Tag Archive for: equitable distribution

Non-Marital Property

Section 3501 of the Divorce Code defines what will be considered marital property versus what will be considered non-marital property. Specifically, marital property will include 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). It will also include the increase of value of any non-marital property during the course of the marriage. 23 Pa C.S. 3501 goes on to list what property will not be considered marital under the statute. Property acquired prior to the marriage or in exchange for said property is not marital as well as property expressly excluded by valid written agreement of the parties at any time.

Property received as a gift from any person other than the other spouse is not marital along with any property acquired after final separation but potentially prior to the entry of a divorce decree as long as marital property was not used in its acquisition. Any inheritance received is treated as a gift and will also be deemed non-marital so long as it is not subsequently commingled with marital funds. The court will also not look at property that was disposed of in good faith while the marriage was intact. An example would be property sold to a family member for its fair market value. Veterans’ benefits cannot be attached, levied or seized except in the case where a portion of the veteran’s retirement pay was waived in exchange for the benefits. Finally, any payment from a cause of action or lawsuit where the underlying claim occurred before the marriage or after separation.

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New Rules for Montgomery County

Montgomery County has just adopted a number of changes to their local rules regarding divorce matters. Where there are pending claims for equitable distribution, 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 should 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 including the disallowance of testimony or introduction of evidence at the time of 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 praecipe to transmit the record for divorce decree.

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Vanishing Credit

The court may give credit for individual 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.

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. Be careful with 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. If you encounter a situation in your divorce where it may be necessary to make a distinction between assets that are clearly marital versus those that you can trace back as being pre-marital and/or separate, you should be sure to consult with an attorney with experience in the valuation of these type of assets or risk all of the assets being addressed in equitable distribution and subject to division with your spouse.

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Disability Pension

Pensions are generally considered marital property and subject to distribution at the time of divorce. The pension may need to be appraised to determine the marital value of the pension, specifically in an instance where the party began accruing the benefits prior to the marriage or the parties were separated for numerous years before a divorce action was commenced. There are also retirement benefits that are excluded from equitable distribution. For example, under 23 Pa. C.S. 3501(a)(6), veterans’ benefits are excluded from equitable distribution.

Other disability benefits besides veterans’ benefits may also be excluded from equitable distribution. The key is to consider the purpose of the benefit and whether it is being used to compensate for lost income. In other words, if the purpose of the benefits is to provide earnings in lieu of what the recipient would’ve made were they still able to work, those benefits will not be subject to distribution. If, however, a portion of the benefit also includes standard retirement benefits, the portion representing retirement benefits will still be subject to distribution.

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Exclusive Possession of Marital Residence

Pursuant to 23 Pa. C.S. § 3502(c), the court has the express authority to award exclusive possession of the marital residence to one or both parties during the pendency of the divorce. This provision was added to the law in 1990. Prior to that, the court had determined it had the authority to grant exclusive possession of the marital residence under the “full equity power and jurisdiction of the court” found at 23 Pa. C.S. §3323(f). This provision gives the court the authority to issue injunctions or other orders necessary to protect the interests of the parties. Laczkowski v. Laczkowski, decided in 1985, was the first case to hold that the court could award exclusive possession of the martial residence during a divorce. 344 Pa. Super. 154 (Pa. Super. 1985). In Laczkowski, the home was to be given to the spouse having physical custody of any minor children.

Other cases have clarified and expanded the instances under which exclusive possession may be ordered. In Uhler v. Uhler, the court indicated exclusive possession should only be awarded sparingly. 428 Pa. Super. 630 (Pa. Super. 1993). Uhler also pointed to the emotional welfare of children as the most important consideration. In Vuocolo v. Vuocolo, the court held an award should be based not only on the needs of minor children, but also the age and health of the parties and their financial needs and resources. 42 Pa. D. & C. 398 (1987). In Merola v. Merola, the court granted exclusive possession in an instance where there were no minor children but the wife was vulnerable and confined to a wheelchair. 19 Pa. D. & C. 4th 538 (1993). In contrast, in Duzgon v. Duzgon, the court did not grant exclusive possession based on wife’s allegations of tension in the home because of husband’s phone calls to his girlfriend. 76 Pa. D. & C. 4th 538 (2005). The court’s rationale was that there was no abuse between the parties and hence no clear need for husband to be excluded from the home. In sum, an award of exclusive possession is a harsh remedy that will not be awarded without clear need and is more likely to be awarded where minor children are involved.

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Factors in 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. Those factors are listed in 23 Pa C.S. 3502 and include the following:

(1) Length of the marriage; (2) Any prior marriage of either party; (3) Age, health, station, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties; (4) Contribution by one party to the education, training or increased earning capacity of the other party; (5) Opportunity of each party for future acquisitions of capital assets and income; (6) Sources of income of both parties, including but not limited to, medical, retirement, insurance or other benefits; (7) The contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property, including the contribution of a party as a homemaker; (8) Value of the property set apart to each party

(9) Standard of living of the parties established during the marriage; (10) Economic circumstances of each party at the time the division of property is to become effective; (10.1) Federal, State and local tax ramifications associated with each asset to be divided, distributed or assigned, which ramifications need not be immediate and certain; (10.2) Expense of sale, transfer or liquidation associated with a particular asset, which expenses need not be immediate and certain; (11) Whether the party will be serving as the custodian of any dependent minor children

The remainder of 23 Pa C.S. 3502 goes on to discuss the courts powers relating to who can reside in the marital home pending the divorce, maintaining life insurance policies, interim partial distributions, and enforcement powers in the event of contempt of a court order on equitable distribution. Parties should keep these factors in mind when fashioning a settlement agreement of their own. 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.

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Agreements in Family Law

Parties are often encouraged to try to reach an agreement to resolve whatever issues have arisen in any legal matter. In family law, agreements are especially encouraged due to the personal nature of the issues at hand along with the belief that it is better for the parties to draft their own agreement rather than allow a stranger to dictate their family dynamics going forward. Most agreements in family law will be treated as any contract would and the parties will be obligated to comply with the provisions or face an action for contempt. The family court will retain jurisdiction over all agreements entered that are subsequently submitted to the court to be made an order. As with any contract the court is generally only concerned that the agreement was entered into voluntarily and knowingly. The court will not necessarily be reviewing the content of the agreement before allowing it to become an order of court.

If a provision of the agreement needs to be enforced and one party seeks the court’s help in pursuing contempt, at that point the court would need to examine the content of the agreement in order to make a decision on a resolution of the contempt. Many agreements will include a provision that the party who breaches the agreement will be responsible for attorney fees if contempt must be sought through the court to gain compliance. The most comprehensive agreement in a family law matter is a marital or property settlement agreement. This type of agreement sets out to resolve all issues in a divorce matter including, but not limited to, how the divorce will be proceed to finalization, division of property, child and spousal support and/or alimony, and custody. One provision that will not hold up in court even if the parties agreed to it is the waiver of child support. The PA Supreme Court ruled in Knorr v. Knorr, decided in 1991, that a parent may not contract away a child’s right to support as the court views child support as an entitlement of the child rather than the parents.

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Qualified Domestic Relations Order

A qualified domestic relations order, or QDRO for short, is a document often used in the context of splitting assets in a divorce to rollover a portion of one party’s retirement plan/benefit to the other party. QDROs are frequently utilized when pensions, 401ks and other retirement benefits have been classified as marital in nature and therefore up for distribution at the end of the marriage. The benefit of a QDRO is that it allows a tax-free transfer of the funds from one party to their new or soon-to-be ex-spouse. The receiving spouse would then be taxed as they withdraw the money as the tax laws provide. The exact nuances of how the plan/benefit is split and what options are available will vary based on the type of plan. For example, it may be that the party receiving a benefit as a result of a QDRO, often termed the alternate payee, cannot begin to do so until the initial participant in the plan begins to do so. The receiving party may or may not be able to designate an alternate successor if they die before the benefits begin to pay out. Or, the plan may provide the receiving party can only designate a survivor beneficiary that would be able to receive the balance of their portion of the benefit if they have started receiving the benefit before they die. The receiving party’s benefit may or may not be affected by the death of the initial participant or his/her early withdrawal penalty, if applicable.

It is always advisable to review the procedures for the specific plan you may need distributed to understand what their rules and policies are when it comes to splitting a participant’s benefits via QDRO in the context of a divorce. You will also likely benefit from having an attorney review the terms of the QDRO as well before signing off on it and submitting it to the plan. Finally, most plans have very specific requirements as far as how the language of the QDRO is to be worded in order for it to be accepted and processed. At a minimum, a QDRO should identify the parties, the plan at issue, and the amount going to the receiving party either as a lump sum or a percentage of the total benefit. 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.

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Jurisdiction/Venue in Divorce

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Under Pennsylvania law, one of the parties to the divorce action must have been a bona fide resident of Pennsylvania for at least six months prior to the commencement of the divorce. Bona fide residence is defined as actual residence with domiciliary intent. Domicile denotes the place where a person has his or her true, fixed, permanent home with the intention of returning after any absence. In other words, where an individual sleeps, takes her meals, receives mail, and stores personal possession.

Generally, an action may only be brought in the county where one of the party resides. There are two exceptions allowing a divorce action to proceed in a different county including by mutual agreement of the parties in writing or by participating in the action started in a different county. If two divorce actions are commenced within 90 days of each other, the county where a party resides or where the last marital residence was located gets to determine which county should handle the matter. If neither county is the location of the last marital residence and no party resides in either county, the county that received a complaint in divorce first can make the determination as far as which county will proceed.

Parties should be careful about agreeing to, or participating in, divorce actions outside of their home counties if property distribution and/or other issues such as custody and support may be raised during the divorce. A divorce action may need to be transferred to the county where the bulk of the property is located or where the children reside for custody or where one of the parties reside for support. This will likely result in the expense of having to file a new complaint in the appropriate county as well as the expense and delay of petitioning to have the matter transferred. On the other hand, parties with no issues relating to the divorce may benefit from a cheaper filing fee by choosing a county other than their own for the divorce action.

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Pet Custody Battles

Many people consider their pets as members of the family and accordingly, when the family breaks up, custody of the pets can become an issue. The Today Show recently covered a story of a man who had already spent $60,000 in a custody battle over his dog previously shared with his ex-girlfriend. While pets may be considered members of the family from the perspective of the owners, the courts in Pennsylvania deal with pets the same way as they deal with other inanimate personal property in the event of a divorce.

First, a count for Equitable Distribution must be raised in the context of a divorce in order to get the court involved in dividing any property. There are generally two options available when it comes to how property will be divided. First, the parties can reach an agreement on how they will divide property and submit this written agreement to the court so that in the event either party does not comply, the disgruntled party can file for contempt and the court can assist in enforcing the agreement. The other option when it comes to property division is to go to a hearing and let the court decide. If you go this route, the court will likely give the pet to one spouse or the other just as it would any other personal property such as furniture or TVs. It is not likely to get involved in creating a schedule to continue to share the pet post-divorce.

The great thing about an agreement is that it can be as specific as the parties want. The courts rarely get involved in the content of agreements that are knowingly and voluntarily entered into and treat them as binding just as they would any other contract. Therefore, an agreement could provide for a custody schedule more similar to one you would normally see with children. For example, the spouses may decide to split custody of the family pet and lay out the terms of when they will exchange custody back and forth (i.e. every two weeks, every month, etc.). Or, the parties may even agree that the schedule for family pet will coincide with the schedule for their minor children if applicable.

More on Dividing Property

Today Show story on pet custody battle

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