You’ve been married for ten years, but now you’re in the midst of an unhappy divorce. Each of you came to the marriage with good-paying jobs, cash in the bank, and even owning some real estate – and then you bought more with your pre-marital funds. What seems clear to you about who owns what is, unfortunately, as straightforward as you think. Here’s what you need to know about equitable distribution and commingled property in the state of Pennsylvania.
What’s Clearly Marital Property
The clearest and easiest thing to understand is that anything you purchased during the time of your marriage – whether you bought it with money earned while you were married or what you had in the bank before – is considered marital property. Even if you only put your name on it, the court is going to view it as belonging to both of you – and that means that it will need to be divided between the two of you.
What’s Clearly Non-Marital Property
If you owned assets prior to getting married — like a house, or a retirement fund, or a valuable painting — those items are non-marital and are protected from equitable distribution. The same is true of any assets that you specified as non-marital in a pre-nuptial agreement, as well as anything you were given as a gift or inheritance before or after the marriage. But if you used cash that you had in a pre-marital bank account to make a big purchase after you were married, there’s a good chance that your pre-marital protections will be gone. The same is true of any money you add to an already existing account. If a pension or 401K fund existed prior to the marriage and you’ve continued to add money to it thinking that the recent deposits are yours, you’re going to be in for a rude awakening. You’ll have to identify the value of the account on the day you got married, and anything deposited after your wedding will be viewed by the courts as marital property. The same is true of any growth in value of pre-marital assets or investments: the increase is likely to be subject to equitable distribution.
What’s A Lot Less Clear
As you can see, things get tricky once you start commingling your funds. Say, for example, your partner owned a home before marriage and you put a significant amount of your funds – whether premarital or marital – into fixing it up or expanding it. Can you get your cash back? There’s no doubt that the increase in value of the home will be marital, but that may or may not be equivalent to your investment. Unless your name was added to the title of your spouse’s pre-marital home when you contributed your pre-marital cash, what you invested may only be recoverable as growth.
Don’t Forget About Debts
We’re spending a lot of time on assets, but it’s important to remember that equitable distribution will also address debts – both pre-marital and marital. Any debts that existed prior to getting married will remain with the spouse who originally incurred them, even if the other spouse was helping to pay them down during the marriage. If you walked in with student loans that your partner was paying for, they are not on the hook to continue paying them down after you’ve split.
The same is not true of debts incurred during the marriage. Even if your spouse rang up big credit card bills on clothing or luxury items for themselves and on a credit card in their own name that they had prior to the marriage, the debt will be considered marital. There are some cases where a court might assign responsibility for an expense that is clearly for the use of one partner to that partner, but that type of action is reserved for situations involving gambling or something would be similarly unfair to include as marital.
How Equitable Distribution is Calculated
The good news is that equitable distribution does not necessarily mean equal. Factors such as the length of the marriage or unequal footing in terms of income or earnings potential will be carefully reviewed by the court, as will age and health, the standard of living established during the marriage, and the custody of minor children.
An Experienced Lawyer Will Help
It is the rare situation where both spouses walk away from a marriage feeling that equitable distribution worked out in their favor. Somebody is always going to feel that they’ve been cheated – and often that’s true of both parties. Equitable distribution can be a contentious process, but having an experienced attorney working as your advocate helps. Contact us today to learn more.