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Brief Overview of issues in Pennsylvania Divorce law

The Pennsylvania Divorce Code sets forth the concepts of no-fault divorce, equitable distribution of marital property, and post-divorce alimony, among other areas of relief. This brief overview will outline some of these areas for you, and give you a basic understanding of the issues that a Court will review and how a Court may respond.

EQUITABLE DISTRIBUTION OF MARITAL PROPERTY

Equitable distribution law in Pennsylvania requires the Court to identify, evaluate and distribute marital property based upon a number of factors. The law states: “In an action for divorce or annulment, the court shall, upon request of either party, equitably divide, distribute or assign, in kind or otherwise, the marital property between the parties without regard to marital misconduct in such proportions and in such manner as the court deems just after considering all relevant factors, including:”

1. The length of the marriage.

2. Any prior marriage of either party

3. The age, health, station, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties.

4. The contribution by one party to the education, training or increased earning power of the other party.

5. The opportunity of each party for future acquisitions of capital assets and income.

6. The sources of income of both parties, including, but not limited to, medical, retirement, insurance or other benefits.

7. 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.

8. The value of the property set apart to each party.

9. The standard of living of the parties established during the marriage.

10. The economic circumstances of each party, including Federal, State and local tax ramifications, at the time the division of property is to become effective.

11. Whether the party will be serving as the custodian of any dependent minor children.

In determining what is meant by “marital property” the Divorce Code creates a presumption that marital property includes "all property acquired by either party during the marriage, including the increase in value ...of any non-marital property acquired [prior to marriage or by gift, bequest, devise or descent]." The Court places emphasis on the timing of the, rather than title to the asset, in determining the nature of marital property. The statute does set forth a number of exceptions to marital property, which are important to remember. These are as follows:

1. Property acquired prior to marriage or property acquired in exchange for property acquired prior to the marriage.

2. Property excluded by valid agreement of the parties entered into before, during or after the marriage.

3. Property acquired by gift, except between spouses, bequest, devise or descent.

4. Property acquired after final separation until the date of divorce, except for property acquired in exchange for marital assets.

5. Property which a party has sold, granted, conveyed or otherwise disposed of in good faith and for value prior to the date of final separation.

6. Veterans benefits exempt from attachment, levy or seizure pursuant to the act of September 2, 1958 (Public Law 85-857, 72 Stat. 1229), [38 U.S.C. 3101], as amended, except for those benefits received by a veteran where the veteran has waived a portion of his military retirement pay in order to receive veterans compensation.

7. Property to the extent to which the property has been mortgaged or otherwise encumbered in good faith for value prior to the date of final separation.

8. Any 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.

Pennsylvania law allows a party to a divorce to "trace" non-marital funds from one account to another during the marriage. In doing this you can trace pre-marital, gift or inheritance property that is placed into a joint account or into joint names, and now has the characteristics of marital property. To overcome the presumption that jointly-titled property is marital, the person asserting the claim must prove by clear and convincing evidence that the property is non-marital. In addition 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. 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. In reviewing this issue, a Court has the power to create and impose a constructive trust upon marital property transferred by one of the parties into the title of a third person.

A Court will generally apply the standard of "fair market value" to an asset to determine its value. The Court may use the date of separation as the date at which the asset is valued, but the date that may be of more importance is the value as of the date of trial. Additionally, a party who utilizes post-separation income to maintain marital assets may be entitled to a credit. There are as many issues involved in the valuation of marital assets as there are different marital assets. There are also very tricky, and quite useful tax issues, strategies and advantages to be used in connection with the valuation and distribution of marital assets. For example, when valuing a business, remember to include the value of "goodwill", unless it is a sole proprietor. Remember, too, that sole proprietors, and some closely held business will have personal expenses pas through the company, thereby artificially reducing the income or value of that business. In addition, in determining both the value of a business, and income for support purposes, a Court will add depreciation back to the bottom line of the business.

Once you have identified and valued the marital property, the Court will consider the eleven factors that are listed above to determine an equitable distribution scheme. A commonly held mis-conception is that the Court will begin at a 50-50 distribution. However, Pennsylvania law requires that the Court must consider the parties' personal monthly "cash flow". This includes an analysis of income not disclosed on income tax returns, business perquisites, and depreciation. If one party has a greater income than the other party the Court has the discretion to award the party earning less a greater percentage of the marital estate. The goal is to balance the primary wage earner’s financial contribution to the marriage with the primary caretaker’s (homemaker if there are no children) contribution. There are special considerations to be given to situations where the stay-at-home spouse went to work to support the family while the other spouse bettered him/herself by obtaining a higher level of education or training. Under this scenario the stay-at-home spouse who supported the educational pursuits of the other may be entitled to a greater share of the marital pie. The Court will take into consideration each spouse’s non-marital assets, but the Court is not allowed to consider potential inheritances.

ALIMONY

There are four types of alimony that a Court may award. They are Permanent, Periodic, Rehabilitative and Reimbursement alimony. The financially dependent spouse may be entitled to alimony. The theory behind Permanent alimony is that it provides an income stream to a dependent spouse who is unemployable due to advanced age, disability, or lack of education and work experience. Periodic alimony may be warranted where a dependent spouse or her custodial children have unmet needs. Rehabilitative alimony allows a dependent spouse whose education or career was disrupted by the marriage to return to school or restart her career. Reimbursement alimony compensates a dependent spouse who supported the family while her spouse earned a professional degree or built a successful family business.

There are seventeen (17) factors enumerated in the Divorce Code. The Divorce Code provides that “In determining whether alimony is necessary and in determining the nature, amount, duration and manner of payment of alimony, the court shall consider all relevant factors, including:”

1. The relative earnings and earning capacities of the parties.

2. The ages and the physical, mental and emotional conditions of the parties.

3. The sources of income of both parties, including, but not limited to, medical, retirement, insurance or other benefits.

4. The expectancies and inheritances of the parties.

5. The duration of the marriage.

6. The contribution by one party to the education, training or increased earning power of the other party.

7. The extent to which the earning power, expenses or financial obligations of a party will be affected by reason of serving as the custodian of a minor child.

8. The standard of living of the parties established during the marriage.

9. The relative education of the parties and the time necessary to acquire sufficient education or training to enable the party seeking alimony to find appropriate employment.

10. The relative assets and liabilities of the parties.

11. The property brought to the marriage by either party.

12. The contribution of a spouse as homemaker.

13. The relative needs of the parties.

14. The marital misconduct of either of the parties during the marriage. The marital misconduct of either of the parties from the date of final separation shall not be considered by the court in its determinations relative to alimony, except that the court shall consider the abuse of one party by the other party..

15. The Federal, State and local tax ramifications of the alimony award.

16. Whether the party seeking alimony lacks sufficient property, including, but not limited to, property distributed under Chapter 35 (relating to property rights), to provide for the party’s reasonable needs.

17. Whether the party seeking alimony is incapable of self-support through appropriate employment.

The theme running through these 17 criteria is the dependent spouse's reasonable needs, income and earning capacity. The Court must consider the parties' assets, including marital property received in equitable distribution. The Court may even award alimony when the dependent spouse has received an extremely large share of the marital estate.

Some of the factors listed above are in relation to the income and employability of the parties. There are cases where a spouse 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. In these cases a Court can look beyond the corporate veil to determine earnings. Further, a dependent spouse may be unable to work as a result of her age, health, education and work experience and/or ability to accumulate retirement funds. 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.

COUNSEL FEES

A Court has the power to order one party to pay all or a portion of the other party’s attorney’s fees. This is to allow a financially dependent spouse to maintain or defend a divorce action on equal ground. An award of counsel fees is often found when one party fails to cooperate, thus prolonging the divorce litigation.

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