Spouses who wish to divorce often have assets and debts that need to be divided as part of the divorce process. In Pennsylvania, the term “equitable distribution” is the legal term for the process of dividing the marital assets and marital debts. If spouses who are going through a Divorce in Pennsylvania are unable to agree about the division of their marital assets and marital debts, the spouses may elect to engage in the formal court process for equitable distribution. The decision of whether to negotiate an out-of-court settlement or utilize possibly a trial often involves a cost-benefit analysis.
Separate or Nonmarital Property in Pennsylvania
Pennsylvania law allows separate or non-marital assets to generally escape the equitable distribution process. Non-marital property includes pre-marital assets (property that a spouse brought into the marriage), inheritances received by one party during the marriage, gifts to a spouse other than from the other spouse, property sold or disposed of in good faith during the marriage and property excluded by a valid pre-nuptial agreement . However, the increase in value during the marriage of nonmarital property may be considered a marital asset if the increase in value was not excluded from consideration in a prenuptial agreement. Furthermore, if a husband or wife decides to use some premarital or nonmarital funds for a common purpose, such as purchasing a home in joint tenancy, those funds will normally be converted from non-marital property to marital property. In addition, in the event that one spouse placed their inheritance in a joint account or purchased an asset held in joint names with this money, the inheritance monies may be considered a gift to the marital estate and not excluded from the marital estate.
Marital Assets or Marital Property in Pennsylvania
Marital assets include property and income acquired during the marriage. A home, business, furniture, retirement accounts, other investments and motor vehicles purchased during the marriage are examples of marital assets. In these examples, the particular asset may be considered to be a marital asset even if it was acquired in only one spouse’s name as long as it was acquired during the marriage and was not acquired through the use of the spouse’s non-marital assets. Some assets may have both a marital and non-marital component. In that case, the non-marital value of the asset is excluded from the equitable distribution process.
In addition to dividing property, most couples also have debts to divide. Marital debts are debts that were acquired by the parties after the date of marriage and before the date of final separation. Marital debts include such items as mortgages, loans, credit card balances, tax obligations and judgments. A debt may be a marital debt even if only one of the parties contracted for the debt as long as the debt was incurred during the marriage and was arguably for a marital purpose.
Discovery and Appraisals
Before an agreement can be reached or the parties proceed to family court for equitable distribution, the family law attorneys and the spouses must have documentation proving the value of marital assets, the amount of marital debt, and the incomes of both spouses. Sometimes, both spouses have access to this information and can provide it to their attorneys. In other cases, only one spouse has access to the information and refuses to provide the information to the other spouse. “Discovery” is the term used for the formal legal process of compelling the spouse possessing information about the marital assets, marital debts or income of either party to provide copies of the information to the requesting spouse or their attorney. It is certainly much less expensive for the spouses to agree to informally exchange the documentation in their possession and then provide it to their respective family law attorneys than for the family law attorneys to file the formal discovery requests to the other spouse.
When real estate, pensions, businesses or other types of assets are involved, it is often necessary to obtain an appraisal by a certified expert to determine the value of the asset. These appraisals vary in price depending upon the asset that is being valued, but are a key component in determining the marital estate to be divided in equitable distribution.
Dividing Marital Assets and Marital Debts
As stated above, equitable distribution is the process of dividing marital assets and marital debts. Because Pennsylvania is an equitable distribution state and not a community property state, our family law courts divide marital assets and debts based upon principles of equity, or in other words as fairly. The division of assets and debts does not necessarily mean that they will be divided on an equal basis.
Under Pennsylvania equitable distribution laws, courts consider a variety of factors and need not weigh the factors equally. This permits more flexibility and more attention to the financial situation of both spouses after the divorce.However, it also makes the resolution of property issues less predictable.
Some of the factors that the Pennsylvania courts consider in equitable distribution include: the length of the marriage, whether either party had previously been married; whether either party has significant non-marital assets including assets excluded by a prenuptial agreement; the age, health, and income of the parties; whether either party contributed to the increased earning potential of the other; the standard of living of the parties during the marriage; the tax consequences of any award and whether either party will be the primary custodian of any minor children. Fault for causing the end of the marriage is not a consideration in the equitable distribution process.
Pennsylvania Marriage Settlement Agreements
Although a divorce may be emotional, most cases do not end up in a contested trial. Usually, with the assistance of their attorneys, the parties negotiate and settle such things as division of property, spousal support, child support and custody. It may not be possible to predict with complete precision what a judge would do, but an experienced family law attorney can give a range of probable results. With that knowledge, parties often prefer to reach their own agreements rather than go through the monetary and emotional expense of a trial. Once an agreement is reached, it will be incorporated into a property settlement agreement which is the contract that divides the marital assets and debts and resolves other issues relating to the divorce including child support, custody, alimony. It is important for both spouses to fully understand the terms of a settlement agreement before they sign it. Once signed, marriage settlement agreements can be enforced by a family court if either party fails to comply with the terms of the agreement. There are only very limited circumstances in which a marriage settlement agreement can be set aside by the court.
Pennsylvania Court Ordered Equitable Distribution
If divorcing spouses cannot agree upon how to divide their marital assets and debts, the spouses will be required to go through the formal court process for equitable distribution. The court process generally requires that each party file an Inventory or in other words a listing of what they believe is the marital assets, marital debts and non-marital property. Most county courts allow the spouses to obtain a conference before the court regarding equitable distribution immediately after a divorce complaint is filed. Generally the court will schedule one or two pre-trial conferences to attempt to mediate the disputed issues in the equitable distribution case. Only in the event that a settlement is not reached will a trial be scheduled. In most counties, the pre-trial conferences and the trial may be conducted by an equitable distribution master instead of a judge. If the equitable distribution hearing is conducted by a master, the master will issue a recommendation to the judge on how the case should be resolved. In this situation, either spouse has the right to file exceptions or an appeal to the recommendation of the master and have the issues reviewed by the family court trial judge.
To schedule an appointment regarding the division of the marital estate, contact us at Randi J. Vladimer. P.C. Our office represents people in equitable distribution cases in Chester, Delaware, Montgomery, Philadelphia, Bucks, and Berks counties. Our law firm conducts appointments in our Radnor office. However, in some circumstances, telephone appointments and other off site meeting places may be available.