Pennsylvania is an equitable distribution state when it comes to splitting up marital assets in a divorce. Equitable distribution does not mean a 50-50 split but, rather, it mandates a fair division of marital property. Marital property includes joint assets and joint debts. A marital asset is defined by statute as: “all property acquired by either party during the marriage and the increase in value of any non-marital property…” 23 Pa.C.S. §3501(a). Marital property includes all property acquired even if it is only held in one partner’s name. The same holds true in regard to marital debt; just because the debt is in one partner’s name does not mean it is not marital debt.
Marital assets are acquired during the marriage, starting with the date of marriage and up until the “date of separation.” There is no formal “legal separation” in Pennsylvania, although the concept of a date of separation is important for a number of reasons. The date of separation can be difficult to pinpoint, and is a complicated legal concept. Loosely defined, the idea is that parties are separated when they are no longer holding themselves out to the world as spouses. This might be when they no longer live together, when they separate their finances, or when one party has initiated a divorce action. There are a number of exceptions under the Divorce Code to what is considered a marital asset, even though the property might be acquired during the marriage, such as inheritances or property acquired by gift.
Equitable distribution is not always clean cut. It requires a careful examination of all of the facts of a particular case, and an application of the large body of statutory and case law surrounding the issue. It is not uncommon, for instance, that one party has purchased a residence prior to marriage. In equitable distribution of the marital estate, the spouse that owned the residence may be entitled to claim the value of the equity in the home that was built up prior to the marriage. Some counties deal with this by utilizing a “vanishing credit,” where the spouse who owned the property prior to marriage gets a higher percentage of the pre-marriage value back in the equitable distribution if the marriage is of relatively short duration. The rights of the spouse who brought the house into the marriage must be balanced against the rights of the spouse that moved into the residence during the marriage. If the home increased in value during the marriage, that increase is marital property subject to equitable distribution. The same concepts apply to retirement accounts and pensions. There will typically be a marital portion of the asset, and a portion which should be returned to the participant spouse.
The Pennsylvania Supreme Court recently ruled on a case involving the treatment of a particular type of asset, a monetary settlement from an accident, in the case of Focht v. Focht, 32 A.3d 668 (2011). In that case, the husband was injured in an accident during the marriage. The husband and wife retained an attorney and eventually were successful in their personal injury lawsuit. However before the lawsuit ended and the settlement money was paid, the parties separated and filed for divorce. Pennsylvania law was not fully clear as to how the settlement funds should be distributed in the divorce. The question the Focht case examined and answered relates to all property that is received after a date of separation but “accrued” during the marriage. The Court specifically examined 23 Pa.C.S §3501(a)(8), which provides that marital property does not include “[a]ny payment received as a result of an award or settlement for any cause of action or claim which accrued prior to the marriage or after the date of final separation regardless of when the payment was received.”
The “award or settlement” could be personal injury claim proceeds, legal awards as the result of judgments, workers’ compensation settlements, or even the proceeds from a winning lottery ticket. The Court stated that there is no statutory definition of “accrued,” so it turned to Black’s Law Dictionary for the legal definition and decided that a cause of action “accrues” when an injury has been inflicted, or an event has transpired giving rise to a right to institute and pursue a suit for damages. Therefore, if a cause of action accrues after the date of marriage and before the date of separation, then any settlement proceeds resolving that cause of action are marital property regardless of when that settlement occurs. The Focht Court ruled that because the cause of action accrued during the marriage, before the parties’ final separation, proceeds from the settlement of the suit were marital property. The marital property exception set forth in §3501(a)(8) did not apply, and it was irrelevant that the parties had finally separated by the time the suit settled and the settlement award was paid. Focht, 32 A.3d 668, 674.
It is easy to see from just these few examples that the equitable distribution of marital property in Pennsylvania is not intuitive or solved by simple application of common sense. Divorce attorneys have many opportunities to help their clients through good lawyering, and the application of the universe of statutory and case law to the individual facts of their cases.
Kristen Doleva-Lecher, Esquire is an attorney in the law firm of Wolf, Baldwin and Associates, P.C. She practices primarily out of the firm’s Reading office, but the firm has additional offices in Pottstown and West Chester. She is a certified mediator and practices in the areas of family law and business representation. She may be reached by telephone at 610.374.2400 or by e-mail to firstname.lastname@example.org.