Article by Aleksandra Kocelko, Esq.
When couples are thinking about a divorce, they are often concerned with how assets will be divided. While this process, known as equitable distribution, is an important part of any divorce, before we can start talking about how we’re dividing assets, we must first determine what there is to divide. Determining what is in the marital estate is the first step in equitable distribution.
Many people focus on how assets are titled, assuming that their individually titled retirement account, for example, will remain theirs in the divorce. Unfortunately, that isn’t always the case. Generally speaking, Pennsylvania defines marital assets as anything earned or acquired during the marriage, regardless of how the asset is titled. What that means is contributions made to a retirement account during the marriage, sticking with that example, are considered marital property and would be subject to equitable distribution. The same would be true for deposits made into a separate bank account or other assets. The Court is not going to be focused on how an asset is titled, but rather on whether it was obtained during the marriage. Of course, any good lawyer will tell you that there are always exceptions to the rule. For example, property acquired by inheritance, property excluded by way of agreement (valid Prenuptial or Postnuptial Agreement), or property received by gift, is not considered marital property in most situations.
Another issue to consider is the property someone brought into the marriage. Generally, pre-marital property will remain that spouse’s separate property, unless it was re-titled into a joint name during the marriage. That said, even if property is kept separate, a component of that property might be considered marital. Specifically, the increase in value of non-marital property is considered marital, subject to division. For example, let’s say you owned a home prior to marriage. At the time of your marriage, the house was worth $150,000, ten years later when you separate, the house is worth $200,000. That $50,000 increase in value, would be considered marital property and would be divided as part of the divorce. It is not always as easy to determine the increase in value and depending on the type of asset; experts might need to determine the marital interest. The same analysis is applied in determining marital debt, the critical question is was the debt incurred during the marriage, and if so, typically it will be considered marital. Of course, there are always exceptions and arguments to be made in specific circumstances.
Once you identify all of the marital assets, the next step is valuing those assets. This can be as simple as looking at a bank statement but could be more complicated if there are pensions, business interests, or other, more complex, assets. Properly identifying and valuing marital assets is critical in any divorce and having an experienced attorney who can assist you with this process is invaluable. If you are considering a divorce or separation, speak with one of our experienced family law attorneys at Burns White for a free consultation.