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Divorce Law Overview
Equitable Distribution of Marital Property
The Divorce Code of 1980, 23 Pa.C.S.A. ß 3101 et.seq. (as amended) pioneered the concepts of no-fault divorce, equitable distribution of marital property, and post-divorce alimony in Pennsylvania. Equitable distribution requires the Court to identify, evaluate and distribute marital property. The Divorce Code establishes the presumption that marital property includes "all property acquired by either party during the marriage [without regard to title], including the increase in value ...of any non-marital property acquired [prior to marriage or by gift, bequest, devise or descent]." 23 Pa.C.S.A. ß 3501; Aletto v. Aletto, 371 Pa.Super. 230, 537 A.2d 1383 (1988)(increase in value of nonmarital property from date of marriage to date of separation). It is the time of acquisition, rather than title, that determines the nature of marital property. Sutliff v. Sutliff, 518 Pa. 378, 543 A.2d 534 (1987). By a preponderance of evidence, a party exclude non-marital property if it falls into one of the nine exceptions enumerated in 23 Pa.C.S.A. ß 3501(a). Among the exceptions, the most significant are:
A party may be able to "trace" non-marital funds from one account to another during the marriage. Winters v. Winters, 355 Pa.Super. 64, 512 A.2d 1211 (1986). Pre-marital, gift or inheritance property placed into joint names, however, is thereby "transmuted" into marital property. Kronz v. Kronz, ___ Pa.Super. ___, ___ A.2d ___ (1993)(pre-marital assets); Bold v. Bold, 374 Pa.Super. 317, 516 A.2d 741 (1986) (gift/inheritance). To overcome the presumption that jointly-titled property is marital, the burden of proof is clear and convincing evidence. Madden v. Madden, 336 Pa.Super. 552, 486 A.2d 401 (1985). The marital portion of income streams, such as wages, income from trusts, or pensions, includes all income earned from the date of marriage until the date of separation. Berrington v. Berrington, ___ Pa. ___, 633 A.2d 589 (1993)(pensions); Solomon v. Solomon, 531 Pa. 11, 611 A.2d 162 (1990)(trust income). The court may impose a constructive trust upon marital property transferred by one of the parties into the title of a third person. Liciardello v. Liciardello, 391 Pa.Super. 219, 570 A.2d 1062 (1990).
To evaluate marital assets, the court generally determines "fair market value." Rev.Rul. 59-60. Although the court utilizes the date of separation to identify marital assets, the presumptive date for valuation is the date of trial. Sutliff v. Sutliff, 518 Pa. 378, 543 A.2d 534 (1987). But see Solomon v. Solomon, 531 Pa. 113, 611 A.2d 162 (1990)(date of valuation depends upon facts and circumstances of each case). A party who contributes non-marital property to the marital estate may be entitled to a credit, which declines over time, to compensate for the non-marital infusion. Sergi v. Sergi, 351 Pa.Super. 588, 506 A.2d 928 (1986). Additionally, a party who utilizes post-separation income to maintain marital assets may be entitled to a credit. Trembach v. Trembach, 419 Pa.Super. 80, 615 A.2d 33 (1992)(real estate taxes and mortgage). The value of a marital asset may be reduced by the amount of the recipient's income tax liability only if the divorce or equitable distribution triggers the taxable event, or if the amount and timing of the tax can be reasonably predicted. Hovis v. Hovis, 518 Pa. 137, 541 A.2d 1378 (1988). The value of a business must include "goodwill" value if the business is not dependent solely upon the reputation, skills or labor of the proprietor. Butler v. Butler, 423 Pa.Super. 530, 621 A.2d 659 (1993); Fexa v. Fexa, 396 Pa.Super. 481, 578 A.2d 1314 (1990). Depreciation must be added back to the book value of business assets, just as it is added back to income for support purposes. Hill v. Hill, 401 Pa.Super. 183, 584 A.2d 1040 (1991).
After marital property is identified and evaluated, the court must weigh the eleven factors enumerated in 23 Pa.C.S.A. ß 3502(a) to determine equitable distribution. The court may not start with a presumption of a 50-50 distribution. Fratangelo v. Fratangelo, 360 Pa.Super. 487, 520 A.2d 1195 (1987). Under the "income and reasonable needs" factor, ß 3502(a)(3), the court must consider the parties' personal monthly "cash flow," including income not disclosed on income tax returns, business perquisites, and depreciation (which is a "paper expense" that should be added back to taxable income). Cunningham v. Cunningham, 378 Pa.Super. 280, 548 A.2d 611 (1988). If there is a disparity in the parties' incomes or earning capacities, the court may award a greater share of the marital estate to the dependent spouse under ß 3502(a)(6). Zollars v. Zollars, 397 Pa.Super. 204, 579 A.2d 1328 (1990). The court should balance the breadwinner spouse's contribution to the acquisition of marital assets against the homemaker spouse's contribution. 23 Pa.C.S.A. ß 3502(a)(7); Teribery v. Teribery, 357 Pa.Super. 384, 516 A.2d 33 (1986). Where the homemaker spouse also fostered the obligor's education or the growth of the family business, however, she may be entitled to a larger share of the marital estate as "reimbursement equity." Bold v. Bold, 524 Pa. 487, 574 A.2d 552 (1990); Johnson v. Johnson, 365 Pa.Super. 409, 529 A.2d 1123 (1987). Under ß 3502(a)(8), the court should consider the parties' non-marital assets, but not potential gifts from family or inheritances to be received in the future. Wayda v. Wayda, 395 Pa.Super. 94, 576 A.2d 1060 (1990); Gruver v. Gruver, 372 Pa.Super. 194, 539 A.2d 395 (1988). In evaluating and distributing marital property, the court may make inferences against a spouse who intentionally reduces his income or divests assets to evade distribution. Naddeo v. Naddeo, 426 Pa.Super. 14, 626 A.2d 169 (1993); Pacella v. Pacella, 342 Pa.Super. 178, 492 A.2d 707 (1985). Also, the court has wide discretion to effect in-kind property distribution or a buy-out. Ryan v. Ryan, 528 Pa. 186, 596 A.2d 140 (1991).
In addition to spousal support to meet her reasonable needs during coverture and alimony pendente lite to enable her to maintain or defend a divorce action on equal par, the dependent spouse may be entitled to alimony. 23 Pa.C.S.A. ß 3701. Permanent alimony provides a stable income to a dependent spouse who is unemployable due to advanced age, disability, or lack of education and work experience. See, e.g., Baker v. Baker, 425 Pa.Super. 237, 624 A.2d 655 (1993). Periodic alimony may be warranted where a dependent spouse or her custodial children have unmet needs. See, e.g., Harasym v. Harasym, ___ Pa.Super. ___, 614 A.2d 742 (1992). Rehabilitative alimony enables a dependent spouse whose education or career was disrupted by the marriage to return to school or retrench her career. See, e.g., Semasek v. Semasek, 331 Pa.Super. 1, 470 A.2d 1047 (1984). Reimbursement alimony compensates a dependent spouse who supported the family while her spouse earned a professional degree or built a successful family business. See, e.g., Bold v. Bold, 524 Pa. 487, 574 A.2d 5524 (1990).
Primarily, the trial court must focus must upon the list of seventeen (17) factors promulgated in the Divorce Code. 23 Pa.C.S.A. ß 3701(b); Endy v. Endy, 412 Pa.Super. 398, 603 A.2d 641 (1992). Of foremost significance are the dependent spouse's reasonable needs, income and earning capacity. 23 Pa.C.S.A. ß 3701(b)(13), (16); McCabe v. McCabe, 374 Pa.Super. 451, 543 A.2d 558 (1988)(maintain standard of living); Geyer v. Geyer, 310 Pa.Super. 456 A.2d 1025 (1983)(accumulate retirement assets). Note that the 1988 Amendments to the Divorce Code eliminated the prerequisite that alimony be awarded only if the dependent spouse had insufficient property to meet her needs and could not support herself through appropriate employment. Cf. Diamond v. Diamond, 360 Pa.Super. 487, 519 A.2d 1012 (1987)(pre-Amendment). As before, the trial court must consider the parties' assets, including marital property received in equitable distribution. 23 Pa.C.S.A. ß 3701(b)(10)-(11), (16). Even where a dependent spouse receives the lion's share of marital property, however, the court may award alimony to provide sufficient income to meet her reasonable needs. Nemoto v. Nemoto, 423 Pa.Super. 269, 620 A.2d 1216 (1993)(wife received alimony in addition to 75% of marital estate). The needs of the custodial children also must be considered. 23 Pa.C.S.A. ß 3701(b)(7).
Several of the statutory factors relate to the income and employability of the parties. 23 Pa.C.S.A. ß 3701. "Where the husband was a sole shareholder of a corporation and there was evidence of manipulation and control of assets and income, the court looked to corporate and not merely personal income as the true reflection of Husband's earning capacity." Perlberger, Pennsylvania Divorce Code ß 6.3.1 (1992 and Supp. 1994), citing Pacella v. Pacella, 342 Pa.Super. 178, 492 A.2d 707 (1985); Ruth v. Ruth, 462 A.2d 1351 (Pa.Super. 1983); see also Pollock and Byrne, "Net Spendable Income Calculations in the Context of Depreciation and Business Expenses," 14 Penna. Fam. Lwyr. 17 (October 1993)("where an individual has an opportunity to control or influence his income, expenses or otherwise adjust the accounting practices of the business to alter 'income' for support purposes, the courts look beyond the corporate veil to determine earnings"). On the other hand, the age, health, education and work experience of the dependent spouse may hinder her employability and/or ability to accumulate retirement funds. 23 Pa.C.S.A. ß 3701(b)(1)-(3), (9). A dependent spouse is not required to accept any employment, but only appropriate employment consistent with her standard of living and station in life. 23 Pa.C.S.A. ß 3701(b)(17); McNulty v. McNulty, 347 Pa.Super. 363, 500 A.2d 876 (1985).
As with property distribution, the court must consider the income tax ramifications of the alimony award, if such factor is reasonably estimable and certain to occur. 23 Pa.C.S.A. ß 3701(b)(15); Hovis v. Hovis, 518 Pa. 137, 541 A.2d 1378 (1988).
Other factors enumerated in the Divorce Code contemplate the "equities" of the case, including the parties' respective contributions to property acquisition or increased earning power, their standard of living, duration of the marriage and marital misconduct. 23 Pa.C.S.A. ß 3701(b)(5)-(8), (11)-(12) and (14). The parties' standard of living during the marriage is probative to determine the dependent spouse's reasonable needs. Edelstein v. Edelstein, 399 Pa.Super. 536, 582 A.2d 1074 (1990).
Like alimony pendente lite, the purpose of counsel fees is to enable a dependent spouse to maintain or defend a divorce action on equal par. Butler v. Butler, 423 Pa.Super. 530, 621 A.2d 659 (1993). An award of counsel fees is particularly appropriate where the payor spouse fails to cooperate, thus prolonging the divorce litigation. Endy v. Endy, 412 Pa.Super. 398, 603 A.2d 641 (1992); McDonald v. McDonald, 423 Pa.Super. 422, 621 A.2d 604 (1993). Counsel fees may be awarded in addition to alimony pendente lite, alimony and equitable distribution where reasonable need is demonstrated. Harasym v. Harasym, ___ Pa.Super. ___, 614 A.2d 742 (1992).
Pennsylvania grants a fault divorce if a spouse deserts without reasonable cause for one or more years, commits adultery, endangers the life of his or her partner or subjects a partner to cruel or barbarous treatment, was already married to someone else (bigamy) when he or she married, was sentenced to jail for longer than two years, or has made the conditions intolerable or life burdensome.
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