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Divorcing couples must divide the marital property prior to the court’s entry of a divorce decree; otherwise, a spouse’s rights to certain property may terminate automatically. Dividing and distributing the marital property may be accomplished through a negotiated settlement between the parties or the case can be submitted to a court appointed Master who will make recommendations which the parties may accept or reject. If one or both parties reject the Master’s recommendations, the case will proceed to a trial and a Judge will make the determination after considering all of the evidence.
What is Equitable Division?
Unlike community property states where the marital property is divided equally (50/50), in Pennsylvania, the marital property and earnings accumulated during the marriage are divided equitably (fairly), but not necessarily equal. The court shall equitably divide, distribute and assign the marital property, without regard to marital misconduct, in such percentages and in such manner as the court deems reasonable after considering specific factors (see below).
Marital Property
Only marital property is subject to equitable division and distribution. Marital property is defined as property acquired by either party during the marriage. Marital property can also include the increase in value of certain non-marital property including 1) property acquired prior to the marriage; 2) property acquired in exchange for property acquired prior to the marriage or 3) property acquired by gift or inheritance during or after the marriage.
Non-Marital Property
Non-marital property is NOT subject to equitable division and distribution. Non-marital property includes the following:
- Property acquired prior to the date of marriage
--Premarital property which is exchanged for new property during the marriage retains its non-marital nature unless it is re-titled in joint names
--Property acquired prior to marriage and titled in the name of an individual spouse is excluded from marital property even though both spouses contributed to its acquisition
- Property acquired in exchange for property acquired prior to the marriage
- Property acquired by gift or inheritance during or after the marriage
--Gifts and inheritances which are acquired by the spouses jointly are marital property
--There is a presumption that gifts or inheritances which are re-titled in joint names are intended to be gifts to the marriage, which are marital property
--Gifts between spouses are marital property subject to equitable distribution
- Property excluded by valid agreement of the parties entered into before, during or after the marriage
--The burden of proof to set aside a premarital agreement is on the party who challenges the agreement. - Property acquired after final separation until the date of divorce, except for property acquired in exchange for marital assets
--The engagement ring is given as a gift conditional upon the promise to marry. When the parties are married the condition is met, and the gift becomes absolute
--Lottery proceeds received after separation are marital property when the tickets were purchased prior to separation
- Property which a party has sold, granted, conveyed, or otherwise disposed of in good faith and for value prior to the date of final separation
- Some veterans’ benefits
--A disability benefit will generally be excluded from marital property, but not all are excluded
- Property to the extent to which the property has been mortgaged or otherwise encumbered in good faith for value prior to the date of final separation
- Any payment received as a result of an award or settlement for any cause of action or claim which accrued prior to the marriage or after the date of final separation regardless of when the payment was received.
Specific Factors
The specific factors that are relevant to determine how to equitably divide the marital property include the following:
- The length of the marriage
- Any prior marriage of either party
- The age, health, station, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties
- The contribution by one party to the education, training or increased earning power of the other party
- The opportunity of each party for future acquisitions of capital assets and income
- The sources of income of both parties, including, but not limited to, medical, retirement, insurance or other benefits
- The contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of marital property, including the contribution of a party as a homemaker
- The value of the property set apart to each party
- The standard of living of the parties established during the marriage
- The economic circumstances of each party at the time the division of property is to become effective
- The tax ramifications associated with each asset to be divided
- Expenses related to the sale or transfer of a particular asset
- Whether the party will be serving as the custodian of any dependent minor children
Preparing The Property Rights Case
Divorcing couples should retain experienced counsel whenever claims for division and distribution exist in a divorce matter. It is not uncommon for one spouse to hide assets or otherwise fail to disclose the existence of an asset. Valuing the assets can also become a point of contention and an experienced attorney can help the client with a proper valuation in order to make sure the client is receiving his or her equitable share.
To discover and inventory the marital and non-marital assets, one spouse may serve interrogatories and a request for production of documents on the other spouse. These are requests for information – written answers and document production – from the other party that must be verified and complete. Document production often includes bank statements, financial documents for a business, wage information, stock and mutual fund accounts, retirement account statements, life insurance information, other sources of income, etc.
If a spouse fails to provide information, then the other party can request an Order from the court to compel the production of the missing information. If a party fails to comply with the Order, then the other party can request sanctions and attorney’s fees. In some cases, the court is empowered to create a constructive trust as to all undisclosed assets for the benefits of the parties or minor children, if any. The party in whose name the assets are held will be declared the trustee of the constructive trust and the court will set the terms and conditions for the trust. The court is also empowered to freeze assets; award temporary possession of the marital home to one spouse; direct a spouse to purchase life insurance or health insurance; avoid fraudulent conveyances; or direct a spouse to execute a real estate listing agreement.
Valuation of Marital Property
For marital property, the date of valuation is generally the date of trial or distribution, not separation. For example, a spouse’s defined contribution retirement plan or IRA will be valued as of the date the plan or IRA is actually distributed to the other spouse, irrespective of the date of separation, so long as the post-separation increases in value relate only to capital appreciation and investment gains, rather than the employee spouse’s contributions after the separation date.
Valuation of Non-Marital Property
The increase in value of non-marital property shall be determined from the date of marriage or later acquisition date to either the date of final separation or the date as close to the hearing on equitable distribution as possible, whichever date results in a lesser increase. There is a rebuttable presumption that the date when a complaint in divorce is filed is the latest possible date of separation. If non-marital property loses value, then the decrease in value can only be used to offset an increase in value of other non-marital property.
Title to the property does not determine the nature of the property. The time of acquisition is the determining factor. For example, if the parties purchase a house during the marriage, but only one spouse’s name is on the deed, the house is still marital property since it was acquired during the marriage and prior to the date of separation.
The date of separation is generally the date when the parties begin to live separate and apart, which is defined as complete cessation of cohabitation, whether living in the same residence or not. In other words, parties may be separated even though they continue to reside in the same household, so long as there has been a physical and financial separation and an intent to dissolve the marriage has been manifested by behavior or communication.
Methods of Valuation
The Divorce Code does not expressly provide for a specific valuation method; however, courts will consider documents and evidence that includes inventories, records of purchase price, appraisal, and expert reports. Each asset may require a different valuation methodology.
Property Rights Lawyer- The Martin Law Firm
Equitably dividing marital property requires experience and expertise. An experienced divorce lawyer will be diligent in identifying all of the property, determining which property is marital property, valuing the property, and then assessing how it should be divided to ensure that the division is fair considering the Pennsylvania factors. If you are contemplating a divorce or if you are a party to a divorce, contact an experienced lawyer at The Martin Law Firm today at (215) 646-3980.
Please call (215) 646-3980 to schedule an appointment.
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Our legal team provides individualized legal solutions for our clients by offering high quality legal counsel and representation in diverse areas of law. Our attorneys regularly represent clients throughout Southeast Pennsylvania, including Montgomery County, Bucks County, Chester County, Delaware County, and Philadelphia County.
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