Tag Archive for: premarital property

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.

If you are getting married, you may want to consider a prenuptial agreement before you tie the knot.  A prenuptial agreement is not necessary in every situation, but is very useful to avoid conflict in certain situations.  It is not always just for divorce.  You may want to use it to allow you to decide how your assets will be distributed in the event of death rather than have your spouse be entitled to their elective share.  

A prenuptial agreement allows you to predetermine in the even of death or divorce how some or all of your assets will be distributed.  In the case of death, you will also need a will.  Some situations where it is very useful to have a prenuptial agreement are when you have children from a prior relationship, a closely held business, or assets accumulated prior to the marriage.   Even if none of those apply, you can still use it to help you save the expense of protracted litigation in the event of a divorce.

For more information on prenuptial agreements, please click here:/Family-Law-Divorce/Prenuptial-Agreements/

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.

Click here to read more on dividing marital property in divorce.