What is Considered Marital Property in Pennsylvania?
The division of marital property is one of the most important issues that spouses will have to face during the divorce process. The parties must clearly understand what marital and non-marital property is to be aware of what part of property each of the spouses will receive during the division process and in what percentage ratio.
Pennsylvania marital property laws establish that all property falls into two categories: “marital” and “nonmarital”. The important point is that only marital property is considered the subject to equitable distribution. The term “marital property” refers to all assets and funds that were acquired by one or both spouses during their joint marriage, with a few exceptions. In this context, in order to determine what would be considered your marital property, it is necessary to take into account the period from the date of marriage registration to the date of couple’s separation.
According to the PA Divorce Code, marital property may additionally include an actively appreciated value of the property – cases when the property acquired before the marriage by one spouse has risen in value due to the efforts of the other or both spouses. To better understand the property classification principle described above, let’s consider the following example.
Example: Let’s imagine that at the time of the wedding, one of the spouses had $50,000 in their bank account. If the value of this account goes up to $75.000 during the marriage and the couple decides to divorce, the $25.000 of the total amount will likely be defined as marital property subject to an equitable division. A similar rule applies to most types of personal property, including real estate, family businesses, cash, virtual assets, vehicles, and bank accounts (mostly retirement accounts).
Is Pennsylvania a Community Property State?
The community property states are those where marital property is considered to be all property acquired by spouses during marriage and is subject to equal division between the parties in the event of the divorce. There are currently 9 such states in the USA. Pennsylvania, however, is not among them and is an “equitable distribution” state. The definition of “equitable” is based on the principle that marital property and debts of the spouses in a divorce are divided by the court in a fair way.
In this context, a fair division of property differs from an equal (50/50) one. In the divorce proceedings, equitable distribution in PA often leads to situations where the property of the spouses is divided in a ratio of 65 to 35 or even 80 to 20. The main goal pursued by the court when considering a divorce case is to fairly and equitably divide property and debts between spouses, taking into account their specific situation and the state legislation.
Given the fact that Pennsylvania is not the community property state (having a more flexible system for the equitable division of property), division attorneys play a significant role in divorce proceedings, as they:
- advise spouses on the nuances of Pennsylvania Divorce Code
- help them reach the mutually-beneficial agreement on the division of marital property
- give their clients an idea of how judges may apply the law in certain specific cases.
In such a situation, the parties who have a legal representative in court can count on the most favorable division of property and will almost certainly be better prepared for the final decision of the judge.
How to Get the Most Equitable Distribution in Pennsylvania
Spouses do not always manage to agree on the division of jointly acquired assets. In such cases, the court resorts to the use of an equitable distribution model, carefully examining all possible aspects regarding marital property of a husband and a wife. In accordance with the Pennsylvania divorce law, property distribution factors are:
- ability of each spouse to provide for their own lives after divorce (employability, estate, liabilities, and needs);
- current income and financial obligations of each spouse (including medical, retirement, insurance, or other payments);
- length of the marriage, as well as the age and health of each spouse;
- profit or loss of each of the spouses in the context of the depreciation or appreciation of property acquired during the marriage;
- presence of minor children under the guardianship of one of the spouses;
- other factors that may be determined by the court as relevant and significant.
All cases on the division of property are case-specific, and, therefore, the listed factors may have a different degree of importance and priority in your situation. Generally, the fact that one of the spouses is a custodian for minor children is of the greatest importance for the court.
Dividing Marital Assets and Debts
When defining and classifying marital property of both spouses, special attention is paid to their assets and debts. Debts include lien rights and various credit obligations, such as mortgages, active loans, and credit card debts.
In the course of the divorce proceedings, the court carefully examines the specifics of the acquisition of certain debts and assets by the spouses. The court decision clearly determines what property and how much money each of the spouses will receive. Also, assets and debts can be used in combination as a balancing tool. For example, if a wife is awarded more property than her husband by the court decision, she may also receive more debt. This is a standard practice that underlies the principle of equitable distribution of property described earlier. If the divorcing spouses have similar incomes from their jobs and the marital assets include a home and modest retirement accounts, the courts will often order a 50/50 division.
Who Gets the House in a Divorce in PA?
The house is one of the most important assets in the divorce process, and, since it is often marital property in PA, its division may raise many issues. Each spouse has a chance of getting the house in the divorce in Pennsylvania, but it depends on the overall family and financial situation of each person. Before deciding what to do with the house, the judge hears the evidence of the spouses and takes into account the appraised value of the house.
Generally, when it comes to the divorce with house division, there are two common scenarios:
- The judge has the power to order the parties to sell the house and share the net proceeds between them (provided that the mortgage and loans secured by the house are paid off).
- By the court decision, the house remains the property of one of the spouses, and its value is attributed to this spouse in the equitable division of property.
Resolving situations where spouses fail to reach an agreement on the equitable division of marital property in PA may require a number of formal steps. Among other things, these steps include obtaining informal and formal (if necessary) recommendations from a court-appointed master. If this does not help the parties to agree, the case is transferred to the judge. They conduct an official trial during which the witnesses testify and the parties to the process try to provide evidence of their rightwards.
Removing Marital Property Before Divorce
With a lot of property or a significant amount of cash at their disposal, one spouse may be tempted to hide these assets from the other spouse. It is important to note that removing assets before the divorce is a rather reckless idea that can result in a number of legal consequences for the party that decided to take such a step.
When talking about the removal of property of spouses before divorce, it implies not only a violation of fiduciary duties, but also the commission of a crime. This may result in criminal prosecution. Thus, the offending party simultaneously risks ending up in prison and being obliged by the court to pay restitution to the other spouse. There is a serious probability that the court will recognize the actions of the husband/wife as fraudulent, and order some or even all of the property in the divorce proceedings to be given to his/her spouse.
Today, successfully removing assets prior to divorce is nearly impossible with the implementation of the discovery process. According to it, spouses are required to reveal their financial situations to each other, including bank accounts, finances, and business assets. Any attempt to hide a certain asset may be exposed during a discovery process, after which the spouse who was caught will definitely face consequences in court.
There is no doubt that the removal of marital property before the divorce can only result in a host of negative outcomes. When planning to take such a step, one or another party to the divorce should consult a divorce attorney. It is a specialized lawyer who will be able to fully explain what risks and possible sanctions such illegal actions entail. In addition, the divorce attorney will help one of the spouses build a high-quality defense strategy in the court, which will be the key to obtaining a fair amount of property during the divorce.