A frequent issue that arises in Pennsylvania divorce cases is how a premarital asset that was contributed to the marriage…
How is Marital Property Divided in Pennsylvania?
One of the most common questions that people going through a divorce ask is, “how is marital property divided in Pennsylvania in divorce?”
Marital property is divided in divorce in Pennsylvania through a process called “equitable distribution.” Unlike in community property states such as California, where marital property is divide equally (i.e. 50% – 50%), in Pennsylvania marital property is divided “equitably,” which means fairly based on the circumstances of the parties.
In deciding what is “equitable” or “fair,” the court is supposed to take into consideration a list of factors set forth in 23 Pa. C.S. § 3502. That list of factors, includes, among other things, (i) the relative earnings or earning abilities of the parties, (ii) the contribution of each party to the marital property, (iii) each party’s separate property, and (iv) custody of any children. To many of our clients’ surprise, marital misconduct, such as adultery, is not a factor considered by the court in equitable distribution. That is in keeping with the general direction of Pennsylvania law in removing fault or blame from the divorce process
The process of equitable distribution can be broken down into three steps: (1) identifying of the martial and non-marital assets, (2) valuing the assets and (3) dividing the marital assets.
1. Step One: Identify the Marital and Non-Marital Assets:
The first step in equitable distribution is identifying the martial assets and non-marital assets. Not all property owned by a married couple is necessarily “marital property.” Marital property, in general, is property acquired during the marriage. Non-marital property, in general, is property acquired before the marriage, after the date of separation, or by gift or bequest. Non-martial property is not subject to equitable distribution.
To determine whether an asset is marital or non-marital, several factors must be considered, such as (i) when the asset was acquired, (ii) how the asset was acquired (e.g. by purchase, gift, inheritance, etc.), and (iii) how the asset is titled. Some assets, such as retirement accounts, may have both marital and non-marital components.
2. Step Two: Value the Assets:
Once the marital and non-marital assets have been identified, the second step is to value those assets. Normally the assets are valued as of the date of equitable distribution. However, in some circumstances assets need to be valued as of a different date. For example, non-marital assets will often need to be valued as of the date of marriage and as of the date of separation, because the increase in value of a non-marital asset during the marriage is marital property.
The value of assets can be determined in a variety of ways. In the case of real estate, often a professional real estate appraiser is necessary. Similarly, for defined benefit pensions a professional pension valuation is often necessary. The value of assets such as bank accounts, brokerage accounts and non-pension retirement accounts can usually be determined from the account statements, but parties must be sure to establish value of each account as of the date of marriage, as of the date of separation and the current value, and to back out pre- and post-marital contributions to the accounts. Dissipation of marital assets must also be considered in valuing marital assets. Dissipation occurs when one party spends money from a marital account post-separation or where a party in control of a marital asset, such as a home, fails to maintain the asset.
3. Step Three: Divide the Marital Assets:
The third and final step in equitable distribution is to divide the marital assets. Martial assets are divided according to the list of factors set forth in 23 Pa. C.S. § 3502. Normally, the court first determines what percentage of the marital assets each party will receive (e.g. a 60% – 40% split). Once the percentage distribution is determined, then a scheme for distributing the martial assets is formulated. Each party does not necessarily receive their percentage of every asset. Rather, the goal is to have the overall distribution of marital assets reflect the percentage distribution. Some assets may be divided between the parties (e.g. bank accounts) and some assets may be distributed in their entirety to one party or the other (e.g. real estate). In distributing individual assets, the court will take into consideration the nature and liquidity of each asset, the tax consequences associated with the asset, and each party’s desires to retain all or part of the assets.
After the distribution scheme is determined, the assets are divided accordingly. Some assets may simply be divided or distributed, such as bank accounts. Real estate often needs to be liquidated or to have title transferred. Qualified retirement accounts are divided through qualified domestic relations orders (QDROs) to avoid taxes and penalties.
The attorneys at Cooley & Handy have extensive experience representing clients in divorce, support, child custody and family law matters. If you believe you need legal advice concerning your divorce or family law matter, we encourage you to contact our office to schedule a consultation. We can help you understand the process and know your options.
Disclaimer: The information contained in this article is for general informational purposes only and should not be construed as legal advice. If you are seeking legal advice concerning a divorce or any other matter, please contact us by telephone or e-mail to schedule a consultation.