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Posts tagged "equitable distribution"

Treatment of Pensions in Divorce

Pensions are subject to division in a divorce to the extent one of the parties earned the pension benefit during the marriage. The court will equitably divide the marital portion of a pension plan after considering all the relevant factors in equitable distribution. The marital portion of a plan would be the portion that accrued from the date of marriage through the date of separation. An entire pension will be marital if the parties were married the entire time a party earned benefits under the pension. In other cases, a coverture fraction is applied based on the total years of service compared to the number of years of marriage. Pensions are often a deferred distribution asset meaning that each party will receive their share at retirement age of the participant. There is the option to do an immediate offset of the marital portion of the pension if there are other assets of comparable value.

Inherited Assets

The receipt of an inheritance may impact your divorce or support case. Section 3501 of the Divorce Code defines what will be considered marital property, and up for division, versus what will be considered non-marital property. Property received as a gift, bequest, devise or descent is non-marital per 23 Pa. C.S. 3501(a). Accordingly, an inheritance that is received during the marriage can be classified as non-marital property. A problem is created if the party who receives the inheritance places the funds into a joint account and/or commingles with other funds properly classified as marital. In that scenario, it can be difficult, if not impossible, to trace which funds were from the inheritance versus which funds were marital when trying to figure out equitable distribution at some later date. As a practical tip, parties should avoid commingling inheritance funds with other marital funds. Inheritance funds should still to be disclosed in a divorce action since the separate assets of the party are a factor for equitable distribution under 23 Pa. C.S. 3502.

Steps in Equitable Distribution

Equitable distribution is the term used in Pennsylvania as it relates to division of marital property in a divorce. Marital property will consist of nearly everything acquired in either party's name from the date of marriage through the date of separation. Equitable distribution does not mean an automatic 50/50 split of all marital property. Instead, the statute on equitable distribution sets out thirteen (13) factors to be considered when seeking to set percentages for distribution on a case-by-case basis. In any divorce involving equitable distribution, the parties should first identify all the property to be considered. Specifically, Pennsylvania Rule of Civil Procedure 1920.33 discusses the requirement of each party filing an Inventory. The Inventory should list all marital assets and debts at issue. An Inventory must be filed prior to requesting a hearing on equitable distribution.

Receipt of an Inheritance

The receipt of an inheritance may impact your divorce or support case. Section 3501 of the Pennsylvania Divorce Code defines what will be considered marital property, and up for division, versus what will be considered non-marital property. Marital property includes all property acquired by either party from the date of marriage through the date of separation. There is a presumption all property acquired during the marriage is marital regardless of how title is held (e.g. individually vs. jointly). However, property received as a gift, bequest, devise or descent is non-marital per 23 Pa. C.S. 3501(a). Accordingly, an inheritance that is received during the marriage can still be claimed as non-marital property. As a practical tip, parties should avoid commingling inheritance funds with other marital funds. Inheritance funds may still need to be disclosed since the separate assets of the party are a factor for equitable distribution under 23 Pa. C.S. 3502.

Exclusive Possession

Many parties in the process of separating are anxious to find out how they can get the other party out of a shared residence. For married individuals, a decision on which party will keep a marital property will not come until the end of the divorce matter and in the interim both parties retain the right to access the marital property. There are two exceptions to this general rule. First, a party may be evicted from a marital property in the context of a Protection from Abuse Order. A final PFA Order can remain in place for a maximum of three (3) years. The second way to have a party removed from marital property is through an application for exclusive possession.

Survivor Benefit Plan

Survivor benefits refer to the benefit that can be paid to the selected beneficiary following the death of the employee. This type of benefit is available in the context of a military pension plan. A survivor benefit is a marital asset that should be addressed in the context of a divorce. It is a separate asset than the pension itself such that a spouse could receive a portion of the actual pension as well as the survivor benefit. The participant spouse must elect a survivor benefit plan at the time of retirement. This is because there is a cost for the survivor benefit plan which is paid through a reduction of the base amount for the benefit. Presently, there is a cost of 6.5% the base pay to elect a survivor benefit plan.

Pension Valuations

Pensions are often one of the assets up for division in a divorce. The marital portion of a pension plan may be divided amongst the parties. The marital portion of a plan would be the portion that accrued from the date of marriage through the date of separation. In some cases, the entire pension will be marital depending on the timing of the marriage alongside the start date of the pension plan. The marital portion will also include investment experience on the marital portion that accrues post-separation. It will not include contributions by the employee made post-separation. Parties can divide the marital portion of the plan by way of percentage or fixed dollar amount.

Appraisals

An appraisal may be needed to ascertain an accurate value of an asset in a divorce or estate matter. Parties may elect to use one appraiser or have competing appraisers. When choosing an appraiser, it is important to make sure the appraiser is licensed or certified. A licensed appraiser has met the minimum requirements for practice. A certified appraiser must complete additional classroom hours and practice in the field. A list of all licensed and certified appraisers is available on the appraisal subcommittee website.

Dividing the Marital Residence

The marital home is often one of the bigger assets to be divided in the context of a divorce. There are two options available regarding division of the marital residence. First, one party can keep the home and buy the other party out for their share of the equity. Equity would be determined by the fair market value of the home minus any mortgages or other liens on the home. The second option is for the home to be sold and the proceeds divided among the party. As a matter of equitable distribution, the disposition of a home would generally not be heard until grounds for the divorce have been established and the matter is scheduled for court. However, the family court has the authority to make determinations regarding a marital home even prior to or an equitable distribution hearing or entry of a divorce decree. The court can grant one of the parties exclusive possession of the home while the divorce is pending under Section 3502 of the Divorce Code. An award for exclusive possession should not be given lightly and the party requesting it has the burden of proving its necessity.

Costs of sale and taxes to be considered in equitable distribution of a business

In Carney v. Carney, a recent decision by the Superior Court of Pennsylvania, the Court held that costs associated with the sale of a business and related tax effects were relevant to an equitable distribution order.

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