An issue that parties face in Newtown, Bucks County divorces is how their property and assets are divided. In Pennsylvania, the process of dividing property or marital assets is called equitable distribution. What are marital assets? Do they include assets and property parties had prior to the marriage? Do those assets and property become marital assets after marriage? In this article, we will answer these questions.
In Pennsylvania divorce cases, property and assets are generally categorized into two groups:
- Separate property/assets, and
- Marital property/assets.
Separate property is not subject to equitable distribution in Pennsylvania divorce cases. Separate property is property that belongs to one spouse only. Separate property is usually acquired by one party/spouse before marriage. A BMW purchased and paid in full by the husband prior to marriage would be considered separate property.
Separate property does not necessarily mean that the property has to be acquired prior to marriage. There are some types of assets that may be separate property even though they were acquired during marriage.
For instance, gifts and inheritances given or left to one party only during marriage are considered separate property. However, gifts/inheritances may be considered marital property in certain situations. Stay tuned for an article discussing when inheritances left to one party become marital property.
However, any increases in value due to market experience is considered marital property. For instance, if one spouse has a pre-marital brokerage account and that brokerage account has a balance of $20,000 as of the date of marriage, and it grows to $80,000 as of the date of separation, $60,000 of that brokerage account will be considered marital. The same would be applicable to real estate or other investments.
Some counties, such as Bucks County, also apply what is called a “vanishing credit.” This is a legal doctrine the Family Master’s office uses to determine that pre-marital assets slowly become marital over the course of the marriage. In Bucks County, they apply a formula that premarital assets slowly become marital at a rate of 5% per year of marriage. So if a marriage is 20 years or more in duration from date of marriage to date of separation, 100% of most premarital assets becomes marital. There are exceptions to applying the vanishing credit. To understand more about the vanishing credit and how it would apply, please speak with one of our experienced attorneys.
Marital property is subject to equitable distribution in Pennsylvania divorce cases. Marital property is property that parties/couples jointly own. They are acquired during the marriage. Common examples of marital property are cars and homes.
Many of our clients often ask what happens if the house was bought during the marriage, but it is in the other spouse’s name only? Does that mean the house is not marital property? The answer is no. Even though the title of the property is under one spouse’s name only, it does not mean that it is separate property. It will generally be considered marital property.
Even though it may seem that all property can fit into one of these two categories, there are property and assets that do not belong exclusively in either. Property may be both marital and separate property. An example of this is a 401K or retirement plan that started before the marriage, but grew during the marriage. We will discuss how PA divorce courts divide this type of property in a later article.
Get Help from Newtown, Bucks County Divorce Lawyers
Equitable distribution in Bucks County divorces may be complex. It is best to consult an experienced Bucks County divorce lawyer as there may be tax implications and other complex legal issues. Get more information about tax implications in high-end divorce cases in Bucks County, PA.