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Posts tagged "equitable distribution"

How to Rollover Retirement Assets

Retirement assets are often one of the substantial assets in a marital estate. It is possible to do a tax-free rollover of retirement benefits as part of a divorce. First, you will need to know what kind of benefits are involved. Qualified benefits will require a Qualified Domestic Relations Order (QDRO) to achieve the tax-free rollover. Qualified plans include defined contribution plans such as 401K as well as defined benefit plans such as pensions. Federal retirement plans (e.g. CSRS, FERS, TSP) also require a court order to achieve the rollover however the appropriate order for federal plans is a Court Order Acceptable for Processing (COAP). Once the QDRO or COAP is drafted to dictate the percentage or fixed amount to be rolled over, it is signed by the parties and then the Judge prior to submission to the plan for execution.

Dealing with Pre-Marital Assets

The Divorce Code defines marital property as that acquired from the date of marriage through the date of separation. It may also include the increase in value of property earned prior to the marriage to the extent the increase occurs during the marriage. A popular example of this may be a retirement plan or savings account. With assets or property earned prior to the marriage, it is important to ascertain the value of that property as of the date of marriage to assign that portion to the party who owns it.

Preparing for Equitable Distribution

Equitable distribution is the term used in Pennsylvania referring to division of marital property at the time of divorce. Marital property will consist of nearly everything acquired in either party's name from the date of marriage through to the date of separation. Equitable distribution does not necessarily mean a 50/50 split of all marital property. Instead, the statute on equitable distribution sets out 13 factors to be considered. In any divorce involving equitable distribution, the parties are tasked with identifying 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. Further, if you are served an Inventory first, you have twenty (20) days to file your own Inventory. In this regard, it is certainly helpful to have some understanding of what you and your spouse have prior to filing for divorce. You can supplement the list of marital property if you do not have knowledge of all the assets and debts at the outset.

Pensions and Retirement in Divorce

Pensions, as well as other retirement plans, are often one of the assets up for division in a divorce. 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. 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.

Dividing Property in Divorce

Equitable distribution is the term used in Pennsylvania referring to division of marital property at the time of divorce. Marital property will consist of nearly everything acquired in either party's name from the date of marriage through to the date of separation. It will also include pre-marital assets that have increased in value during the marriage. Equitable distribution does not necessarily mean a 50/50 split of all marital property. Instead, the statute on equitable distribution sets out 13 factors to be considered. Those factors are listed in 23 Pa C.S. 3502. While the length of marriage is a factor in equitable distribution, it does not mean that assets won't be split at all in shorter marriages.

Keeping the House in a Divorce

If you want to keep the house in a divorce, you may wonder what they will entail. If the mortgage is in joint names or in your spouse's name, you are definitely going to need to refinance the mortgage into your own name at the time you get divorced, unless your spouse is nice and agrees to stay on the mortgage longer. If there is equity in the home, and not enough other assets to compensate your spouse in other ways, there is a good chance you are also going to need to come up with additional money as part of the refinance in order to buy your spouse out. The equity will be the value of the home at the time of the distribution less all the debt on the home (mortgage, home equity lien, etc.). The amount you will have to pay your spouse will depend on the percentage split of the assets as well where you live. In some counties they will deduct the cost of sale even though you are not selling the home. In others, they do not. If you need to time to be able to refinance, in some cases, it is recommended that you wait the two year period that you can delay a divorce by not consenting. During that time, as long as the mortgage is being paid you can remain the house while you work to build your credit or income so that you can refinance. If you are interested in keeping the house, you will want to check your credit as soon as you separate and talk to a mortgage broker or lender to see what things you will need to do in order to qualify for a loan and then set a plan to meet those steps. You also want to make sure you create a budget to make sure that you really can afford the home. You will need to project your income, the support you receive and the costs of the home, not just the mortgage but all the maintenance and make a decision based on all those factors. 

Pensions in a Divorce

In a divorce, especially a long term marriage, a pension can be a very valuable asset. Assets accumulated during the marriage are marital assets, regardless of whose name the asset was accumulated in. Retirement accounts, including pensions are marital assets to the extent that they were acquired during the marriage. If a portion of the pension was accumulated prior to the marriage or after the marriage, the court will use a coverture fracture to determine the marital portion. This means the number of years married over the total years that the pension was accumulated will be marital. In addition, many pensions have a survivor benefit that should also be considered. A survivor benefit is an election when the pension is taken that reduces the monthly pension payment based on the election that is chosen. Depending on the value of the pension and the health of the parties, the divorcing spouse may want to pursue the survivor benefit whereby they secure a monthly payment in the event of pension earner's death which could be various percentages of the monthly pension depending on the election that was taken. Instead of doing a percentage of the marital portion, in some cases, it may be beneficial to have the pension appraised and the survivor benefit appraised to offset the value with other assets. Usually a private company will be hired to do this type of valuation. 

Served with Divorce Papers? Now what?

If you are served with divorce papers, you will want to first, keep them. Do not throw them away even if you are upset or angry. You can get a copy from the courthouse, however, if you have already done this. You are considered served on the day you receive them even if you tell the person who tries to hand it to you that you do not want the divorce papers. Your service date is an important date as it starts the period of time in which you have to wait if you are doing a mutual consent divorce. You will want to have an attorney look at the papers that you received so that they can determine for you if you need to response. The papers will always say you only have so many days to respond. Do not panic. It is unlikely that you will lose rights if you do not answer them within that time frame. Do, however, consult an attorney, who will be able to explain the legal jargon to you and let you know whether a response is required. A response is only usually required if you need to raise new claims such as spousal support or alimony or equitable distribution. Most attorneys will offer a consultation either by phone or in their office, and oftentimes, this initial consultation will be free. If you need support, you may bring someone with you to the appointment or have them on the phone with you. If you are served papers, in most cases, you will want to freeze any joint debt and secure any joint assets, but you may also want to discuss it with your attorney. Being informed and knowing what to expect is an important part of getting you through the process. An attorney can discuss with you what you can expect with respect to distribution of assets, support, and also the time frame in which things may happen or how things may be delayed. 

Impact of Inheritance

The receipt of an inheritance may impact your divorce or support case. Regarding divorce, and specifically equitable distribution of marital property, 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. 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.

Interest in Marital Property

A creditor may run into trouble in seeking to pursue their interest through real property of a married couple. Lappas v. Brown, 335 Pa. Super. 108 (Pa. Super. 1984), established that property subject to an order of court is in custodia legis, or under wardship of the court, pending compliance with the order. In Lappas, the underlying dispute involved a defense attorney who confessed judgment to get payment for legal services rendered. Meanwhile, the Commonwealth had seized all available funds as derivative contraband. Ultimately, the attorney was unable to collect his fee due to the existing order of court regarding the forfeiture. City of Easton v. Marra, 862 A.2d 170 (2004), expanded the principle of in custodia legis to actions for divorce and equitable distribution. In City of Easton, a divorce proceeding had been pending since 1988 when the City sought collection of unpaid taxes by forcing a tax sale of the real property the parties owned. A motion to stay the sheriff's sale was granted since the property remained in custodia legis pending final resolution and equitable distribution per the parties' divorce action.

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