Question: My wife and I are getting a divorce. We live in Newtown. We both worked full-time until we had kids. We decided she would work part-time so that she could take care of the kids, instead of our kids having to be with a babysitter most of the time. How do our property and assets get split up? I have a 401K that I started before we were married. Does she get part of that too even though I had it for years before we got married? Isn’t it true that she can’t get the property and assets I had prior to marriage?
Answer: In Pennsylvania divorces, marital assets and property are spilt up via a process called equitable distribution. The term is misleading because one would assume that a couple’s marital assets are spilt 50/50. However, this is not always the case.
Pennsylvania courts do not automatically divide a divorcing couple’s property in half. Courts look at many factors when dividing marital assets. In fact, there are 13 factors court must consider pursuant to Pennsylvania divorce laws, such as:
- The sources of income of both parties, including, but not limited to, medical, retirement, insurance or other benefits.
- The standard of living of the parties established during the marriage.
- The economic circumstances of each party at the time the division of property is to become effective.
To see a discussion on all 13 factors, see Newtown Divorces & Equitable Distribution: How Courts Divide Marital Assets.
Therefore, you could get more than 50% of the marital assets or you could get less than 50% depending on the court’s determination. The predominant factor is the parties’ respective incomes and ability to build back an estate of their own post-divorce. The Court considers that the income superior spouse will be able to build back their estate quicker than the income inferior spouse. They will generally award a greater percentage to the income inferior spouse, depending on the size of the marital estate and the income inferior spouse’s other financial resources.
Retirement plans and 401Ks are assets and are generally divided between divorcing parties. Even though you had the 401K prior to marriage, the marital portion and any gains on the pre-marital portion will likely be subject to equitable distribution, unless some part of the plan is considered separate property.
While separate property is not subject to division generally, premarital separate assets can become marital assets over time. This is called the “vanishing credit.” Though this doctrine is not binding law in Pennsylvania, different counties may apply this doctrine. Bucks County is one of those counties. When vanishing credit is applied in Newtown, Bucks County, divorce cases, premarital assets slowly become marital assets at a rate of 5% per year during the marriage. Depending on how long a couple is married, even separate property may become 100% marital property. There are however, exceptions to applying the vanishing credit.
Equitable distribution is complicated, and it is best that you speak to one of our divorce lawyers in Newtown, Bucks County, who can assess your situation and explain how retirement plans may be divided and how the vanishing credit may apply.