Tag Archive for: equitable distribution

Tips for Keeping Divorce Costs Down

1. Understand that family lawyers charge based on their time. This includes time reading emails, talking to you and anything else related to your case. Sending daily emails or calling constantly to talk about your case is a surefire way to escalate your bill. Instead, keep a journal of your thoughts and schedule one block of time to go over all your issues with your attorney and be sure to engage a private therapist or good friend if most of your conversation is related to emotional struggles instead of legal issues.

2. Weigh the cost of what you hope to gain against what you will have to spend to get that amount. Consider that in support matters, oftentimes, it may not make sense to hire a lawyer to fight over $ 100 difference between what you hope to get and what you spouse would agree to pay. You need to balance the cost of legal fees against the amount of money you hope to gain order to assess whether it is worth the litigation in the financial areas. This applies to support as well as the divorce issues.

3. Gather your own financial records and get organized. You can save money if you are organized and gather your own records that are needed for your divorce. Make sure you have current statements and statements from separation on all your accounts, including retirement accounts, contributions during separation, mortgage statements, credit card statements, etc. and present them to your lawyer in an orderly fashion and you will not only save the money having to have your lawyer gather this for you, but you will be in a better position to possibly settle your case out of court.

4. Consider Mediation. Even if you have an attorney, you are still able to mediate your conflicts if both parties agree. Even if you are unable to come to a global settlement, you can usually narrow down your issues in dispute which will in the long run save both time and money.

5. Understand that your emotional pain has no correlation to what you will receive. Unlike a personal injury claim where you are compensated for pain and suffering, the divorce laws are not structured to compensate you for you pain or hurt. Understanding the factors involved in dividing your assets are based on economic factors rather than emotional factors may help you set realistic expectations and help keep the costs down.

For more information, see: /Family-Law-Divorce/Bucks-County-Divorce/

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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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My spouse left me, why do I now have to pay the mortgage?

If you are getting a divorce in Pennsylvania, oftentimes the court will require the occupant of the marital home to pay the mortgage. It does not matter whose name is on the mortgage. The theory behind requiring the occupant to pay the mortgage is that only that person is receiving a benefit for use of the home. Consider it fair rental value. The court will normally impose a support obligation on the spouse to pay you if they earn more and you have been married for at least a few years. If you have children with your spouse, you can seek a mortgage contribution as part of child support if they children remain the home with you. The mortgage contribution, however, is never going to be equal to the mortgage, nor is it even half of the mortgage. In some cases, you will not even get a mortgage contribution if your income and the child support amount do not mathematically warrant it. It is also in the discretion of the Judge whether to even award it. If you cannot afford to pay the mortgage between the income you have and the support you receive from your spouse, it may be time to consider selling the home. If you fail to pay the mortgage while living in the house during a divorce, the Court can intervene and order it sold. It is a good idea if you are separating to consult an attorney who can assist you by figuring out approximately how much you can expect to receive. This not only helps in deciding if you can afford to stay in your home during a divorce but will also help you decide how much you can afford to live elsewhere if you have to move. The attorney can also provide you with the documented expectation of support in order to help you secure a rental if your income does not support it alone.

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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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Insurance Policies

Questions regarding insurance policies often come up in the context of a divorce. Married couples may have commingled auto insurance policies, health insurance plans, and/or life insurance policies with their spouse as beneficiary. Technically, there are no rules on maintaining certain policies that existed at the commencement of the divorce in the sense that there is no automatic punishment or sanction for dropping these policies at separation. On the other hand, the courts have the power to order certain policies be maintained through their general equity powers in the period between separation and divorce. Perhaps, the most prudent action is to maintain all policies until finalization of the divorce or other mutual agreement or seek the advice of an attorney first to avoid the potential of additional fees that may be incurred if you are ordered to reinstate any policy and/or be responsible for any liability incurred while the other party was uninsured. Additionally, as it relates to health insurance specifically, it is routinely ordered as part of a support action and unreimbursed medical expenses, which can be substantial if there is a lapse insurance coverage, will also be shared.

Section 3502(d) of the Divorce Code provides that the court can order the continued maintenance and beneficiary designations of certain policies or even the purchase of new policies as part of equitable distribution. For example, life insurance policies may often be utilized as part of an equitable distribution award to ensure the receipt of ongoing support obligations such as alimony. If there is no agreement or Order on life insurance policies post-divorce, the insured should update their policies immediately to reflect their desired beneficiary. Pennsylvania estate law does provide that post-divorce the ex-spouse is no longer entitled to receive payment on the policy even if the beneficiary designation on the policy was never updated. However, this will only be the end result for a private policy. Policies sponsored by an employer are governed by federal law and under ERISA, the proceeds must be paid per the plan documents regardless of the termination of the marriage.

Click here to read more on insurance policy designations.

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Fair Rental Value

The issue of fair rental value arises where one spouse is no longer living in the marital residence pending finalization of a divorce action. The principle behind fair rental value is that the spouse that has moved out of the former marital residence still has a ½ interest in the property and accordingly, should be compensated for their interest. The court must consider a number of items in reaching an appropriate calculation of any rental credit due. First, the court must determine if there are any equitable defenses that should offset the total of any rental credit due. Second, the court must consider the length of the dispossession. Case law also establishes that the other spouse must be in actual possession of the home.

Finally, the court must calculate the total amount of credit for expenses paid on the home. These expenses would include the mortgage payments and other ordinary expenses related to the home. Similar to any rental credit due, expenses should be split in half to reflect each party’s ownership interest. If the rental value exceeds the expenses related to the home, the spouse that has left the home should get a credit for ½ of the rental value offset by the expenses. An argument for fair rental value is most likely to occur where the home is owned outright such that no mortgage payments are made or there are relatively small monthly payments on any debt associated with the house compared to what the home could rent for.

Click here to read more about equitable distribution.

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Issues with the Marital Residence

The family court has the authority to make determinations regarding a marital home even prior to or subsequent to a divorce decree. First, 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. Case law, however, has indicated that 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, and even decisions on which realtor should be used or what the listing price should be.

Section 3105(a) discusses the court’s obligation to enforce agreements between the parties. Accordingly, if an agreement has been made regarding the marital residence and one party refuses to comply, there is the option of taking the issue before the court for enforcement. Again, this may result in an order for the home to be listed for sale, for a certain realtor to be chosen and/or for a certain listing price. Deductions in the listing price can also be requested and awarded. The best agreements will contemplate issues which may arise and set forth contingency plans. For example, a party can specify at the outset how 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.

Click here to read more on dividing marital property.

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Survivor Benefits

Survivor benefits refer to the benefit that can be paid to the selected beneficiary following the death of the employee. This type of benefit is most frequently available in the context of a pension plan. A survivor benefit is a marital asset that should be addressed in the context of a divorce. Additionally, the survivor benefit is a separate asset than the pension itself such that a spouse could receive a portion of the actual pension as well as the survivor beneficiary designation. The employee may need to choose whether they want to establish a survivor benefit at the time of retirement. The election of a survivor benefit can result in the reduction of the benefit the employee will receive during their lifetime.

Even if an employee does not elect a survivor benefit, in certain cases it can still be established through court order. A Qualified Domestic Relations Order may be necessary to establish the award of a survivor benefit. Whether or not the award of a survivor benefit is appropriate likely depends on if there is an offset for the interest in the pension or a deferred distribution. With an offset, the employee keeps their entire pension and the other party is awarded other assets such that the parties still achieve an equitable distribution. With a deferred distribution, where the spouse of the employee will be receiving an actual portion of the pension but not until the employee retires, the survivor benefit can act as an insurance policy to ensure the spouse will receive some benefit from the pension even if the employee dies prior to retirement. The best course of action is to obtain and review all plan documents on the retirement/pension and any prior elections of the employee as a first step in determining how to reach an equitable distribution and what options are at your disposal.

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Retirement Plan Distributions in Divorce

Retirement plans are often one of the significant assets up for distribution in the course of a divorce. Careful attention should be given to the type of retirement plan at issue to avoid tax penalties and/or early withdrawal penalties to the extent possible. First, retirement plans must be distinguished between qualified plans and non-qualified plans. Qualified plans include defined contribution plans such as 401Ks as well as defined benefit plans such as pensions. A Qualified Domestic Relations Order (QDRO) will be necessary to distribute a qualified plan. Non-qualified plans include individual retirement accounts or IRAs. A QDRO is not needed to distribute these plans.

Both qualified and non-qualified plans will be taxable as distributed. The QDRO effectuates a tax-free rollover of funds to the spouse being awarded a share of the retirement plan in divorce but the spouse will be taxed on it when they withdraw it. Distributions outside of a QDRO may also be subject to an early withdrawal fee. Typically, a 10% early withdrawal penalty applies to distributions before the plan participant is 59 ½ years old. There are a few ways to avoid the early withdrawal penalty including a loan from the retirement plan, disability of the plan participant, and scheduled equal payments. Additional exceptions for IRA plans include higher education expenses and for first-time home buyers.

Click here to read more on distribution of retirement accounts.

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Increase/Decrease in Asset Value

Property acquired prior to the marriage or in exchange for said property is not marital however the increase in value of that property during the marriage is up for distribution. Pursuant to 23 Pa. C.S. §3501(a)(1), any increase in value for non-marital or separate property should be measured from the date of marriage or date of acquisition through the date of separation or date close to the equitable distribution hearing, whichever date results in a lesser increase. This provision is intended to protect the party with the interest in the non-marital property in situations where there may be a lengthy time period between when the parties separate and when they get to the point of dividing the property.

Section 3501(a)(1) also discusses the potential for offsets in any increase in non-marital property by a decrease in non-marital property. Accordingly, if Wife had an increase in non-marital property as well as a decrease in non-marital property of the same amount, the two occurrences would cancel each other out. However, if the increase is greater than the decrease, the increase would be reduced by the extent of the decrease for a net value. This rule applies to the non-marital property of each spouse. In other words, Wife’s increased value in non-marital property can only be offset by her decreased value in non-marital property, not Husband’s, and vice versa.

Click here to read more on equitable distribution.

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