased by 

either party, either during the marriage or after separation. Husband’s former wife 

owned and paid for the life insurance policy until her death. Although no prior North 

Carolina case has ever characterized life insurance proceeds as a gift for purposes of

equitable distribution, no case has ever addressed insurance proceeds owned and paid 

for by a third party but received during the marriage by one of the spouses. Thus, we 

will rely upon cases classifying gifts from third parties during the marriage to review

the trial court’s conclusion the proceeds were a gift and thus Husband’s separate 

property. 

Wife agrees we should rely upon cases regarding gifts from a third party but 

argues the trial court erred in classifying the life insurance proceeds as a gift because

Husband failed to present evidence of “donative intent” by Husband’s former wife. 

 

2 Based upon the facts and analysis in Crago, the life insurance policy was apparently a term policy. 

See Crago v. Crago, ___ N.C. App. ___, 834 S.E.2d 700. There was no mention of any cash value for 

the policy. See id.
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Opinion of the Court

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She contends this case does not present an issue of first impression, as Husband 

argues, because “Appellant is actually asking this Court to apply its usual and 

customary gift analysis for an asset; the lack of case law specifically discussing this 

one asset type does not a case of first impression make.” We agree we can apply the 

“usual and customary gift analysis” but that analysis is more straightforward for 

some assets than others. As discussed earlier, life insurance policies may be classified 

differently depending upon the type of policy, policy ownership, payment of 

premiums, vesting of the right to proceeds, and the relationship of the insured to the 

beneficiary. And no prior case in North Carolina has addressed life insurance 

proceeds from a policy on the life of a third party where the beneficiary-spouse paid 

no consideration for the policy. 

Under the gift analysis discussed in Burnett v. Burnett, 122 N.C. App. 712, 471 

S.E.2d 649 (1996), Husband had the burden of showing that the life insurance 

proceeds were his separate property. The Burnett Court discussed several factors 

which may show donative intent, and these factors may vary based upon the 

particular type of property in question:

The party claiming a certain classification has the 

burden of showing, by the preponderance of the evidence, 

that the property is within the claimed classification. Thus 

a party claiming property acquired during the marriage to 

be separate, on the basis that it was a gift, has the burden 

of showing that the “alleged donor intended to transfer 

ownership of the property without receiving any 

consideration in return.” . . .
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Opinion of the Court

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“The evidence most relevant in determining 

donative intent [or the lack of donative intent] is the 

donor’s own testimony.” Other evidence relevant to 

donative intent includes the testimony of the alleged donee, 

documents surrounding the transaction, whether a gift tax 

return was filed, and whether an excise tax was paid. 

Transfer documents stating that the property is a gift or 

characterizing the consideration as love and affection is 

strong evidence of donative intent. On the other hand, 

transfer documents indicating receipt of consideration is 

prima facie evidence that the recited consideration was 

indeed paid. A mere recital of consideration, however, does 

not compel a finding that consideration was received, if 

other evidence reveals that no consideration was in fact 

received. Bargain sales, or those where some small 

consideration is received in exchange for the transfer, if 

accompanied with donative intent, are treated as partial 

gifts.

Burnett, 122 N.C. App. at 714-15, 471 S.E.2d at 651-52 (second alteration in original)

(footnote omitted) (citations omitted).

Wife argues Husband failed to present evidence of “donative intent” citing to 

several cases addressing gifts of various types of property in different factual settings. 

For example, in Berens v. Berens, this Court held that the parties’ contributions to 

their children’s 529 accounts were not “gifts” to the children, noting that 

“[i]n order to constitute a valid gift, there must be 

present two essential elements: 1) donative intent; and 2) 

actual or constructive delivery.” “These two elements act 

in concert, as the present intention to make a gift must be 

accompanied by the delivery, which delivery must divest 

the donor of all right, title, and control over the property 

given.” 

260 N.C. App. 467, 469-70, 818 S.E.2d 155, 157-58 (2018) (citation omitted) (quoting 
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Opinion of the Court

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Courts v. Annie Penn Mem’l Hosp., Inc., 111 N.C. App. 134, 138, 431 S.E.2d 864, 866 

(1993)). The Berens Court explained:

Applying this settled property law principle, the 

parties’ contributions to their 529 Savings Plans were not 

gifts. In their briefs, both parties discuss various tax 

implications of 529 Savings Plan contributions at length.

But the treatment of these plans for tax purposes does not 

control the determination of ownership under the equitable 

distribution statute. Instead, we look to whether the 

parties delivered an ownership interest in those funds to 

their children, thereby divesting themselves of that 

interest.

They did not. 

Berens, 260 N.C. App. at 470, 818 S.E.2d at 158 (citation omitted).

As recognized by Berens, treatment of property for tax purposes or in another 

legal context may not control its classification for purposes of equitable distribution. 

Id. Indeed, classifying property based upon marital contribution instead of title or 

other legal principles is one of the fundamental principles of the equitable 

distribution statute. Hill v. Hill, 229 N.C. App. 511, 518, 748 S.E.2d 352, 358 (2013)

(“One of the purposes of the Equitable Distribution Act was ‘to alleviate the 

unfairness of the common law [title theory] rule’ and to base property distribution 

upon ‘the idea that marriage is a partnership enterprise to which both spouses make 

vital contributions . . . [.]’” (first and second alterations in original) (quoting Friend–

Novorska v. Novorska, 131 N.C. App. 508, 510, 507 S.E.2d 900, 902 (1998))).

In Plymouth Pallet Co. v. Wood, this Court stated the elements of a gift between 
RICHTER V. RICHTER

Opinion of the Court

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living persons:

The essential elements of a gift inter vivos are: (1) the 

intent by the donor to give the donee the property in 

question so as to divest himself immediately of all right, 

title and control therein; and (2) the delivery, actual or 

constructive, of the property to the donee.

51 N.C. App. 702, 704, 277 S.E.2d 462, 464 (1981).

Some of the factors noted in prior cases dealing with gifts of real estate or stock 

simply do not exist in a case dealing with life insurance. One obvious difference is 

that life insurance proceeds are not “delivered” to the donee until after the donor’s 

death; it is not a “gift inter vivos.”3 In equitable distribution cases in particular, where 

one spouse claims property was a gift, the analysis normally focuses on whether 

consideration was paid for the asset. For example, in cases addressing deeds to real 

estate to one or both spouses from a third party, courts have noted “documents 

surrounding the transaction, whether a gift tax return was filed, and whether an 

excise tax was paid.” Burnett, 122 N.C. App. at 715, 471 S.E.2d at 651. All of the 

factors noted in Burnett address the issue of consideration for the transfer of real 

property. Excise taxes are based upon the purchase price for land. N.C. Gen. Stat. § 

105-228.30 (2019); see Patterson v. Wachovia Bank & Tr. Co., N.A., 68 N.C. App. 609, 

612-13, 315 S.E.2d 781, 783 (1984) (“Under the provisions of G.S. 105-228.28, et seq., 

every person who deeds real estate away for a consideration must pay the county an 

 

3 Ownership of a life insurance policy could be given or transferred during the insured’s life, but we 

are discussing payment of life insurance proceeds upon death of the insured. 
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Opinion of the Court

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excise tax based on the consideration involved, but no tax is required of those who 

give property away. Yet, though the evidence shows that the property was worth over 

$90,000, and the plaintiff Ross Coble, the only living person with personal knowledge 

as to the consideration involved, if there was any, is the one who had the deeds 

eventually recorded, no excise stamps were ever affixed to the deeds by the 

grantors.”). Gift tax returns are filed for gifts as defined by the applicable tax laws, 

but neither party here has made any argument based upon the treatment of the life 

insurance policy proceeds for tax purposes. In the cases addressing whether property 

is a gift, absence of consideration gives rise to an inference of donative intent, and 

thus a gift. See Joyce v. Joyce, 180 N.C. App. 647, 651, 637 S.E.2d 908, 911 (2006) 

(finding the transfer of property supported by adequate consideration from a father 

to son was not a gift). Payment of consideration gives rise to the opposite inference. 

See id. 

Wife contends that Husband’s evidence regarding the lack of consideration and 

the circumstances of his prior marriage and the insurance policy on Mrs. Richter’s 

life was not sufficient to show Mrs. Richter’s “donative intent.” She argues Husband 

“failed to meet his burden of providing any material evidence that would establish or 

even hint at the origin, procuring circumstances and causes, or consideration (or lack 

thereof) for his status as Jeanne Richter’s life insurance beneficiary.” She claims, 

“Defendant’s own testimony as to the various components of the Life Insurance 
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Opinion of the Court

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Proceeds was plainly silent on the purpose or intent of his status as a beneficiary, 

and largely in agreement with the Plaintiff’s in that it confirmed his receipt of the 

Life Insurance Proceeds during his marriage, and confirmed their existence as of the 

date of separation.” Wife is correct that Husband’s testimony at trial focused more 

on the tracing of the life insurance funds to the IRA, the Annuity Account, and the 

Fieldstone house, as part of his argument that these assets were his separate 

property because the life insurance proceeds themselves were his separate property. 

But Husband’s evidence was responding to Wife’s contentions regarding classification 

of the disputed assets. 

At trial, Wife did not contend that Mrs. Richter made a gift of the life insurance 

proceeds to both of the parties or that there was any marital contribution to the life 

insurance policy. Wife’s arguments and evidence at trial addressed tracing of the 

funds and comingling of marital and separate funds. Her arguments at trial—until 

her closing argument—treated the life insurance proceeds as Husband’s separate 

property when received but she contended he had commingled the insurance proceeds 

with marital assets; Husband responded by showing evidence the proceeds were not 

commingled with marital assets, except as to the Fieldstone house. 

Wife acknowledged at trial she had stipulated that the remaining funds in the 

Alliance account were Husband’s separate property because the funds came from the 

life insurance proceeds but she did not stipulate to the classification of the other 
RICHTER V. RICHTER

Opinion of the Court

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accounts because she did not know if any marital contributions were made to those 

accounts. Regarding the stipulation on Schedule H of the pretrial order, Wife testified 

the funds in the Alliance Account as of the date of separation were from the insurance 

proceeds:

Q: So you have stipulated that his Alliance account is his 

separate property? 

A. That is the balance that is left as of the date of 

separation. He has used funds out of that account, and I 

believe there was money left over as of the date of 

separation. I’m not sure of the balance now. But yes, that 

part of it, that balance of the date of separation, is separate.

She then testified that she did not know whether marital funds had been contributed 

to the IRA and Annuity Account, although they were initially established with funds 

from the life insurance proceeds. 

Both parties have presented a slightly different argument on appeal than they 

did before the trial court. This change is reflected in the parties’ briefs, which devote 

a large part of their arguments to the stipulations instead of to the evidence. As we 

determined above, the stipulation regarding the Alliance Account did not entirely 

resolve the classification issues arising from the insurance proceeds, but the parties’ 

equitable distribution affidavits and the pretrial order also present the classification 

issue as a tracing issue, not based upon the origin of the life insurance funds. Our 

Courts have long held that parties may not change horses on appeal to gain a better 

mount:
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Opinion of the Court

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The issues before the trial court, however, were set out in 

a pretrial order to which plaintiff freely consented while 

represented by competent counsel, and plaintiff may not 

now take an inconsistent position on appeal. “The theory 

upon which a case is tried in the lower court must prevail 

in considering the appeal and interpreting the record and 

determining the validity of the exceptions.” Parrish v. 

Bryant, 237 N.C. 256, 259, 74 S.E.2d 726, 728 (1953); see 

also Weil v. Herring, 207 N.C. 6, 10, 175 S.E. 836, 838 

(1934) (“the law does not permit parties to swap horses 

between courts in order to get a better mount in the 

Supreme Court[ ]”), and In re Peirce, 53 N.C. App. 373, 382, 

281 S.E.2d 198, 204 (1981) (where respondents stipulated 

to the use of “recording machines in lieu of a court 

reporter,” they waived on appeal any objection about the 

quality of the recording equipment used in the trial court).

Inman v. Inman, 136 N.C. App. 707, 714-15, 525 S.E.2d 820, 824-25 (2000) (alteration 

in original).

Neither party has entirely swapped horses on appeal, although both have at 

least changed the saddles on their horses. At trial, Wife’s testified she agreed the life 

insurance proceeds should be classified as Husband’s separate property but by the 

time of her closing argument, she attempted to avoid the stipulation and her own 

testimony. For the first time, she argued that none of the disputed assets should be 

classified as Husband’s separate property because he had failed to show “donative 

intent” by Mrs. Richter, going so far as to claim that the trial court was not “bound 

by the pretrial order” and requesting the trial court to classify all of the disputed 

assets as fully marital. She argued: 

Now, what does that include? Well, it includes the 
RICHTER V. RICHTER

Opinion of the Court

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Fieldstone property. It includes the [IRA]. It includes the 

annuity. It includes the Ford Escape. And even though, 

Judge, even though it’s listed on the Schedule, I think it 

was I,[

4] the remainder of that Alliance account, I think, 

was listed there as a stipulation of separate property. I 

think that the evidence -- the Court isn’t bound by that 

Pretrial Order, if during the course of the proceedings, 

evidence is offered that contradicts the Pretrial Order.

As discussed above, Husband’s evidence did rely heavily on the stipulation that 

the Alliance Account was his separate property because it contained life insurance 

proceeds and all of the proceeds were initially in that account. Even though both 

parties have changed their theories or arguments on appeal to some extent, there was 

evidence from both Husband and Wife regarding the source of the life insurance 

proceeds and the circumstances under which he received them. Wife testified 

Husband and Mrs. Richter had previously shared 50-50 custody of their two sons but 

during her terminal illness, as her condition worsened, she became unable to care for 

the children, so they spent more time with Husband and Wife. Shortly before her 

death, Mrs. Richter agreed for Husband to have full custody of their sons and she was 

seeing them only on weekends and not overnight. On 27 August 2013, Mrs. Richter

 

4 It was Schedule H, and the trial court was bound by the pretrial order. “It is well-established that 

stipulations in a pretrial order are binding upon the parties and upon the trial court. Clemons, ___ 

N.C. App. at ___, 828 S.E.2d at 505. The trial court may not ex mero motu modify or eliminate 

stipulations after completion of the trial without giving the parties “any notice or opportunity to 

respond to the modification.” Plomaritis v. Plomaritis, 222 N.C. App. 94, 107, 730 S.E.2d 784, 793 

(2012).
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Opinion of the Court

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executed her Last Will and Testament in which she appointed Husband as her 

Executor. She left all her assets to her sons in trust and appointed Husband as her 

trustee and Wife as her alternate trustee. She also executed a Power of Attorney 

appointing Husband as her attorney-in-fact on 28 March 2014. Mrs. Richter’s two 

sons were also the beneficiaries of her IRA accounts. 

The trial court may draw reasonable inferences from the evidence, and based 

upon the circumstances of Mrs. Richter’s death and Husband’s position as sole 

custodian of their two children upon her death, the trial court’s findings and 

conclusion that the life insurance proceeds should be classified as a gift to Husband 

are supported by the evidence. 

When a trial by jury is waived, and where different 

reasonable inferences can be drawn from the evidence, the 

determination of which reasonable inferences shall be 

drawn is for the trial judge. 

In Main Realty Co. v. Blackstone Valley Gas & E. 

Co., 59 R.I. 29, 193 A. 879, 112 A.L.R. 744, the court said: 

“In reaching his conclusions, the trial justice had the 

benefit of seeing and hearing the witnesses. He also was 

entitled to consider all the evidence and to draw therefrom 

such inferences as were reasonable and proper under the 

circumstances, even though another different inference, 

equally reasonable, might also be drawn therefrom.”

Elec. Motor & Repair Co. v. Morris & Assocs., Inc., 2 N.C. App. 72, 75, 162 S.E.2d 

611, 613-14 (1968) (citation omitted).

Perhaps Wife could have argued at trial Mrs. Richter intended to benefit both 

her and Husband by the life insurance since at the time of her death, the parties were 
RICHTER V. RICHTER

Opinion of the Court

- 31 -

together and caring for her two sons. But she did not make this argument. Instead, 

she argues on appeal that Husband should have presented more specific or detailed 

testimony about Mrs. Richter’s “donative intent” in making him the beneficiary of her 

life insurance policy. Yet as in most cases in which there is a dispute regarding 

whether an asset was a gift to one of the spouses, the trial court may look to the 

circumstances of the case and may infer the donative intent from a transfer made 

without consideration. See Burnett, 122 N.C. App. at 715, 471 S.E.2d at 651. 

Husband was the sole beneficiary of the life insurance policy, which supports the trial 

court’s conclusion that the former Mrs. Richter did not intend to make a gift of the 

proceeds to the marriage or to Wife. As simply stated in Burnett, “a party claiming 

property acquired during the marriage to be separate, on the basis that it was a gift, 

has the burden of showing that the ‘alleged donor intended to transfer ownership of 

the property without receiving any consideration in return.’” 122 N.C. App. at 714, 

471 S.E.2d at 651 (quoting Brett R. Turner, Equitable Distribution of Property § 5.16 

at 195 (2d ed. 1994)). Although this particular question was not the primary focus of 

the evidence presented by either party at trial, Husband’s evidence supported the 

trial court’s findings of fact and those findings support the trial court’s conclusion of 

law as to classification of the disputed assets. In fact, Wife’s evidence tended to 

support the trial court’s findings and classification as well. 

III. Conclusion
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Opinion of the Court

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Because the trial court’s findings are supported by the evidence and those 

findings support the trial court’s conclusion of law classifying the disputed assets as 

Husband’s separate property, we affirm the trial court’s order. 

AFFIRMED.

Judges ZACHARY and MURPHY concur.