Complex Financial Issues in Divorce
An Explanation of Equitable Distribution of Property
April 16, 2018 | Complex Financial Issues, Divorce, Equitable Distribution, Legal Perspective
In Pennsylvania, family courts divide marital property using a system called equitable distribution. The goal of equitable distribution is to effectuate economic justice between the parties. Therefore, the division is not always done in equal shares, as is commonly seen in community property states.
A Pittsburgh divorce lawyer can walk you through the steps of equitable distribution and explain the intricacies if you are considering divorce and need to review your property and marital assets.
The marital estate is typically split in a 50/50 percent to 65/35 percent division depending on the equities in the factors. If a dependent spouse will seek alimony, the dependent spouse may receive a lesser percentage of the marital estate in order to protect the ability to collect alimony.
The Equitable Distribution Factors Examination of the 13 factors in 23 Pa.C.S.A. § 3502 will determine the equities of dividing the property. The largest factors are the parties’ respective incomes, capacity for future earnings, age, contributions as homemaker or caretaker of children, and value of nonmarital property. Lesser factors subject to consideration are length of the marriage, other marriages, contribution to education/earning capacity of the other party, contributions to or dissipations from the marital estate, standard of living, and tax ramifications of retaining certain assets.
Defining the Marital Estate
There are two significant steps which lead to definition of the marital estate: information collection and inventory filing.
Information can be collected by exchange of statements or through discovery. Discovery involves a series of questions used to identify assets and obtain documentation of their value. The questions can be asked in written form, called interrogatories, or in verbal form, called a deposition. Discovery of this nature is permissible in all equitable distribution claims pursuant to Pa. R.C.P. 1930.5(b).
Try DIY Discovery
Avoid discovery if you and your spouse are able to cooperate to exchange documents. Depositions are expensive. Interrogatories and requests are helpful, and often less expensive than a deposition. However, discovery is very time consuming and unpleasant. If you and your spouse are able to work together to obtain the information you need to define the marital estate, you will save a great deal of time, money, and annoyance by collecting the paperwork and providing it to the respective attorneys.
The filing of inventories is governed by Pa. R.C.P. 1920.33(a). Much like an inventory count in a retail store, an inventory provides a detailed list of assets and debts to be divided. These are far more than the screwdrivers and towels — the items on the inventory will include items like bank accounts, retirement accounts, mortgages, cars and car payments. A recent amendment to the inventory rule requires inclusion of values of the assets and liabilities on the inventory. Once both sides have completed inventories, they can be used as a settlement worksheet to complete the case.
An Asset Myth
A common misconception is that assets in one spouse’s name are not marital assets. If the asset was purchased during the marriage, it is presumed to be marital property unless the spouse claiming the asset can prove it was purchased with nonmarital funds. For example, a car purchased by one spouse with only that spouse’s name on the title would still be considered marital property unless nonmarital funds were used to buy it.
Look for Changes in Nonmarital Property
The increase in value of nonmarital property can be added to the marital estate. Nonmarital property is property which was owned by one of the spouses before the marriage and never re-titled, given as a gift or inheritance, or excluded from the marital estate by a prenuptial agreement. For example, a husband, while married, receives a gift of $100,000 for his 40th birthday from his grandfather. The husband opens an account in his name alone and deposits the $100,000. When the couple divorces 12 years later, the account contains $127,000 due to investment growth. The $27,000 is a marital asset which will be divisible between the parties.
How to Divide Equitably
Once the percentage has been determined using the factors, and the marital estate and the nonmarital increase in value is determined, each spouse can go through the assets and liabilities to decide what property the spouse wants or needs. For some spouses, real property is more important. Some nonworking spouses will focus on retirement benefits. Vehicles and houses will likely be awarded to one party, while retirement or investment accounts can be split between the two. The court does not typically divide the household contents, but leaves this to the spouses.
Every case will turn on its own particular set of facts. Consulting with a knowledgeable Pittsburgh divorce lawyer will assist you in working through these steps appropriately. If you’d like to discuss your particular case, contact our office at (412) 471-9000 or fill out our online contact form. Additionally, check out these additional blogs about equitable distribution.
Jennifer Zofcin is a senior associate attorney with Pollock Begg, where she focuses her family law practice on divorce, equitable distribution, support, custody matters and adoption cases.