What is property?

Everything with exchangeable value or anything that goes to makeup a person's wealth: every interest, estate, obligation, right. Anything that you own or that generates income is considered by the law under the category of property:

Your car, your furniture, money in bank accounts, retirement plans, even a business or a profession is property. In a divorce action, property also means what you partially own and owe money on; it includes your debts.

The law in Pennsylvania, views marriage as a relationship between partners, taking into account the monetary and non-monetary contributions of each spouse to the family unit. Even if one of the partners never earned one dollar, that partner is considered to have contributed to the family's property (or wealth) and has rights to a percentage of that property.

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How does the law divide property?

Pennsylvania is an equitable distribution state. Equitable distribution means a "far". not equal division of marital property. Marital property includes all property that was acquired during the marriage, regardless of how it is titled (in whose name it is). Gifts from one spouse to another are marital property if they were purchased with marital funds.  Generally gifts and inheritances that a spouse receives during the marriage belong to that spouse. Pensions and business interests that were developed by one spouse are considered marital property if they were acquired during the marriage. Marital property in Pennsylvania is defined by § 3501of the PA Statutes as:

(a) General rule.-As used in this chapter, "marital property" means all property acquired by either party during the marriage, including the increase in value, prior to the date of final separation, of any nonmarital property acquired pursuant to paragraphs (1) and (3), except:

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

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

23 Pa. C.S.A. § 3501(a).  

Furthermore, the factors to be considered, and the impact of marital misconduct on the equitable distribution is addressed as follows:

Equitable division of marital property is defined by statute § 3502:

(a) General rule.-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.

23 Pa. C.S.A. § 3502(a)(emphasis added).

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Types of Property

Non-Marital property refers to property acquired before marriage, through inheritance or by gift from a 3rd party, excluded by a valid agreement between parties; property directly traceable to any of these sources.

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What if it isn't clear what category the property fits into?

In the absence of an agreement between parties, The court (judge) will decide what property is to be considered marital property. Although the court cannot transfer the title of property from one spouse to another except for pensions and the like), it can make a money award to one party to compensate for the other party keeping the property. In the case that property falls into both categories such as a car that was purchased in part with money from one partner's non­marital funds and in part with marital funds, the court will determine what percentage of the car is marital property and what percentage is non­marital and factor this into the monetary award when the property settlement is decreed. (It can also order the sale of the property and division of the proceeds.) The court will also consider issues of alimony/spousal support in determining property settlement issues. 

Factors to be taken into account in determining how marital property will be divided is defined by statute:  

Equitable division of marital property is defined by statute § 3502:

(a) General rule.-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.

23 Pa. C.S.A. § 3502(a)(emphasis added).

Factors to be taken into account in determining the amount of the monetary award to both parties:

1)  The contributions, monetary and non­monetary of each part to the well­being of the family:

Consider: Did you concentrate on homemaking and child­rearing to the exclusion of generating an income that would have enabled you to bring property into the marital unit? Did you put your spouse through school? Did you bring money into the marriage that you earned when you were single, or that came from an inheritance, etc. and mingle it with family funds?

2)  The value of all property interests of each spouse:

Consider: Do you or your spouse have considerable property that the court will consider non­marital and that can generate an income for you? This will affect any monetary settlement

3)  The economic circumstances of each spouse at the time that the award is to be made:

Consider: Are you unemployed? Have you been out of the job market for a number of years? Do you have assets?

4)  The circumstances and facts which contributed to the estrangement of the parties:

Consider: Even though fault (adultery, desertion) are not supposed to be grounds for denial of a monetary award, there still may be some impact if the case seems pretty open-and­shut

5)  The duration of the marriage:

Consider: If you have been married for a long time and were totally economically intertwined or interdependent, the court will view settlement differently than if this was a two­year marriage between individuals with the same earning capacity.

6)  The age and physical and mental condition of the parties:

Consider: See #5 above. This situation will be compounded in a long term marriage particularly if the dependent spouse is sick.

7)  How and why specific marital property was acquired, including the effort expended by each party in accumulating the marital property:

Consider: Details of acquisition, sources of funds, etc. Are any of these items family heirlooms or an inheritance from one spouse's side?

8)  Any award or other provision which the court has made with respect to family use personal property or the family home, and any award of alimony:

Consider: All of these categories are ultimately inseparable and will be factored into the court's decision.

9)  Such other factors as the court deems necessary and appropriate to consider in order to arrive at a fair and equitable monetary award:

Consider: Are there children involved? Their welfare and best interests are primary in the eyes of the court. The court will favor their not being moved out of the family home which may mean that the family home will not be sold until the youngest child is 18 years old. This is a very different picture than if there are no children and one of the partners wants to "cash out" of the family home.

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Relationship between Monetary Award and Alimony

Alimony may be awarded to either spouse for their support and maintenance after the divorce. It is based on the financial circumstances of the divorcing spouses. The needs of one spouse and the ability of the other spouse to pay are the primary factors in determining alimony. Alimony may be paid in a lump sum of money or the award of some property.

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Types of Property

There are two types of property. One type of property is real property, which is real estate. The other type is personal property, such as securities, bonds, bank accounts, automobiles, household furniture, jewelry, paintings, books, record collections, and the family dog, to mention a few.

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Real Property

Real property includes all real estate. It includes your home, beach house, condominium, or that interest in some real estate investment held in both your names, or titled solely in one spouse's name or held by another for your benefit.

There are several options available to deal with real property in your Separation Agreement. First, one spouse can sign over their entire interest in the property to the other spouse. Second, both spouses can agree to the sale of the property. Third, another practice often followed is giving the right to one of the parties (usually the custodial parent) to remain in the home for a certain period of time, particularly until the children reach their age of majority or become self­supporting. Another possibility is to allow one party to remain in the home, to have the house appraised, to fix the equities of the parties as of that date, then to allocate whatever appreciation may be attributable to the house to the party who then continues to make the payments, and that person gets whatever increase or decrease in value there may be at the time that the house is actually sold. There are other questions, too. If one of the parties remains in the house and that person makes the payments on the house, does that person also get the tax advantages, which include the interest payments and state property taxes as a deduction on his/her income tax return? Or does the other spouse, who is perhaps paying support as well as house payments, have the benefit of that deduction?

With any real estate, similar agreements or trade­off of interest in properties can be made. Some examples are as follows: (1) a husband could sign over the family home to the wife in exchange for the wife signing over to him the beach property and her interest in his share of their investment in their real estate syndicate. (2) the wife could sign all properties, other than the family home, over to the husband in exchange for the husband paying a greater sum in spousal support. (3) the husband could pay a lump sum to the wife in exchange for her signing over her interest in any real estate to him.

Often, one spouse desires to purchase the other's interest in joint real estate. You may wish to hire one or two independent, licensed appraisers to determine the fair market value of the property before you and your spouse decide on any "buy out" terms. Again, you cannot be overly cautious in considering tax consequences. Be sure to check with your tax adviser before any "buy out" between you and your spouse.

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Personal Property

Personal property includes items such as securities, bonds, savings accounts, checking accounts, retirement funds, retirement accounts, pensions, automobiles, household furniture, jewelry, books, record collections, paintings, and/or other objects of art. Any of these items can be used as a trade­off for other items. A separation agreement should definitely contain some provision as to what should be done with all these accumulated goods.

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