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Pennsylvania Property Division
Property Distribution Laws in Pennsylvania

In Pennsylvania the courts generally accept a fair and reasonable property division the parties agree to, but if the parties cannot agree, the property is divided by the Court of Common Pleas within the Judgment of Divorce.

Pennsylvania is an equitable distribution state. The appreciation of separate property is marital. When the parties are unable to reach a settlement, the Court of Common Pleas distributes the marital assets between the two parties in an equitable fashion. Equitable does not mean equal or even half, but rather what is deemed by the Court of Common Pleas to be fair. Property division or equitable distribution can only be made at or after the time of the entry of divorce.

Factors in Equitable Distribution

According to Pennsylvania Consolidated Statutes - Title 23, 3501, 3502, 3505, in awarding property, the court considers:

  • the length of the marriage;
  • any prior marriage of either party;
  • the age, health, station, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties;
  • the contribution by one party to the education, training or increased earning power of the other party;
  • the opportunity of each party for future acquisitions of capital assets and income;
  • the sources of income of both parties, including, but not limited to, medical, retirement, insurance or other benefits;
  • the contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property, including the contribution of a party as homemaker.
  • the value of the property set apart to each party.
  • the standard of living of the parties established during the marriage.
  • the economic circumstances of each party, including Federal, State and local tax ramifications, at the time the division of property is to become effective.
  • whether the party will be serving as the custodian of any dependent minor children.

Generally, marital misconduct occurring during the marriage is not to be considered in equitable division of property. Although marital misconduct is not to be considered, it may be considered in evaluating another of the factors, such as dissipation of marital property.

All marital property will be divided in an equitable fashion according to the court unless agreed to otherwise by the divorcing spouses.

Marital Property vs. Separate Property

Marital property is all property acquired by either spouse during the marriage, including the increase in value, prior to the date of final separation, of any non-marital property. Property acquired by gift, except between spouses, bequest, devise or descent is separate.

Marital property is property acquired between the date of the marriage and the date of the separation. Some other types of property acquired during the marriage are not marital property subject to equitable distribution or division. Most gifts and inheritances that a spouse receives during the marriage belong to that spouse.

Valuing and Dividing Property

First, the court classifies assets and liabilities, property and debt, as marital or separate. Then it assigns a monetary value to the marital property and debt. Finally it distributes the marital assets between the two parties in an equitable manner. The general rule declares that assets should be valued at the time that they are divided between the spouses. However, the Court has discretion to select any fair valuation date.

The Marital Home

In Pennsylvania as in many jurisdictions, the equity in the marital home is often one of the biggest assets the spouses divide. The equity is the market value of the house, less any debts or liens against it. Equity is established by determining what the current market value of the home is at the time of separation. Once the spouses agree to a current market value, any debts associated with the property (mortgage, taxes, home equity loans, etc.) from are deducted the market value to arrive at the equity to be divided. Normally, making this calculation requires a paid real estate appraisal or a real estate agent can prepare a market analysis for free.

From there, couples choose one of three options to divide the equity:

  • The spouses sell the home and divide the proceeds.
  • One of the parties may refinance the home and “buy out” the other party.
  • One spouse (usually the custodial parent) remains in the home with the exclusive use and possession for a certain period of time (for example, until the youngest child graduates from high school), then either buys out the other spouse or sells the home and divides the proceeds.

Pensions and Retirement Accounts

Pensions acquired between marriage and separation are usually considered to be marital property. Only the percentage of the pension actually acquired during the marriage is marital property. Some disability pensions, even if acquired during the marriage, may be non-marital property.

In Pennsylvania vested pensions are marital property. A pension vests when all the requirements to receive the pension have been met. Unvested pensions are also marital property. Until the pension has vested, the person under whom the pension is maintained has only an expectancy of interest in the pension.

Several different methods of valuation are used in determining how much a marital asset is worth, depending upon the asset to be valued and the level of agreement between the parties. Courts generally accept the value when the spouses mutually agree on a value of a particular asset. Experts may be retained by the parties or by the courts to determine the value of marital assets if the parties cannot agree. Such experts may include accountants, real estate or business appraisers, or pension valuators. The use of experts adds to the cost of the divorce.

In Pennsylvania the court may include the retirement benefits and plans earned by both spouses as marital assets available for division. Retirement benefits vary greatly but can generally be divided into two groups:

  • Defined Contribution Plans: A defined amount of money belonging to the employee. The employee and/or the employer make defined contributions. The balance of the plan is constantly changing, but its value is definable at any given point. 401(k)’s, 403(b)’s and profit sharing plans fall into this category.
  • Defined Benefit Plans: A retirement benefit where an employer promises to pay a benefit to an employee sometime in the future, based upon some type of formula. Normally, this formula is based on the employee’s salary near the end of his or her career and the number of years he or she worked for the employer before retirement. Defined benefit plans are much more complicated to value and often require the professional evaluation of an actuary to determine exact values.

In Pennsylvania if spouses share in each other’s retirement or pension plan, a Qualified Domestic Relations Order must be completed. A QDRO is a written set of instructions that explains to a plan administrator that two parties are dividing pension benefits. The instructions set forth the terms and conditions of the distribution - how much of the benefits are to be paid to each party, when such benefits can be paid, how such benefits should be paid, etc.

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