In Pennsylvania, the term "equitable distribution" refers to the process of dividing marital assets and debts. If spouses can’t agree how to divide their property, they may end up in court, where a judge will decide for them. This article provides an overview of how property might be characterized and assigned in a divorce.
In Pennsylvania divorces, property is characterized one of two ways. Separate property is property that belongs to one spouse, and marital property is property that’s owned jointly by the couple.
Separate property includes:
- property acquired before the marriage (eg., a car that was fully paid off before the marriage)
- inheritances and gifts received during the marriage
- property excluded from the marital estate by a valid prenuptial or postnuptial agreement, and
- property acquired after separation.
Generally, Pennsylvania law allows separate (or “non-marital”) property to escape the equitable distribution process. However, it’s important to remember if separate property increases in value during the marriage, the increase in the value may be considered a marital asset. Or, if spouses use non-marital funds (eg., one spouse’s pre-marriage savings) for a common purpose, such as purchasing a home during the marriage, those separate property funds used for the down payment may become marital property.
Property disputes are very common in divorce, but they often present complex legal issues and may require financial tracings: matters that are best left to the experts. If your divorce involves a dispute regarding the character of substantial property, you might want to contact an experienced family law attorney that can advise you of your rights.
Assets and income acquired during the marriage are presumed to be marital property. Some common examples include a home, business, retirement accounts, investments, furniture, art, and cars purchased or established during the marriage. And, title (the name under which property is owned) doesn't necessarily determine character. So, even if property, such as a car, was placed in only one spouse's name, it will generally be considered part of the marital estate if it was purchased during the marriage.
Some assets may have both a marital and separate component (eg., a retirement account that was established before the marriage, but which continued to grow during marriage). In that case, the separate value of the asset should be excluded from the equitable distribution process.
In addition to property, couples also need to divide debts. A debt is considered “marital” if it was incurred after the date of marriage and before the date of final separation. Marital debts include items such as mortgages, loans, credit card balances, and tax obligations. A debt may be considered marital even if it was incurred by only one of the spouses during the marriage. If, for example, one spouse runs up a big credit card bill for clothes or other items during the marriage, both spouses will be liable for the payments.
Dividing Marital Assets and Debts
As stated above, equitable distribution is the process of dividing marital assets and debts. Because Pennsylvania is an equitable distribution state and not a community property state, its courts divide marital property based upon principles of equity, or in other words, what a judge thinks is fair. This does not necessarily mean that property will be divided equally.
When making such decisions, courts may consider a variety of factors, and can give them whatever weight they see fit.
Some of the factors that the court considers in equitable distribution include:
- the length of the marriage
- whether either spouse was married previously
- whether either spouse has significant non-marital assets, including assets excluded by a prenuptial agreement
- the spouses’ ages, health, and income(s)
- whether either spouse contributed to the other's increased earning potential (how much income a person could earn based on education, job skills, and work history)
- the standard of living established during the marriage
- the tax consequences of any award, and
- whether either spouse will be serving as the custodian of any minor children.
When making decisions about property, Pennsylvania courts do not consider either spouses “fault” in causing the divorce.
See Pennsylvania Divorce FAQs for an explanation of fault versus no-fault divorces in Pennsylvania.
Marital Settlement Agreements
Although divorce may be emotional, most cases don’t end up in trial. Spouses are usually able to negotiate and settle the issues in their divorce, often with an attorney's help.
It may not be possible to predict how a judge would decide the issues in your case, but an experienced attorney can advise you of the possible results. Armed with that knowledge, couples often prefer to reach their own agreements rather than endure the stress and expense of a trial.
The terms of a divorce agreement should be memorialized in a “marital settlement agreement” (“MSA”), which is a written contract between spouses that resolves most or all of the issues in their divorce, such as alimony, child custody, child support, and the division of property and debts. The provisions of an MSA will become part of a court’s final judgment of divorce.
If you’re going through a divorce and plan to negotiate with your spouse, you may want to contact an experienced attorney that can help you draft or review an MSA, and ensure that your rights are fully protected.