Diminishing Credit

Diminishing credit is a concept that property brought into a marriage loses its separate nature and becomes marital in nature as the marriage progresses. The court may give credit for separate property brought into the marriage depending on the circumstances. Generally, any credit to be received decreases with the length of the marriage. For example, Bucks County will reduce the credit by 5% a year such that there is no longer a credit after 20 years. A prime example of a situation where this rule would be applicable is the purchase of a marital home. Say Spouse A contributed $40,000 of their pre-marital money to the purchase of the house. If the parties separated after 5 years, the amount of Spouse A’s individual contribution is reduced by 25%. Accordingly, Spouse A would argue that 75% of the $40,000 down payment, or $30,000, is their separate property and not subject to equitable distribution in the divorce. In contrast, Chester County applies a 10% reduction per year so that after 10 years there is no credit. In the above example, after 5 years 50% of the credit will have vanished so that Spouse A would only be able to assert $20,000 as separate property not subject to equitable distribution.

Since the diminishing credit is not a statute or official rule but more or less a policy used by the respective Masters when looking at the marital estate in a divorce matter, it varies from county and county. In that regard, it is important to work with an attorney who is familiar with the county where you are seeking a divorce. It is practical advice to avoid where possible the commingling of individual property with marital property. It will be hard to make an argument on the amount of individual property that should be credited to a party if it’s hard to trace the source of the funds. You ultimately risk all of the assets being addressed as marital property in equitable distribution and subject to division with your spouse if you cannot provide clear proof of their separate nature.