Pennsylvania Equitable Distribution Laws

By Lisa Marie Vari , Esquire

In Pennsylvania, the term "equitable distribution" is the legal term for the process of dividing the marital assets and marital debts. If spouses are unable to agree about the division of their marital assets and marital debts, the spouses may elect to engage in the formal court process for equitable distribution. The decision of whether to negotiate an out-of-court settlement or utilize possibly a trial often involves a cost-benefit analysis.

Separate or Nonmarital Property

Pennsylvania law allows separate or nonmarital property to generally escape the equitable distribution process. Nonmarital property includes property that a spouse brought into the marriage, inheritances received by one party during the marriage, gifts to a spouse other than from the other spouse, property sold or disposed of in good faith during the marriage and property excluded by a valid prenuptial agreement . However, the increase in value during the marriage of nonmarital property may be considered a marital asset if the increase in value was not excluded from consideration in a prenuptial agreement. Furthermore, if a husband or wife decides to use some nonmarital funds for a common purpose, such as purchasing a home in joint tenancy, those funds normally will be converted from non-marital property to marital property.

Marital Assets or Marital Property

Marital assets include property and income acquired during the marriage. A home, business owned by the parties, furniture, retirement accounts, other investments and cars purchased during the marriage are examples of marital assets. In these examples, the particular asset may be considered to be a marital asset even if it was acquired in only one spouse's name as long as it was acquired during the marriage and was not acquired through the use of the spouse's non-marital assets. Some assets may have both a marital and non-marital component. In that case, the non-marital value of the asset is excluded from the equitable distribution process.

Marital Debts

In addition to dividing property, most couples also have debts to divide. Marital debts are debts that were acquired by the parties after the date of marriage and before the date of final separation. Marital debts include such items as mortgages, loans, credit card balances, tax obligations and judgments. A debt may be a marital debt even if only one of the parties contracted for the debt as long as the debt was incurred during the marriage.

Discovery and Appraisals

Before an agreement can be reached or the parties proceed to court for equitable distribution, the attorneys and the spouses must have documentation proving the value of marital assets, the amount of marital debt, and the incomes of both spouses. Sometimes, both spouses have access to this information and can provide it to their attorneys. In other cases, only one spouse has access to the information and refuses to provide the information to the other spouse. "Discovery" is the term used for the formal legal process of compelling the spouse possessing information about the marital assets, marital debts or income of either party to provide copies of the information to the requesting spouse or their attorney. It is certainly much less expensive for the spouses to agree to informally exchange the documentation in their possession and then provide it to their respective attorneys than for the attorneys to file the formal discovery requests to the other spouse.

When real estate, pensions, businesses or other types of assets are involved, it is often necessary to obtain an appraisal by a certified expert to determine the value of the asset. These appraisals vary in price depending upon the asset that is being valued, but are a key component in determining the marital estate to be divided in equitable distribution.

Dividing Marital Assets and Marital Debts

As stated above, equitable distribution is the process of dividing marital assets and marital debts. Because Pennsylvania is an equitable distribution state and not a community property state, our courts divide marital assets and debts based upon principles of equity, or in other words as it thinks is fair. This division of assets and debts does not necessarily mean that they will be divided on an equal basis.

Under Pennsylvania equitable distribution laws, courts consider a variety of factors and need not weigh the factors equally. This permits more flexibility and more attention to the financial situation of both spouses after the divorce. However, it also makes the resolution of property issues less predictable.

Some of the factors that the Pennsylvania courts consider in equitable distribution include: the length of the marriage, whether either party had previously been married; whether either party has significant non-marital assets including assets excluded by a prenuptial agreement; the age, health, and income of the parties; whether either party contributed to the increased earning potential of the other; the standard of living of the parties during the marriage; the tax consequences of any award and whether either party will be serving as the custodian of any minor children. Fault for causing the end of the marriage is not a consideration in the equitable distribution process.

Marriage Settlement Agreements

Although divorce may be emotional, most cases do not end up in a contested trial. Usually the parties negotiate and settle such things as division of property, spousal support, and child custody between themselves, often with an attorney's help. It may not be possible to predict with complete precision what a judge would do, but an experienced attorney can give a range of possible results. With that knowledge, parties often prefer to reach their own agreements rather than go through the monetary and emotional expense of a trial. If an agreement is reached, it may be drafted into what is called a marital settlement agreement also called a property settlement agreement. A marital settlement agreement is a contract between the spouses that divides the marital assets and debts and resolves other issues of the divorce including child support, spousal support, alimony, counsel fees and costs, and child custody. It is important for both spouses to fully understand the terms of a proposed marriage settlement agreement before they sign the agreement. Once signed, marriage settlement agreements can be enforced by the court if either party fails to comply with the terms of the agreement. There are only very limited circumstances in which a marriage settlement agreement can be set aside by the court.

Court Ordered Equitable Distribution

If divorcing spouses cannot agree upon how to divide their marital assets and debts, the spouses will be required to go through the formal court process for equitable distribution. The court process generally requires each party to file an Inventory or in other words a listing of what they believe is the marital assets, marital debts and non-marital property. The local rules of some county courts allow the spouses to obtain a conference before the court regarding equitable distribution immediately after a divorce complaint is filed. Other county courts (such as Allegheny County) prohibit any court conferences or hearings regarding equitable distribution until such time as a divorce decree is ready to be entered which, in a contested divorce, could involve a two year wait for the conference or hearing to be scheduled. No matter which county the case is filed in, generally the court will schedule one or two pre-trial conferences to attempt to mediate the disputed issues in the equitable distribution case. Only once a settlement is not reached in mediation will a trial be scheduled. In many counties, the pre-trial conferences and the trial may be conducted by an equitable distribution master instead of an elected judge.

Disclaimer

The statements in this section are based on Pennsylvania law and have been issued to inform and not advise. The statements are general in nature and individual facts in a given case may alter their application or involve other laws not referred to here.

ABOUT THE AUTHOR
Lisa Marie Vari, has focused her legal efforts in the family law field for over ten years. Attorney Vari handles the most complicated aspects of the firm's divorce, equitable distribution, support and child custody matters. Ms. Vari is a member of the Allegheny County Bar Association and the Pennsylvania Bar Association, including the family law sections of both organizations, and the Allegheny County Matrimonial Inns of Court.