Source: http://bloomsburgattorney.com/propertyDivision.php
Timestamp: 2019-04-24 18:37:41+00:00

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One of the most important aspects of your divorce is the fair division of your marital property, assets and debts. The division of marital assets and debts in Pennsylvania is a three step process known as Equitable Distribution. The first step is to determine the value of your marital estate (in other words, what assets and debts have you accumulated during your marriage). The second step is to determine what percentage of the marital estate you should receive and what percentage of the marital estate your spouse should receive. The final step is to determine how to accomplish that division. Common to the division of marital property are questions like: Who gets the house? Does everything get sold and divided between us? If property is in my name alone, is it still marital? What is marital property and what isn't? How will I make sure I am protected? It is critical to protect yourself in this regard from the moment you know that you will be divorcing. Decisions made early in your case can have serious and long lasting impact and consequences. Your equitable distribution lawyer will be able to give you experienced counsel and knowledgeable advice in the area of divorce and property distribution in Pennsylvania.
Regardless of your choice of divorce process (Mediation, Collaborative or Litigation), call an experienced divorce attorney at the firm. She has years of experience handling all types of divorce cases across Pennsylvania.
Property that each spouse owned before the marriage, as well as property given to or inherited by one spouse during the marriage, usually remains that spouse's separate property. It may, however, be considered as part of the total circumstances in determining a fair allocation of the marital property. Non-marital assets are defined in 23 Pa. C.S. �3501(a)(1)-(8).
If non-marital property is not kept separate from marital property, it may lose its separate characterization and become subject to division.
Therefore, property acquired prior to the marriage is not marital property and under the Divorce Code, which only empowers the court to equitably distribute marital property, it may not be distributed. Estep v. Estep, 326 Pa. Super 404, 474 A.2d 302 1984). In Estep, the court noted it is the responsibility of the Legislature, or the parties themselves by agreement, to provide for the inclusion of premarital property accumulated in anticipation of marriage. Id.
The increase in value of non-marital property is marital property subject to distribution. 23 Pa. C.S. �3501.
The division of marital assets is governed by 23 Pa. C.S. �3502. The statute lists 13 factors which are relevant to the equitable division of marital property. The court is instructed to "equitably divide, distribute or assign, in kind or otherwise the marital property between the parties without regard to marital misconduct."
The inability of the court to consider marital misconduct in the context of the division of the marital estate is a difficult concept for many people to accept in this process. They feel as though there should be an element of punishment for the offending spouse.
The task in dealing with the division of assets can be categorized in three steps: (1) what are the marital assets [1 (and debts) and what are they worth?; (2) what percentage should each party receive?; and (3) how will the parties receive their percentage share?
Defining the marital assets and debts and determining their worth is the process of defining the marital estate. The attorney needs to assist his or her client in identifying their "property."
In many cases the parties can stipulate to the value of many of the assets in the marital estate by agreeing to use an objective standard for valuation of a particular asset. That may be a real estate appraisal for the marital residence or a pension valuation report for a spouse's retirement plan. It may be a business valuation report or a personal property appraisal.
Another issue that affects the value of the marital estate is the date of separation. The date of separation can significantly affect the value of the marital estate based upon changes in market value (real estate, 401(k) plans).
23 Pa. C.S. �3103 provides a definition regarding separation.
"Separate and apart." Cessation of cohabitation, whether living in the same residence or not. In the event a complaint in divorce is filed and served, it shall be presumed that the parties commenced to live separate and apart not later than the date that the complaint was served.
While the language "not later than the date that the complaint was served" provides an absolute end date for the marriage, it does not eliminate the possibility that the parties "separated" long before the time the complaint was served. The inference of the presumed date of separation shifts to the opposing party the burden of producing evidence to disprove the presumed fact; failure to meet this burden of production will normally result in a decision in favor of the party invoking the presumption. McCoy v. McCoy, 2005 Pa. Super. 411, 888 A.2d 906 (2005).
The court may consider each marital asset or group of assets independently and apply a different percentage to each marital asset or group of assets.
The final task for the attorneys and the parties (in a negotiated settlement) or the court (in a litigated case) is to determine how the distribution will be accomplished. Will the parties have to liquidate assets (i.e. sell the marital home)? Will one party obtain a loan to purchase the other party's interest in an asset? Can payments be made over time and what are the potential tax consequences? How to handle the parties' creative solutions (allowing assets to remain jointly titled or removing names from ownership but not obligation)?
(2) Property excluded by valid agreement of the parties entered into before, during, or after the marriage.
(3) Property acquired by gift, except between spouses, bequest, device, or descent or property acquired in exchange for such property.
(5) Property which a party has sold, granted, conveyed, or otherwise disposed of in good faith and for value prior to the date of final separation.
(6) Veterans' benefits except from attachment, levy, or seizure pursuant to the act of amended, except for those benefits received by a veteran where the veteran has waived a portion of his military retirement pay in order to receive veterans' compensation.
"The increase in value of any non-marital property acquired pursuant to subsection (a)(l) and (3) shall be measured from the date of marriage or later acquisition date to either the date of final separation or the date as close to the hearing on equitable distribution as possible, whichever date results in a lesser increase. Any decrease in value of non-marital property of a party shall be offset against any increase in the value of non-marital property of that party. However, a decrease in value of non marital property of a party shall not be offset against any increase in value of the non-marital property of the other party or against any other marital property subject to equitable division."
Subsection (a.1) is substantial for a number of reasons. First, a decrease in value of one non-marital asset can be used to offset an increase in value of another non-marital asset owned by the same party. Second, a post-separation decrease offsets a pre-separation increase. Third, it is not necessary to use the same valuation date for all non-marital assets. Instead, a party may use the date for each asset that minimizes increase (the party may use either the date of separation or date as close as possible to hearing). Fourth, decreases in a party's non-marital, assets cannot offset increases in marital assets.
For example, a party should not get a larger share of a marital pot because his or her marital assets decreased in value or did not increase as much as the other party's non-marital assets.
Retirement Benefits can be divided into two main categories: Defined Benefit Plans and Defined Contribution Plans.
A Defined Benefit Plan specifies the amount of the benefit the employee will receive upon retirement. The benefit is defined within the plan and is determined by years of service and the compensation the employee earned during employment. With some exceptions, the employee does not have the ability to receive a lump sum distribution from the plan but rather will receive a monthly benefit upon entering pay status. Each plan has a Summary Plan Description that explains how to obtain the benefit and how the benefit is calculated. Examples of Defined Benefit Plans include the State Employees' Retirement System (SERS), the Public School Employees' Retirement System (PSERS) and several Federal pension plans (CSRS, FERS).
Under a Defined Contribution Plan, the employer and employee specify the amount that is being contributed to the plan. The present value of the plan is easily discernable from paper statements provided to the employee or from on-line account inquiries. Types of Defined Contribution Plans include ESOPs, SEPs, Profit Sharing Plans and 401(k)s.
(1) In the case of the marital portion of a Defined Benefit Retirement Plan being distributed by means of a deferred distribution, the Defined Benefit Plan shall be allocated between its marital and non-marital portions solely by use of a coverture fraction. The denominator of the coverture fraction shall be the number of months the employee spouse worked to earn the total benefit and the numerator shall be the number of such months during which the parties were married and not finally separated. The benefit to which the coverture fraction is applied shall include all post separation enhancements except for enhancements arising from post separation monetary contributions made by the employee spouse, including the gain or loss on such contributions.
(2) In the case of the marital portion of a Defined Benefit Retirement Plan being distributed by means of an immediate offset, the Defined Benefit Plan shall be allocated between its marital and non-marital portions solely by use of a coverture fraction. The denominator of the coverture fraction shall be the number of months the employee spouse worked to earn the accrued benefit as of a date as close to the time of trial as reasonably possible and the numerator shall be the number of such months during which the parties were married and not finally separated. The benefit to which the coverture fraction is applied shall include all post separation enhancements except for enhancements arising from post separation monetary contributions made by employee spouse, including the gain or loss on such contributions.
In summary, with respect to deferred distributions of benefits, the benefit is measured at the date of retirement and benefits arising from post-separation monetary contributions of the employee are excluded. Additionally, the coverture fraction equals the length of service during marriage (before final separation) divided by the total length of service up until benefits are paid. Therefore, it is implied that benefits resulting from promotions, etc., after separation (but before retirement) are INCLUDED in the amounts to which the coverture fraction applies.
With respect to the immediate offset of benefits, the present value of benefits is measured at the date closest to the hearing as possible and the present value of benefits arising from post-separation monetary contributions of the employee is excluded. Furthermore, the coverture fraction equals the length of service during marriage (before final separation) divided by the total length of service up until the date that the value of benefits is measured . The implication of this subsection is that benefits resulting from promotions, etc. after separation (but before valuation date) are INCLUDED in the amounts to which the coverture fraction applies.
Other issues to consider with regard to retirement plans in divorce include vesting (retirement benefits - both vested and non-vested - are marital property subject to equitable distribution) and survivorship benefits (issues regarding the cost of same and responsibility for payment).
If immediate offset is the method of distribution, it will be necessary to obtain a present value calculation to determine the value of the asset which is offset against other marital assets and debts. If deferred distribution is used, it may or may not be necessary to obtain a present value calculation for the benefit. Present value calculations can be obtained from a variety of sources including software applications, on-line valuation services and local actuaries.
If retirement benefits are being transferred to the non-participant spouse (often referred to as the "alternate payee"), a court order directed to the Plan Administrator is typically required to preserve the tax deferred status of the funds being transferred. This court order (called a Qualified Domestic Relations Order or QDRO for many types of plans) should be processed at the same time as the request for the entry of the divorce decree. If the QDRO is not entered at the same time as the decree in divorce and the participant spouse dies before the entry of the QDRO, the plan may not honor the right of the alternate payee to receive all or a portion of the benefit. Many plans offer sample QDROs and will review and approve a draft prior to its entry as a court order.
Consider the recent U.S. Supreme Court decision of Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. _____ (2009) where the participant's failure to change his beneficiary designation on his DuPont Savings and Investment Plan (SIP Plan) resulted in the balance in the plan (approximately $400,000.00) being paid to his ex-wife nearly 7 years after the parties divorced. Wife's waiver of her interest as part of the divorce decree was ineffective as to the SIP Plan because such a waiver is only effective if executed through the "plan documents."
Consider Smith v. Smith, 938 A.2d 246, 595 Pa. 80 (2007) where the Court held that the value of the post separation increases in value that occur as the result of legislative action are marital as opposed to post separation increases which occur as the result of post separation monetary contributions made by the employee spouse.
Consider Prol v. Prol, 935 A.2d 547, 2007 Pa. Super. 313 (2007) where the Superior Court held that the trial court's remedy of ordering forfeiture of wife's marital share of a pension as a result of her delay in filing a proposed Qualified Domestic Relations Order (QDRO) was too harsh and inequitable.
While many clients are focused on what percentage of the marital estate they receive, the overall percentage can be less important than the type of asset received. The parties can often overlook elements of liquidity, costs of sale or transfer and tax effects. These factors are 10.1 and 10.2 of the statutory list of factors to be considered by the court when dividing the estate of the parties. When considering their alternatives, parties can and frequently will consider all assets as belonging to the same "class" or category.
1.	A divorcing couple owns a home worth $250,000.00 today with a mortgage balance of $100,000.00. If you represent the spouse who wants to keep the home, what are the considerations? If you represent the spouse who doesn't want the home?
2.	The parties have a marital residence with $100,000.00 of equity and one spouse has a 401(k) with a marital value of $100,000.00. Are these assets equal?
Divorcing spouses also have to consider intangible factors surrounding their marital estate: the marital home, their retirement benefits, and the source of the asset (family gift or sentimental value).
With regard to enforcement of a marital settlement agreement, consider Annechino v. Joire, 946 A.2d 121, 2008 Pa. Super. 50 (2008). The common law rule precluding enforcement in divorce of unmerged property settlement agreements has been superseded by statute (23 Pa. C.S. �3105(a)) which provides that an agreement regarding matters within the jurisdiction of the court in divorce is within that court's jurisdiction regardless of whether it was incorporated into the decree. Additionally, it is irrelevant that equitable distribution was not plead within the divorce complaint as the property settlement agreement is a matter within the jurisdiction of the family court.
With regard to insurance issues, per 23 Pa. C.S. �3502(d), the court can direct the continuation of life and health insurance policies or require the purchase of same where the policy did not exist during the marriage.
(d) Life insurance.--The court may direct the continued maintenance and beneficiary designations of existing policies insuring the life or health of either party which were originally purchased during the marriage and owned by or within the effective control of either party. Where it is necessary to protect the interests of a party, the court may also direct the purchase of, and beneficiary designations on, a policy insuring the life or health of either party.
(f) Equity Power and Jurisdiction of the Court.-- In all matrimonial causes, the court shall have full equity power and jurisdiction and may issue injunctions or other orders which are necessary to protect the interests of the parties or to effectuate the purposes of this part and may grant such other relief or remedy as equity and justice require against either party or against any third person over whom the court has jurisdiction and who is involved in or concerned with the disposition of the cause.
Inheritances are non-marital property to the extent they are not commingled with marital assets. Many times, however, parties have received and dealt with an inheritance before retaining an attorney for divorce. Inheritances received during the marriage and used by the parties or commingled with other marital assets lose their characterization as separate assets. The courts can apportion assets differently so that while the court may divide the majority of an estate on a 50/50 basis, they may distribute a marital asset that has its roots in the inheritance of one spouse on a different basis favoring the inheriting spouse.
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.
Before a client agrees to the assignment of any debt, be sure to consider what, if anything, is security for the obligation. If an asset such as a car is security, the spouse who gets the car should also be responsible for paying the debt associated with the car. If a debt, such as a signature loan or credit card charge, is not secured by property, be sure that the debt is assigned to whoever is more financially reliable or capable of paying the debt. If the client does not want responsibility for the debt and does not believe that his or her ex-spouse will pay it for one reason or another, the client should plan to pay the debt in full prior to the divorce. If neither the client nor his or her spouse has sufficient resources or income to pay off the debt, the two parties can sell an asset and use the money from the sale to pay the debt. Once the debt has been paid in full, it is important that the client save the receipts as proof that the creditor is no longer owed any money.
There are essentially three methods to handle joint debts in a divorce: (1) the debt can be assigned to a responsible spouse for payment with the agreement that the responsible spouse will indemnify and hold harmless the released spouse; (2) the debt can be re-financed into the name of the spouse who will be responsible for the debt; or (3) one of the parties can repay the debt in full prior to the divorce.
The effectiveness of an assignment situation can be increased if a creditor will release the spouse not responsible for payment from the debt. This is called an "assumption" because the spouse who remains responsible for the debt is said to have "assumed" the obligation of the released spouse.
Consider Lizik v. Lizik, 3 Pa. D&C 5 th 484 (2007) where the court found that student loans taken out by wife prior to separation on behalf of the parties' children were not marital debt since there was insufficient evidence that husband and wife had a meeting of the minds to incur the debt jointly.
Contact Elizabeth today to set a free consultation to discuss your divorce, custody, support or other family law matter.

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