Property Division - Equitable Distribution
Pennsylvania Equitable Distribution Laws
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 the divorce process in Pennsylvania are able to agree as to how to distribute the assets, they can file a Property Settlement Agreement (also called a Marital Settlement Agreement or Postnuptial Agreement) and ask the Court to divorce them. If spouses are unable to agree, they can ask the Court to schedule the case for consideration. The decision of whether to negotiate an out-of-court settlement or to proceed to trial often involves a cost-benefit analysis.
If you reach an agreement, you control the distribution of the assets. If you cannot reach an agreement, the Court will make the decision as to how the assets will be divided. You will always save money reaching an agreement in lieu of going to Court. However, sometimes, it is not possible for everyone to reach an agreement. For instance, the marriage might be abusive; a spouse might have narcissistic behavior; a spouse might feel overwhelmed or controlled by the other. Sometimes, one of the spouses just refuses to separate assets unless the court decides how it should happen. The process is very dependent on your own personal relationship and marriage history. We will help guide you through the process to help you make these important decisions.
Separate Or Non-Marital Property In Pennsylvania
In a Pennsylvania divorce, the law allows a spouse to keep some or all of his or her separate or "non-marital" assets. Non-Marital property includes premarital assets (property that a spouse had at the time of the marriage), inheritances received by one party during the marriage, or gifts to one spouse from someone else (like a parent or grandparent). Special attention is given to property addressed in a prenuptial agreement.
However, separate or non-marital assets are still considered, although not divided, as part of the process. The increase in value (or, in some cases, the decrease in value) of such assets during the course of the marriage will be distributed or, at least, considered as part of the overall divorce. Also, if one spouse has a lot more in his or her name because that spouse has a larger separate estate, it might mean the spouse with less in separate assets gets more of the marital assets. It is important to identify and value assets for these critical reasons.
Marital Assets Or Marital Property In Pennsylvania
Marital assets include property acquired during the marriage, whether in your name, your spouse's name, or in joint names. Marital assets may include: your house (the "marital residence"), a business started by one or both spouses during the marriage, furniture, retirement accounts (including pensions), vehicles, and investments.
Some assets may be "premarital" but have a marital value. Assets you or your spouse had at the time of the marriage would be classified as "premarital" assets. However, the increase in value of those assets from the date of the marriage until the date of the separation is usually considered to be "marital" and subject to division in the divorce. Examples include 401(k) retirement savings accounts, or real estate owned prior to the marriage. You will need to know the balances and values of these premarital assets dated at or near the date of the marriage.
Pennsylvania Marital Debts
In addition to dividing property, most couples also have debts to divide. Marital debts are debts that were incurred by one or both spouses during the marriage. It will not matter whether the debt is in the name of one or both spouses - simply, a debt is considered to be "marital" if it was incurred during the marriage. There are some, but not many, exceptions to this general classification of debt (for example, debt incurred to buy or abuse drugs or alcohol, to fuel a gambling addiction, or to fund an extramarital affair). For the most part, however, debt incurred during the marriage is marital. Examples of marital debts include such items as mortgages, loans, credit card balances, tax obligations, student loans, and other judgments.
Dividing Marital Assets And Marital Debts In PA
In Pennsylvania, a divorce can be granted when you complete the process of "Equitable Distribution". "Equitable Distribution" is the process of dividing marital assets and marital debts. Since Pennsylvania is an equitable distribution state (and not a community property state or a 50/50 state), our Pennsylvania family law courts divide marital assets and debts based upon principles of equity - in other words, based on what is fair. This division of assets and debts does not necessarily mean that they will be divided on an equal basis. You might receive more or less than 50% of the marital assets and debts. The Court will make the determination based on several factors set forth in the Pennsylvania Divorce Code.
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 serving as the custodian of any minor children. Fault for causing the end of the marriage is not a consideration in the equitable distribution process.
Your attorneys will walk you through the three-step process necessary for equitable distribution. You must (1) identify the assets; (2) value the assets; (3) divide the assets. Your divorce can be granted when you reach an agreement as to how you will divide the assets.
Pennsylvania Property Settlement Agreements
If an agreement is reached, it may be drafted into what is called a Marital Settlement Agreement, also known as a Property Settlement Agreement or Postnuptial Agreement. A Marital Settlement Agreement is a contract between spouses that divides the marital assets and debts and resolves other issues relating to the divorce including child support, spousal support, alimony, counsel fees and costs, and child custody. It is important for both spouses to fully understand the terms of a proposed Marital Settlement Agreement before they sign the agreement. You cannot sign and then try to cancel the agreement based on a misunderstanding of the terms. The agreements, absent certain legal reasons, are binding contracts.
If someone does not abide by the terms of the contract, a Court can enforce the terms of the Agreement by finding the spouse to be in contempt of the agreement. It is very important that you understand the terms of the contract before signing the Property Settlement Agreement (Marital Settlement Agreement).
Although divorce is a very emotional process, most cases do not end up in a contested trial. Usually the parties negotiate and settle such matters as the division of property, spousal support, and child custody between themselves and their attorneys. It is not common to need to have a full trial before the Judges. It may not be possible to predict with complete precision what a judge would do, but an experienced family law attorney can help explain the range of possible results to help you make your decisions. With that knowledge, parties often prefer to reach their own agreements rather than go through the monetary and emotional expense of a trial.
Pennsylvania Court-Ordered Equitable Distribution
If divorcing spouses cannot agree upon how to divide the assets and debts, one of them can file a Motion with the Court to have the case heard by a Master in Equitable Distribution. In some counties, like Chester County, you can ask for the case to move forward to the Master right away; in other counties, like Montgomery County, you must first have grounds for the divorce and you must complete discovery. Your divorce attorney will help guide you as to when it might be best to file for a Master.
The Equitable Distribution / Divorce Master will conference with attorneys and then with the spouses to try to help the spouses reach a settlement. They will help to (1) identify the assets; (2) value the assets; and then (3) distribute the assets. The Master will help resolve disputes related to these three steps, and will help everyone move closer to a settlement. Settlement discussions can continue after the conferences but, if a settlement cannot be reached, the case will be scheduled for a hearing. The great majority of cases are resolved by agreement after a lot of negotiation and hard work with the Master.
Enforcement Of PA Equitable Distribution Orders And Marriage Settlement Agreements
Marital Settlement Agreements are binding, legal contracts. If a party to the contract fails to comply with the contract, the failure to comply is a breach of contract. If that happens, there are solutions offered by the Court and the party who breached the contract can face several sanctions such as being required to pay your counsel fees, having fines and penalties applied, or, in severe cases, incarceration. Also, the requirements of the contract cannot be discharged in bankruptcy.
Schedule a Consult with a Divorce Attorney Now
The attorneys at the Law Offices of Jennifer J. Riley offer free consultations to help you learn your legal rights and obligations related to your divorce, support, or custody matter. We believe that understanding your legal rights can help to empower to help you make life's difficult decisions. We strive to help reduce the fear everyone feels about the process.
We meet with our Montgomery County and Bucks County clients in our Blue Bell office; we meet with our Mainline clients in our Wayne, Pennsylvania office, located near the King of Prussia Town Center.
To schedule a free consultation, please contact us by email or by phone at 215-283-5080.