When the courts determine the equitable distribution of property the court must first identify what property is marital property, and thus divisible in a divorce case, and what property is separate property and thus not divisible.  While one spouse may not be awarded the other spouse’s separate property, the existence of a large amount of separate property owned by one spouse is a factor to be considered in determining the amount of marital property that is awarded to the other spouse.

Marital property is generally defined as all property acquired during the course of the marriage (i.e., from the date of marriage until the date of separation) regardless of how the property is titled.  Thus, assets that are always or usually titled only in one name (such as pensions, stock options, life insurance policies), if acquired during the marriage are nevertheless marital property.  Other types of marital assets are frequently held in joint names such as the marital residence, other real estate, bank accounts, investment accounts, etc.  However, regardless of title, the general rule is that if the asset was acquired during the marriage it is marital property.  Moreover, marital property also can include the increase in value in a person’s separate property.

Separate property is property that one party had before the marriage or property inherited by that party or property that was gifted by a third person (not the spouse) to that party and that property remains in his or her own name.  If one spouse owns separate property and then puts it in the joint names of both parties, generally (but not always) the law presumes that this was a gift to both parties and thus it becomes marital property.  The value of separate property at the date of marriage (or the value at the time of the subsequent gift or inheritance) remains the separate property of the titled spouse BUT the increase in that value, from the date of marriage (or the subsequent date of the gift or inheritance) and until the date of separation, IS marital property.  For example, if the wife owned $10,000 in Apple stock and at the time of separation that stock had increased to $40,000, $10,000 would be the wife’s separate and non-divisible property, and the $30,000 increase would be divisible marital property.  Pennsylvania draws no distinction between active appreciation (such as where it is the couple’s labor that caused the value of husband’s separate business to increase) and passive appreciation (when the growth occurs purely by the operation of market forces and has nothing to do with anything that the parties themselves may have done such as where shares of stock increase in value); all appreciation in Pennsylvania is marital property.  As discussed separately, the parties can exclude appreciation in separate property by means of a prenuptial agreement or a mid-nuptial agreement.