Grounds and Equitable Distribution in Montgomery County

Montgomery County has a different procedure regarding grounds for divorce and equitable distribution matters. Once grounds are established and discovery is complete, the moving party should file a Motion for Entry of Grounds and Appointment of an Equitable Distribution Master. The moving party will now have to pay a $400 fee at the time the Motion is filed. The Motion must certify that all discovery is complete. A list of all the assets and debts at issue along with their corresponding values must also be included. Finally, the initial pre-hearing statement should be attached including a completed Inventory and Appraisement. Once the Motion and all its required accompaniments are filed, a copy of the same should be served on the other party. A Certificate of Service should then be completed and filed with the court.

The non-moving party has forty-five (45) days from the date of service to file their own pre-hearing statement and Inventory and Appraisement. Similarly, a copy should be served on the moving party and a Certificate of Service should be filed with the court. The non-moving party must also certify that all discovery is complete and include a list of all assets and debts with values as of the date of filing the certification. The failure of either party to comply the Rule may result in sanctions such as barring testimony or prohibiting introduction of certain evidence at the equitable distribution proceedings from the party that failed to comply. Where equitable distribution, alimony or counsel fees is not at issue or has settled by agreement and grounds have been established, the moving party can file a standard praecipe to transmit the record for divorce decree.

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Pensions in Pay Status

Pensions already in pay status at the time of separation require additional considerations in a divorce matter. The pensions can still be divided as a marital asset however the method of valuing the total value of the pension for distribution is altered. This is because often elections for survivor benefits are made at the time the benefits commence and are usually irrevocable. Accordingly, any survivor benefit should be valued separately and set against the value of the pension itself. Pensions in pay status also present a unique issue when it comes to support.

Based on the case law established in Pennsylvania it is impermissible to use a monthly pension benefit as income available for support and also divide the pension itself as an asset in equitable distribution. This was made clear in Cerny v. Cerny, 440 Pa. Super. 550 (1995) and reiterated in Rohrer v. Rohrer ,715 A.2d 463 (1998). This same rule extends beyond just monthly pension benefits as evidenced by the fact pattern in Cerny. There, Husband had received a lump sum payment from his employer following termination. The lump sum was split as an asset and the figure received was also the basis for income available with respect to the support award. Husband was successful in appealing the decision such that the payment was only considered for support purposes and deemed a separate asset for equitable distribution purposes.

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Important Dates for Defining Marital Property

There is often a misconception that assets and debts individual names will not be divided as part of a divorce action. This is simply not true. Section 3501 of the Divorce Code defines marital property as anything acquired by either party from the date of marriage up to the date of final separation. It also includes any increase in value on pre-marital assets. In the event of reconciliation after separation, the time frame for items acquired during the marriage and ultimately subject to distribution would change as the Divorce Code refers to final separation as the date to consider when determining the marital estate.

Case law has distinguished what actions/behavior will be considered a successful reconciliation, hence eliminating any prior date of separation for cut-off of the marital estate, versus those actions/behavior that will not change the initial separation date. Separation for the purposes of divorce is defined as the “complete cessation of any and all cohabitation.” Cohabitation, though not specifically defined in the Divorce Code, is generally understood to be living and dwelling together as husband and wife with the mutual assumption of all marital rights, duties and obligations.

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Mere attempts at reconciliation likely do not change the date of separation for the purposes of divorce. There must be more than just remaining in the same house overnight or for the weekend or taking a week long trip together. Even isolated instances of sexual relations do not mark successful reconciliation. The court will examine the facts of the reconciliation to determine if it was a full-blown resumption of the marital relationship which would potentially result in a different date of separation or alternatively, treat the failed attempt as further evidence that the marriage is irretrievably broken and the divorce should proceed on the initial separation date. In Britton v. Britton, 400 Pa. Super. 43 (1990) a reconciliation did defeat the period of separation when the reconciliation lasted three months, the parties resumed living together, ceased to maintain separate residences, jointly purchased a townhome, shared the same bedroom, engaged in sexual relations, shared a joint bank account and had a social life as husband and wife.

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Workers’ Compensation Awards

Pennsylvania law does allow for workers’ compensation awards to be distributed as marital property. The key factor is if the right to receive the award accrued during the marriage. Pennsylvania generally defers to the timing of the receipt of assets as opposed to the method in which it was obtained for classifying what will be presumed marital property. In that regard, the purpose of the award is not relevant in determining the marital status. However, the court still has the discretion to consider the purpose of the award and other equitable considerations when determining what percentage should go to each spouse in distributing the marital estate.

Drake v. Drake, 725 A.2d 717 (1999) is one of the cases that explains Pennsylvania’s stance on workers’ compensation awards. In the opinion, the court rejects the analytic approach which only allows an award to be marital if it’s intended to replace lost wages during the marriage. The award would be separate property if it is intended to replace future lost earnings extending beyond the end of the marriage. In Drake, Husband had sustained an injury in 1985. By 1989 he had entered an agreement with his employer to receive a lump sum commutation award. The parties did not separate until 1993. The court held that surely the right to receive the award had accrued during the marriage and was accordingly, marital property subject to equitable distribution. Focht v. Focht, 990 A.2d 59 (Pa. Super. 2009) confirmed the decision in Drake and also held the same rule applies as far as date of accrual for personal injury awards and lottery settlements.

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Dividing Personal Property in Divorce

Personal Property in a divorce includes the tangible items that you own, such as the furniture, the houseware, the televisions, the paintings, and other items in your home. When parties separate, one of the parties normally leaves the home and takes items with them. What is taken can often lead to a dispute. It is important to keep things in perspective. The court will normally assign garage sale value to the items which means you are not likely to get a huge credit if you walk away from the entire contents of the home. Some parties unrealistically expect a credit of $ 20,000 for all the contents of the home since they left with very little. This is not likely to happen. What the Court normally does is have the parties list out the items in dispute and if you cannot agree alternate on picking items from the list. If you do have valuables that have a higher value, such as artwork or guns, these things can be separated if you have an appraisal. You should have your certified appraisal before you go to court in order to obtain the highest value for this item. While you may be attached to certain items of sentimental value, it is important to weigh the cost of the item against the cost of fighting over the item. Most personal property issues resolve by agreement. When they do not, most get sent to arbitration to resolve unless the items are appraised. When you leave the house, it is best to take the items that you want to have when the divorce is finalized as it can often take years before these issues will even get heard by the Court.

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Income or Asset? Avoid the Double Dip

Oftentimes when getting divorced, an asset the generates income can either be considered in equitable distribution or in support. For example, if you receive stock options as part of your employment, they are considered an asset for purposes of divorce. If you cash them in during the divorce, it will either be considered an asset for income, but not both. If you have a pension that accumulated during the marriage and it goes into pay status during the divorce, or if it is already in pay status at the time of the divorce, it may be considered an asset or income but not both. You need to be careful that if you have a support order that the income from that pension or the stock option is not considered into the incomes if you want to have that asset considered an asset for equitable distribution. You need to be very careful that any support order entered specifically states whether any of the income was included, and if so, how much.

Sometimes, an asset may be a hybrid of a marital asset and non-marital asset. For example, a pension may include a portion of non-marital years and a portion that is marital. In that instance, you need to weigh whether it is better to include the entire pension income, or whether you want to include the non-marital portion income and include the marital portion as an asset for equitable distribution. Since you often receive more in equitable distribution than you do in support, oftentimes, the person who is entitled to a share of the pension or a share of the stock option will want to consider it in equitable distribution instead of support. Either way, be very clear in any agreements or order, which is so that there is no double dip if you are paying and that there is no argument it was already included if it was not considered.

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How to Preserve Premarital Assets without a Prenuptial

If you are getting married and the idea of a prenuptial agreement puts a distaste in your mouth or that of your spouse, but you are still concerned about losing your premarital assets, there are a few things that you should and should not do if you get married without a prenuptial. Never add your spouse’s name to the house or bank account you had prior to marriage unless you are willing to gift this asset to the marriage. This is not to say that the house you own prior to your marriage will not be distributed in a divorce, but you can minimize the amount by keeping it separately deeded. The equity that you have when you get married will remain your asset should you get divorced. You should know what this value is when you get married by having the house appraised and keeping documentation on your mortgage balance at the time of your marriage. Without a prenuptial agreement, the increase in value during the marriage will become marital, whether or not you add your spouse to the deed or title of your account. If you have a mortgage and pay it off during the marriage, you will be accumulating marital equity even if the house does not go up value. In addition, if you have any bank accounts, you will want to keep the funds that you had going into the marriage in your separate name.

Once you start putting your premarital assets into a joint account, they become a gift to a marriage. This means that if you get divorced and have no prenuptial agreement, the Court will have to decide how to distribute this asset if you cannot agree. If you are in Bucks County, the court will normally apply a diminishing credit value meaning for every year that it was transferred into joint names, 1/20 of the asset will be considered as marital and you can seek a credit for the balance. After 20 years, you will get no credit for the premarital asset you contributed to joint names. When you start gifting your premarital assets to the marriage without a prenuptial in place, you should be very careful to document both the amount of your contribution and the source of funds. This way, if you do end up in a divorce, you will be better prepared to argue for the diminishing credit if you are in Bucks County or a more equitable share of the asset.

For more information on prenuptials, see /Family-Law-Divorce/Prenuptial-Agreements/

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Theories on Property Division

There are two different theories on how title to property may affect the division of the property at the time of divorce. The title theory looks at which spouse holds title to each asset. There are multiple forms of title. Sole title grants the unilateral power to control. Examples of assets that may be relevant in divorce that are solely titled include retirement accounts, individual bank accounts, and vehicles. The remaining forms of title often apply to real property. Tenancy in common is the co-possession of an entire asset where each party has a ½ interest. Joint tenancy with right of survivorship is also co-possession of an entire asset with the condition that the surviving party will receive sole possession upon death of the other party. Each party can potentially transfer their interest during their lifetime. Finally, tenancy by entireties is similar to joint tenancy with right of survivorship but can only exist between spouses and any transfer of the interest can only occur with consent of the other spouse. Most states prefer the title theory. Equitable distribution is the method for property division under this theory.

The other theory in property division is community property. Under this theory each spouse has a present, vested ½ interest in all property acquired during the marriage. This results in an equal distribution of the property and is the minority view. Regardless of the theory utilized, the process of dividing property involves three steps. First, all the assets must be identified and classified as either marital or separate. There is a presumption that if the asset was acquired during the marriage it is marital. Second, each marital asset should be valued. Finally, all assets should be distributed either equitably or equally, depending on the property division theory being utilized. Both Pennsylvania and New Jersey divide property by method of equitable distribution.

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Things to consider when selling your house during a divorce

When you sell your house during a divorce there are certain things that you should consider regarding equitable distribution:

1. Make sure that the house does not appear empty by removing the furniture. If buyers are aware you are going through a divorce, they may try to offer you less than your house is really worth. If possible, leave the furniture and photos on the walls. You can do a stipulation with your spouse on who gets what when you do sell and if you are not going to be living in the house you may want to get that done before you leave.

2. You may not agree with your spouse on the listing price or realtor. It is best to communicate with your spouse rather than have the court make these decisions for you. If you cannot agree on a realtor, one option the court likes is to submit three names to the court each and they will decide or you could do this between attorneys or a mediator. If you cannot agree on a listing price, you may want to defer to the realtor. You also may want to build in an agreement on dropping the price after a certain time has passed and how much you agree to drop it.

3. Keep receipts for repairs and always exchange estimates. If you make repairs to your house and you are getting divorced, you want to be sure to get credit for the repairs and reimbursed from the proceeds of the sale of the house. In order to do this, you need to make sure the repairs are necessary and agreed to before you pay for them. A good idea would be for each spouse to get estimates and agree in advance before the work is done as to what is getting reimbursed.

4. You may have an uncooperative spouse who refuses to market the house or make it available. Remember in a divorce that the Court can control and enforce the sale of the house and remedies against an uncooperative spouse could include giving Power of Attorney to one side only to control the sale, or even in some cases, eviction from the house of an uncooperative spouse.

5. You need to consider who will pay the mortgage, expenses and taxes while the house is up for sale. If the house is occupied, normally, the spouse who remains in the house is responsible for everything and this is not something reimbursed. If the house is unoccupied, these expenses can be imposed on both parties and you will want to keep receipts for everything to seek a credit in equitable distribution.

6. Make sure you have an agreement in place on disbursement of the proceeds when the sale is completed.

7. Remember if you work together with your spouse it will benefit both of you in getting the highest dollar value for your home and save you unnecessary legal fees.

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Divorcing and Preserving the Proceeds from the House Sale

If you are getting divorced and need to sell your house as part of the divorce process, it is important to keep your attorney informed. Oftentimes when you go to settlement, if you do not have an agreement in place, the proceeds will be split equally. As part of the divorce process, you can obtain a court order either through an agreement with the other spouse or through the court that preserves your proceeds until such time that an agreement on divorce is reached. In Pennsylvania, assets are distributed equitably, not equally. Usually the spouse who earns less money at the time of the divorce receives more than half the overall assets, although there are many factors that determine equitable distribution. If the parties can agree, it may be best to distribute equally that portion of the proceeds that are not in dispute and only hold the amount disputed in escrow or in joint names requiring two signatures. You should have this agreement or court order put in place prior to closing and if possible, prior to signing your agreement of sale.

For more information, visit: /Family-Law-Divorce/Division-of-Marital-Property/

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