In a Divorce, Who Gets What?
It all depends on how the marital property is divided. The law defines marital property as all property acquired during the marriage prior to the date of final separation. It is the time of acquisition that matters most, not the title. Marital property typically includes a home, car, furniture, jewelry, electronics, a business, retirement accounts, or investments.
Exclusions from marital property include property acquired prior to the marriage, property acquired by gifts and inheritance, property acquired after separation, and property excluded by a prenuptial agreement. While gifts from third parties are excluded as marital assets, gifts between spouses are in fact marital property.
Although certain property may be non-marital, the increase or decrease in value of non-marital property is marital property. The increase in value for non-marital property is typically measured from the date of marriage until the final date of separation. Pennsylvania law considers any appreciation in value to be marital regardless of whether it increased by way of inflation, market forces, or the contributions and efforts of one spouse.
The law was recently amended to state that any increase subject to distribution would be the lesser of (a) the increase from the date of marriage to the date of separation or (b) the increase from the date of marriage to the date of trial. This was amended to protect a spouse who, for example, had a substantial increase in value of a stock from the date of marriage to the date of separation, but the stock price plunged from the date of separation to the date of trial. Under those circumstances, it would be grossly unfair to value that asset as of the date of separation.
Property that is otherwise non-marital can be transformed into marital property. Where a spouse contributes non-marital property into a joint account or conveys an asset into joint title, it converts it into marital property. In addition, when a non-marital asset is sold and the proceeds are commingled with marital funds to acquire new property, the new property is marital. For example, if one spouse owned a home prior to the marriage and sold that home in order to make a joint purchase on a new home, the jointly purchased home will be included as a marital asset.
Equitable distribution does not only consider the assets, but also the debts of the parties. Marital debt is defined as any debt incurred after the date of marriage and before the date of final separation. Property that has been mortgaged or encumbered in good faith prior to the date of separation is subject to equitable distribution. A common example might be if the parties took a line of credit on their home. Unsecured debts such as credit cards, if incurred prior to the date of separation, are included in the marital estate even if in the name of an individual spouse.
Once we determine the marital estate, the question is: how is it divided? If divorcing spouses cannot agree on how to divide their marital assets and debts, the spouses will be required to go through the formal court process for equitable distribution. Equitable distribution of the marital property takes into account a number of factors to determine what is equitable in order to achieve overall fairness between the parties. In essence, it is not what is equal, but what is fair. A determination of what is fair can often be unpredictable and varies from case to case.
Some of the factors the courts may consider in dividing the marital property are the parties’ prior marriages, age, health, employability, non-marital assets, and the standard of living during the marriage. However, the two biggest factors are usually the length of the marriage and any income disparity during the marriage between the parties. Marital misconduct, such as infidelity, abandonment, or abusive conduct is generally not a factor relevant to the equitable distribution of marital property.
In some marriages, one spouse focuses on the home and family while the other spouse focuses on his or her career. The spouse that focuses on the home and family may sacrifice his or her career and come through the divorce with limited earnings and employment history. Such a spouse may be dependent on the earnings of the spouse who focused on his or her career. Thus, when the parties separate, that spouse is at an economic disadvantage. Taking the equitable distribution factors into consideration, a court may determine, for example, that the spouse that focused on the family may be entitled to more than a 50% share of the marital estate. Such a determination provides an equitable, or fair, result to the spouse who will earn less for years to come after the divorce.
In conclusion, equitable distribution is a very important aspect of any divorce proceeding. It is important to make a careful and thorough analysis of the property that comprises the marital estate, and its corresponding value. Equitable distribution of the marital estate does not always mean equal distribution. The quest by the courts is to make it a fair distribution.
By Stephen M. Ault, Esquire
Espinosa & Associates, LLC
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