Pennsylvania is an equitable distribution state. It divides property in a divorce based on a judge's determination of what's fair under the circumstances of each case. (Pa. C.S.A. - Title 23 - Chapter 35 § 3502.) Community property states, on the other hand, attempt an equal 50-50 distribution between the spouses.
You might find it interesting to learn more about the differences between equitable distribution states and community property states.
There are a number of things you can do to get a jump on the process of ultimately dividing your property. The steps below can serve as a guide.
Identify all the property you and your spouse own jointly or individually, and make lists of both. This will make it easier down the road when you want to sort out who gets what. But be aware that this is just a start, because an asset in only one spouse's name may still be subject to distribution.
“Property” includes pretty much anything that has monetary value. A few examples are houses, bank accounts, businesses, retirement accounts, patents and copyrights, investments, furniture, art, and motor vehicles.
The date of separation is crucial, because assets acquired after separation are usually exempt from distribution, meaning they belong only to the spouse who bought them (premarital property is normally exempt as well.)
In Pennsylvania, courts consider couples to be separated when they begin to live “separate and apart.” This means that the spouses no longer have sexual relations with one another. In meeting the “separate and apart” standard, it helps if the spouses don't hold themselves out to the world as a married couple. For example, they don't attend public functions as if they're still married. Spouses don't necessarily have to live in different households to satisfy the separation requirement, but living under the same roof may make it more difficult to prove they've met the standard.
It's important to note that if one of the spouses filed a divorce complaint with the court, the law presumes that the couple started to live separate and apart not later than the date the divorce complaint was served on (legally delivered to) the other spouse. (Pa.C.S. – Title 23 – Chapter 31§ 3103.)
Whenever you obtain property after separation, make a note of the date you acquired it and keep receipts. You may need to prove the acquisition date if there's a dispute about the asset at some point. (It's a good idea to document, as best as possible, the dates any premarital assets were acquired too, if there's any disagreement about when you obtained them.)
As stated above, assets acquired after the date of separation are generally considered exempt from distribution, unless a spouse used marital funds to buy that asset. So if a separated spouse dips into a joint marital account to buy a new television, the law will likely consider the TV to be part of the marital “estate.”
Property is characterized in one of two ways under the divorce laws in Pennsylvania: “marital property” or “non-marital property.” (Pa. C.S.A. - Title 23 - Chapter 35 §3501.) An asset's designation plays an essential role in the process of property distribution. As a general rule, marital property is subject to distribution; while non-marital property (sometimes called “separate” property) isn't.
Assets and income acquired during the marriage are presumed to be marital property. In light of that, the name under which property is owned doesn't necessarily determine a property's designation as marital or separate. For example, if an automobile purchased during the marriage is in only one spouse's name, the law will likely consider it part of the marital estate.
For the most part, “non-marital” assets are:
Something to keep in mind is that although a premarital asset may be excluded from distribution, the increase in that asset's value during the marriage may not be. In other words, the law may designate the dollar amount of that increase as marital property.
Commingling (mixing) separate property with marital property can result in non-marital assets losing their exempt status. You might see this where a spouse takes money from a bank account opened and funded before the marriage and transfers that money into a joint account owned with the other spouse. If you want to keep your separate property for yourself, your best bet is to isolate it from anything related to the marriage.
You'll need to find out what each asset is worth. Finding the current value of some assets, like a bank account, is easy, but other types of property can pose challenges. Houses, businesses, and expensive personal property (like artwork and jewelry) will likely require professional appraisers to calculate the fair market value. Note that retirement accounts—especially defined benefit pension plans—can be difficult to value. For these assets, you'll probably need to retain an actuary who can figure out these values.
Finally, even though courts won't divide separate assets in a divorce, courts can consider their value when deciding how to divide marital property. For example, if one spouse inherited a large amount of money, the court may take that into account when deciding how to divide the marital estate.
Divorcing couples may follow the steps above, and amicably decide how to divide their property. (Many couples settle their differences with the aid of their lawyers or a qualified divorce mediator.)
In Pennsylvania, spouses can enter into a written contract known as a divorce settlement agreement (sometimes referred to as a “property settlement agreement” or “marital settlement agreement"), which memorializes their agreed-upon terms. Couples then submit their written agreement to the court, so it can be incorporated into their final divorce judgement.
Because it usually saves time, anxiety, and attorney's fees, a written settlement agreement is the preferred method of resolving property division in a divorce. And these agreements aren't limited to property. In fact, they almost always address custody and parenting time (visitation), child support, alimony (spousal maintenance), and any other issues present in the divorce.
However, if spouses can't agree, they'll end in a court trial, where a judge will decide the outstanding issues, including property distribution.
If spouses have a valid prenuptial or postnuptial agreement which addresses the division of property in the event of divorce, courts will be guided by the agreement's terms.
Other than that, and as referenced above, in divorce in Pennsylvania, splitting assets is accomplished by applying the theory of “equitable distribution”. Note that “equitable” doesn't always mean “equal”.
Pennsylvania courts consider several factors when determining equitable distribution, some of which are:
And, when making decisions about property division, Pennsylvania courts won't consider either spouse's “fault” in causing the divorce. (Pa. C.S.A. - Title 23 - Chapter 35 § 3502.)
Pennsylvania's divorce law gives the court the right to allow one or both of the spouses to reside in the marital home, during the divorce or afterwards. But there are any number of ways to deal with the eventual distribution of the house.
The easiest way to divide the house is to sell it and allocate the proceeds between the spouses. But that's frequently problematic, especially if there are young children involved, because the spouses might not want to uproot them. In those situations, it's not unusual for one spouse to buy out the other's interest. This is often accomplished by having the spouse who will retain the house give up other assets of equal value. Another method is for that spouse to refinance the house and use the proceeds to pay off the other spouse.
It's also common to wait to sell the house until a certain date, usually tied to an event, like the youngest child's entry into, or graduation from, college. The spouse who resides in the house during that interim period is normally responsible for paying the costs associated with living there.
Debts must also be divided in divorce. You'll need to identify, characterize, and value all debts. Be sure to make a list, and consider all credit cards, loans, mortgages, promissory notes, and liens.
Debts are characterized and valued much like assets, but there are some differences. Debts incurred during marriage are generally considered marital obligations, unless a spouse can show that being held responsible for a particular debt is unreasonable. An example could be where one of the spouse's ran up significant gambling debt that the other spouse had nothing to do with.
Debts incurred before marriage are generally separate, and assigned to the spouse who incurred them (unless the couple jointly incurred the debt before marriage). In addition, if a debt accrued before marriage for a marital purpose (such as a loan for wedding costs), there's a chance a court would characterize it as marital.
Debts incurred after the date of separation generally aren't considered marital debt, unless the circumstances of the debt would indicate otherwise.
Be aware that creditors aren't usually bound by your divorce judgment. So if the judgment states that your spouse is supposed to be paying off a marital loan after the divorce, but that spouse then stops making payments, you could be liable for the shortfall.
In that regard, Pennsylvania law holds that when one spouse incurs a marital debt for items necessary for the “support and maintenance of the family” (like food, clothing, and such), both spouses are responsible, and a creditor can sue both. But if the creditor obtains a judgment against both spouses, it has to try to collect first from the spouse who actually incurred the debt. If the creditor can't find assets to satisfy the judgment, then the creditor can attempt to collect from the other spouse. (Pa. C.S.A. - Title 23 - Chapter 35 § 4102.)
If at all possible, use marital property to pay off as much debt as you proceed through the divorce. This will help lessen the possibility of post-judgment problems.
Before attempting to resolve your differences with your spouse on your own, you may want to consult with an experienced family law attorney who can explain your rights and obligations in a divorce.
If you and your spouse are able to reach an agreement on your divorce issues, you should definitely have your own attorney review any proposed agreement before you sign it. That's the best way to ensure that your rights are protected and that you fully understand the legal consequences of the agreement.
If you find yourself battling your spouse over many issues in your divorce, you'll probably need an attorney to assist you in attempting to settle your differences, and to represent you in court, if necessary.