Appraisals

An appraisal may be needed to ascertain an accurate value of an asset in a divorce or estate matter. Parties may elect to use one appraiser or have competing appraisers. When choosing an appraiser, it is important to make sure the appraiser is licensed or certified. A licensed appraiser has met the minimum requirements for practice. A certified appraiser must complete additional classroom hours and practice in the field. A list of all licensed and certified appraisers is available on the appraisal subcommittee website.

An ideal appraiser should have prior experience with the exact type of appraisal sought. This would include experience in the geographic market, the type of property, and intended use of the property. You should discuss with the appraiser if any information you supply to them is confidential and should not be included in their report. You should also make it clear who the appraiser is permitted to discuss the appraisal with and/or share the report with. Finally, you should be clear about the valuation date for the appraisal. This may be the date of purchase, date of separation, date of death, or current value. Per the Uniform Standards of Professional Appraisal Practice, appraisers are not permitted to revise an appraisal to account for a different valuation date after completion. Instead, the standards require a completely new appraisal which is not cost-efficient.

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Dividing the Marital Residence

The marital home is often one of the bigger assets to be divided in the context of a divorce. There are two options available regarding division of the marital residence. First, one party can keep the home and buy the other party out for their share of the equity. Equity would be determined by the fair market value of the home minus any mortgages or other liens on the home. The second option is for the home to be sold and the proceeds divided among the party. As a matter of equitable distribution, the disposition of a home would generally not be heard until grounds for the divorce have been established and the matter is scheduled for court. However, the family court has the authority to make determinations regarding a marital home even prior to or an equitable distribution hearing or entry of a divorce decree. The court can grant one of the parties exclusive possession of the home while the divorce is pending under Section 3502 of the Divorce Code. An award for exclusive possession should not be given lightly and the party requesting it has the burden of proving its necessity.

Section 3323 gives the court general equity powers to issue any order necessary to protect the interests of the parties or as justice requires. This can include an order mandating a party to pay the mortgage on time, forcing the home to be sold if neither party can afford it pending divorce, and even decisions on which realtor should be used or what the listing price should be and decisions on dropping the price. If reaching a private agreement on what to do with a marital residence, you should contemplate issues which may arise and set forth contingency plans. For example, you can spell out how all expenses of the home will be covered post-separation. You can dictate a timeline for buy-out of equity if one party is keeping the home. Commonly, a refinance is done to remove the other party’s name from the financial responsibility for the home and to access funds necessary for the buy-out. In the case of sale, you can specify at the outset how a realtor will be chosen, what range is acceptable for the asking price, under what circumstances reductions will be made to the listing price if the home has not sold within a certain time frame. It is also useful to explain how parties will be compensated, if at all, for any pricey expenses/repairs above the costs of regular maintenance to ensure the home will sell. Lastly, you want to spell out how the proceeds will be split.

Click here to read more about dividing property.

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Discussing Your Home During Divorce

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If you are overwhelmed with the divorce process it is important to take a step back and get organized.  One of the most overwhelming aspects of divorce is related to getting your financial documents gathered and assessed.  For our clients in Bucks and Montgomery Counties here in PA, we know how stressful this can be, especially when it comes to your home.

 

What will happen to your home when you get divorced?  For most couples the marital home is one of the largest assets in their financial portfolio.  Typically there is a mortgage attached to the home and equity that needs to be evaluated.  One party may want to keep the home, but doing so can cause financial issues.


The best way to answer the question of “What should we do with the house in our divorce?” is to first take a look at the following:  


  1. The most recent appraisal of the marital home or fair market value. This is an important first step in determining what the house is worth in today’s market.  We recommend checking out comparable homes in your area that are on the market and that have recently sold.  Additionally, you will want to talk to a local realtor for current market conditions and determine if it is a seller’s market.    


  1. Your current mortgage statement and home equity line of credit statements.  With the appraisal and the debt owed, we can determine the equity you have in your house and come up with a plan to divide that equity or have one spouse buy the other out of the house.  If you have a home equity line of credit that will reduce your overall equity in the house and, when sold, will be paid off first from any proceeds.  


  1. Detailed information on who owned the home at the time of marriage.  If one spouse owned the home before you were married, then their initial investment of a down payment and some appreciation may not be subject to distribution. We can only divide appreciation that was earned during the course of the marriage.  Additionally, if one of you owned the house and the other paid for improvements or paid down the mortgage, then those factors would also need to be discussed.


  2. Copy of the deed.  It is very important to have a clear picture of who has legal rights to your home.  One or both of you may be on the deed and the distinction is important for many reasons we can discuss.  Additionally, if one of you wants to buy the other out of the house then the deed may need to be changed.  


When we work with clients like you we explain each step of the process and look for every opportunity to ease your stress.  Your current housing situation and how you want to start your post-divorce life are guiding factors in our work as we negotiate on your behalf.  Getting all of your financial documents organized will make this easier for you to understand and also considerably reduce your legal bills.  

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How to Rollover Retirement Assets

Retirement assets are often one of the substantial assets in a marital estate. It is possible to do a tax-free rollover of retirement benefits as part of a divorce. First, you will need to know what kind of benefits are involved. Qualified benefits will require a Qualified Domestic Relations Order (QDRO) to achieve the tax-free rollover. Qualified plans include defined contribution plans such as 401K as well as defined benefit plans such as pensions. Federal retirement plans (e.g. CSRS, FERS, TSP) also require a court order to achieve the rollover however the appropriate order for federal plans is a Court Order Acceptable for Processing (COAP). Once the QDRO or COAP is drafted to dictate the percentage or fixed amount to be rolled over, it is signed by the parties and then the Judge prior to submission to the plan for execution.

Non-qualified plans, most notably IRAs, do not require a specific order to do a rollover. Often, just a copy of the settlement agreement or Order and copy of the Divorce Decree may be sufficient to complete a rollover. It is important to make sure the rollover is direct to ensure it is tax-free. If the funds are instead withdrawn with the intention to re-deposit into the other party’s account, there will be a 20% tax withholding on the withdrawal in addition to any early withdrawal penalties that may be applicable. It is also a good idea to make sure the rollover is done promptly after the divorce. As the party receiving funds via rollover, be careful as to how you elect to receive distributions once the funds are in your account. Similar, tax and any applicable early withdrawal penalties will apply to you once accessing the funds.

Click here to read more about dividing marital property.

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Basic Requirements for a QDRO

A qualified domestic relations order or QDRO for short, is a document that is needed to split certain retirement benefits in the context of a divorce. Specifically, all benefits governed under ERISA (Employee Retirement Income Security Act of 1974) require a QDRO for division. ERISA plans may include pensions, 401Ks, profit-sharing plans, and stock ownership plans. A few examples of plans not governed by ERISA are local state or municipal plans, IRAs, or military benefits. There are certain base requirements for all QDROs. One, you must identify the name and address of both the participant spouse and the alternate payee, or party now standing to receive a portion of the benefits.

Two, you must specify exactly how much the alternate payee is to receive. This can be done a few different ways including as a fixed dollar amount or a percentage of the marital portion of the plan. The marital portion will be determined by looking at the years married in comparison to the total number of years as an employee earning benefits. Third, you need to explain when or how the benefits will be distributed. For many retirement benefits, the alternate payee cannot begin to collect until the participant spouse retires. Finally, the plan must be clearly identified. Certain plans may have specific language they want used or a particular template to file. It is wise to enlist the services of a company that routinely drafts QDROs to ensure the language is correct and all requirements are met.

Click here to read more about retirement benefits in divorce.

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Dealing with Pre-Marital Assets

The Divorce Code defines marital property as that acquired from the date of marriage through the date of separation. It may also include the increase in value of property earned prior to the marriage to the extent the increase occurs during the marriage. A popular example of this may be a retirement plan or savings account. With assets or property earned prior to the marriage, it is important to ascertain the value of that property as of the date of marriage to assign that portion to the party who owns it.

The court may determine that an asset that is technically outside the definition of marital property is still up for distribution. This is a possibility for long term marriages such that the longer you are married, the less likely you are able to successfully keep certain assets off the table as being pre-marital. For example, Bucks County has applied a vanishing credit for pre-marital assets. The separate nature of a pre-marital asset is reduced by 5% a year such that there is no longer a credit after 20 years and the entire asset is considered marital.

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, Spouse A can still claim 75% of the down payment. However, if the parties separate after 20 years, there is no credit back to Spouse A for that initial investment of pre-marital funds.

The rules on credit for individual or pre-marital property can vary county to county since it’s not a statute, but more or less a policy used by the respective Masters when looking at the marital estate in a divorce matter. It is a good idea to be careful about commingling any separate or non-marital property with marital property.

Click here to read more about division of property.

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Preparing for Equitable Distribution

Equitable distribution is the term used in Pennsylvania referring to division of marital property at the time of divorce. Marital property will consist of nearly everything acquired in either party’s name from the date of marriage through to the date of separation. Equitable distribution does not necessarily mean a 50/50 split of all marital property. Instead, the statute on equitable distribution sets out 13 factors to be considered. In any divorce involving equitable distribution, the parties are tasked with identifying all the property to be considered. Specifically, Pennsylvania Rule of Civil Procedure 1920.33 discusses the requirement of each party filing an Inventory. The Inventory should list all marital assets and debts at issue. An Inventory must be filed prior to requesting a hearing on equitable distribution. Further, if you are served an Inventory first, you have twenty (20) days to file your own Inventory. In this regard, it is certainly helpful to have some understanding of what you and your spouse have prior to filing for divorce. You can supplement the list of marital property if you do not have knowledge of all the assets and debts at the outset.

The second part of Rule 1920.33 goes over the requirements for a pre-hearing statement. This statement is to be prepared when your case is ready to go to court on equitable distribution. Again, you will list all marital assets and debts. However, by this stage in the divorce you should have gathered all the information you need and be able to provide more detail regarding the assets, debts and their values or balances. Corroborating documentation should be attached to the pre-hearing statement as exhibits. Pre-hearing statements should be filed at least sixty (60) days prior to a scheduled equitable distribution hearing. The court does have the ability to impose sanctions for failure to file these forms as directed by the rules. It is important to work with an experienced family law attorney when dealing with equitable distribution matters to ensure all marital property is identified and subsequently submitted to the court in a timely fashion.

Click here to read more about divorce.

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Pensions and Retirement in Divorce

Pensions, as well as other retirement plans, are often one of the assets up for division in a divorce. The court will equitably divide the marital portion of a pension plan after considering all the relevant factors in equitable distribution. The marital portion of a plan would be the portion that accrued from the date of marriage through the date of separation. In some cases, the entire pension will be marital depending on the timing of the marriage alongside the start date of the pension plan. The marital portion will also include investment experience on the marital portion that accrues post-separation. It will not include contributions by the employee made post-separation.

A court order is necessary to effectuate a distribution of a pension, or other qualified plan, in a divorce matter. Often called a qualified domestic relations order, or QDRO, the court order provides requisite information to the plan administrator regarding the split of the pension. Qualified plans are governed by the Employee Retirement Income Security Act (ERISA) and the QDROs allow an exception to ERISA’s anti-alienation provisions. QDROs may also be utilized outside of pension plans to allow for a tax-free rollover of benefits. A popular example would be a 401k or other profit-sharing plan. It is important to check with the plan administrator to confirm if a special court order is necessary in the context of a non-qualified plan. In some instances, a property settlement agreement or transcript describing the transfer along with a divorce decree is enough.

Click here to read more about equitable distribution.

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Dividing Property in Divorce

Equitable distribution is the term used in Pennsylvania referring to division of marital property at the time of divorce. Marital property will consist of nearly everything acquired in either party’s name from the date of marriage through to the date of separation. It will also include pre-marital assets that have increased in value during the marriage. Equitable distribution does not necessarily mean a 50/50 split of all marital property. Instead, the statute on equitable distribution sets out 13 factors to be considered. Those factors are listed in 23 Pa C.S. 3502. While the length of marriage is a factor in equitable distribution, it does not mean that assets won’t be split at all in shorter marriages.

If the parties have to go to court for equitable distribution, they will be required to submit a statement beforehand laying out what they allege is the marital property at issue, how the factors listed affect their case, and what they are ultimately seeking as an “equitable” distribution. It is important to have knowledge of all the marital assets and debts at issue. Additionally, parties should have documentation to prove the value of any assets and debts to be addressed. Key dates for valuation may include date of marriage, date of separation and final hearing date. Items acquired after the date of separation but prior to the final divorce decree should also usually be excluded.

Click here to read more about division of property.

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Impact of Inheritance

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The receipt of an inheritance may impact your divorce or support case. Regarding divorce, and specifically equitable distribution of marital property, Section 3501 of the Divorce Code defines what will be considered marital property, and up for division, versus what will be considered non-marital property. Marital property includes all property acquired by either party from the date of marriage through the date of separation. There is a presumption all property acquired during the marriage is marital regardless of how title is held (e.g. individually vs. jointly). However, property received as a gift, bequest, devise or descent is non-marital per 23 Pa. C.S. 3501(a). Accordingly, an inheritance that is received during the marriage can still be claimed as non-marital property. As a practical tip, parties should avoid commingling inheritance funds with other marital funds. Inheritance funds may still need to be disclosed since the separate assets of the party are a factor for equitable distribution under 23 Pa. C.S. 3502.

Money received by way of an inheritance is similarly not to be considered income for a support matter. This was established in the case of Humphreys v. DeRoss, 790 A.2d 281 (Pa. 2002) wherein the court noted that the term “inheritance” was not expressly listed in the statutory definition of “income” under 23 Pa. C.S. 4302 and so was not intended to be included. However, Humphreys also established that receipt of an inheritance may still be a factor under Pennsylvania Rule of Civil Procedure 1910.16-5. Rule 1910.16-5 states factors for the court to consider for deviation from a guideline support obligation. One of the factors the court may consider is the assets and liabilities of the parties. In E.R.L. v. C.K.L., 2015 PA Super 220, the court upheld an upward deviation of a child support award where father had just received a $600,000 inheritance. The base support award was appropriately calculated in that case without the inclusion of the inheritance money.

Click here to read more about division of property in divorce.

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