Spouses who wish to divorce often have assets and debts that need to be divided as part of the divorce process. In Pennsylvania, the term "equitable distribution" is the legal term for the process of dividing the marital assets and marital debts. If spouses who are going through the divorce process in Pennsylvania 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 to proceed to trial in Pennsylvania often involves a careful cost-benefit analysis in the divorce process.
Because Pennsylvania is an equitable distribution state and not a community property state, our Pennsylvania family law courts divide marital assets and debts based upon principles of equity, or in other words, as the court thinks is fair. This division of assets and debts does not necessarily mean that they will be divided on an equal basis.
Separate or Nonmarital Property in Pennsylvania
Pennsylvania law allows separate or nonmarital assets to generally escape the equitable distribution process. Nonmarital property includes pre-marital assets (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 antenuptial agreement (also known as a prenuptial agreement). Furthermore, if a husband or wife decides to use some premarital or nonmarital funds for a common purpose, such as purchasing a home in joint names, those funds normally will be converted from non-marital property to marital property.
Marital Assets or Marital Property in Pennsylvania
Marital assets include property and income acquired during the marriage. A home, business started by both or one of the spouses during the marriage, furniture, retirement accounts, other investments and motor vehicles 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 Pennsylvania equitable distribution process.
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 cost depending upon the asset that is being valued, but can be a key component in determining the value of the Pennsylvania marital estate to be divided in equitable distribution.
Pennsylvania 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. Pennsylvania 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 and was arguably for a marital purpose.