Category: Agreements


How do Pennsylvania courts identify marital property?

Posted by HKHLaw – September 16, 2012

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.

Interim Agreements in Pennsylvania Divorces

Posted by HKHLaw – September 12, 2012

During the course of the divorce proceeding it is quite frequent that the parties may enter into a variety of interim agreements often for the purpose of avoiding anticipated problems or resolving interim issues that would otherwise be litigated.  These agreements can include the following:
  • Exclusive Possession of the Marital Residence: Where one party is allowed to use the marital residence and the other party is not permitted to enter the residence except upon limited and very specifically set forth terms.
  • Advance Distribution: Parties frequently agree on an interim or advance distribution of assets, often for the purpose of providing funds for attorneys’ fees, expert witnesses, the down payment on a car or a home, etc., etc.  These advance distributions are intended to be accounted for and recognized when the parties ultimately reach a final settlement or when they go to court to have the court determine what will be the final distribution of assets.
  • Freezing of Assets: Where there is a risk that one party may dissipate an asset or attempt to remove it beyond the control of the court, the other party can ask the court to freeze that asset or a group of assets.  This might arise when a spouse has cleaned out a joint bank account, or has threatened to do so, or where a party may have significant accounts in that party’s own name, or when a party has the ability to borrow against or liquidate a pension account, etc., etc.  The threat of or actual initiation of litigation to prevent further dissipation or to freeze funds inappropriately removed, frequently results in the parties reaching an agreement to freeze those assets or proceeds.  Such agreements are often entered as stipulated (or “agreed upon”) orders.

Post-Nuptial Agreements / Marital Settlement Agreements / Property Settlement Agreements in Pennsylvania

Posted by HKHLaw – September 11, 2012

The most common type of agreement in a divorce case is a post-nuptial agreement, frequently referred to as a Marital Settlement Agreement (“MSA”) or a property settlement agreement (“PSA”).  Such agreements are entered into when the parties have reached an overall comprehensive agreement and frequently include custody and child support terms as well.  MSA’s are intended to evidence the terms of the parties agreements on distribution of property, use or sale of the marital residence, the filing of future tax returns, the disposition of past tax refunds, alimony or interim support, how and when pensions will be divided, and any number of other issues that may have arisen in the course of the divorce proceedings.

As in other settlement type agreements (such as prenups and midnups) these agreements require clarity in drafting and full and fair disclosure.

An explanation of prenuptial agreements and their use in Pennsylvania

Posted by HKHLaw – September 11, 2012

Prenuptial Agreements are intended to alter what would happen in the event of a divorce or a death in absence of the agreement.  In other words, without an agreement if a couple divorces they each have their respective rights under the Divorce Code or, if one of them dies, under the Probate Estates and Fiduciaries Code.

A prenuptial agreement can alter those rights and provide a completely different distribution scheme.  Such an agreement can eliminate the right of an opposing spouse to seek spousal support, APL or alimony, in fact it can waive all rights under the Divorce Code.  Alternatively such an agreement might be used solely to protect a family business that one spouse is likely to inherit or be gifted from claims of the other spouse, but not dealing with any other asset or issue.  One is limited only by one’s imagination as to what can be accomplished with a prenuptial agreement.

Post-separation attacks on prenuptial agreements in Pennsylvania are less likely to succeed than in just about any other state because Pennsylvania does not have requirements such as fairness at the time the agreement was entered or fairness at the time the agreement goes into effect, or the requirement that the dependent spouse have representation of an attorney, as many other states do.

In order to be enforceable in Pennsylvania a prenuptial agreement must meet two tests: (1) it must be clearly and specifically drafted i.e., not confusing or ambiguous as to intent; and (2) there must be full and fair financial disclosure which is generally interpreted quite comprehensively i.e., disclosure of income, assets, liabilities and expectancies.  In order to prove that such disclosure was provided, prenuptial agreements usually attach the disclosure documents (tax returns, financial statements, etc.) to the prenuptial agreement and reference the financial disclosures specifically in the agreement.  Meeting both tests requires very careful attention.

Mid-Nuptial Agreements in Pennsylvania – An Explanation

Posted by HKHLaw – September 5, 2012

The Pennsylvania Divorce Code specifically recognizes agreements entered into “before, during and after” the marriage.  A mid-nuptial agreement is entered during the marriage but is otherwise similar in effect to a prenuptial agreement.  Because a mid-nuptial agreement is entered after the marriage occurred, it technically is and is sometimes referred to as, a post-nuptial agreement.  Generally speaking however a post-nuptial agreement is thought of as a final settlement agreement and is often referred to as a marital settlement agreement or a property settlement agreement.

Mid-nuptial agreements are not anywhere near as common as prenups or postnups.  Sometimes they are entered because a parent is intending to make a large gift, perhaps in the context of estate planning, to the Husband or Wife, such as an interest in a business or a piece of real estate, and there is a desire to keep that asset “in the family.”  In this limited type of agreement a spouse will be asked to give up all rights in that particular asset but will not be asked to give up rights in any other marital assets such as rights to alimony or equitable distribution of other assets, etc.

The other circumstance that gives rise to consideration of a mid-nuptial agreement is when a couple may be having marital difficulties but neither party has decided to proceed with the divorce and both parties want to try and make efforts to save the marriage.  However, they don’t want to be emotionally burdened with might happen to their assets if they fail to reconcile and so they decide up front that in the event they subsequently break up (six weeks, six months or six years later) the agreement will set forth how the economic issues will be resolved.  While one hopes that both parties enter into the negotiations for such an agreement in good faith, the private motivations of any individual can never be ascertained with certainty.  Nevertheless, mid-nuptial agreements still require, for enforceability purposes, the same formality and tests as a prenuptial agreement i.e. clarity in drafting and full and fair financial disclosure.  There is one additional requirement for an enforceable mid-nuptial agreement.  While a prenuptial agreement does not require any extra consideration other than the occurrence of the marriage itself, a mid-nuptial agreement, being entered into after the marriage has already occurred, requires separate and real consideration to be given to the spouse who may be surrendering certain rights.  A discussion of the type of consideration is beyond the scope of this blog.

What is a Cohabitation Agreement and Why Might You Need One in Pennsylvania?

Posted by HKHLaw – September 1, 2012

Some people just want to live together without the benefit of marriage or would like to get married but can’t because of legal prohibitions such as Pennsylvania’s refusal to recognize same sex marriages.  Such couples often have as sophisticated and complex financial interrelations as do many married couples.

Similar to a prenuptial agreement, a cohabitation agreement can set forth what will happen to jointly owned real estate, bank accounts, and other assets and can, in some instances, deal with issues of child custody and support whether the couple has had a child naturally or by adoption.

One thing no agreement can do, whether it be a cohabitation agreement, post-nup, mid-nup or a prenup, is eliminate or reduce a parent’s obligation to financially support a child or significantly alter a parent’s custodial rights.  However, in some relationships such rights do not exist in the first instance, such as step-parents, some surrogacy situations, etc.  One parent may be a natural or adoptive parent but the other half of the couple may have no otherwise legally cognizable rights.

A cohabitation agreement can at least establish the intentions of the parties and the desires of the parties in such situations at a time when the parties had an amicable relationship rather than first trying to establish what those intentions were, perhaps years ago, in the midst of a hostile dispute when there may be strong motives to deny original intentions.

Agreements and their role in family law disputes

Posted by HKHLaw – August 29, 2012

The vast majority of disputes in any family law matter are settled by an agreement.  This doesn’t mean there won’t be any litigation, but ultimately most issues in the majority of cases get resolved by an agreement, whether it be a custody agreement, a child support agreement, an agreement on the interim and exclusive use of the marital residence, an agreement for advance partial distribution of assets, or an overall comprehensive property settlement agreement (often referred to as a marital settlement agreement or a postnuptial agreement which generally encompasses many issues, all of which have been ultimately agreed upon and reduced to a written agreement).

Other types of agreements are entered into not because the alternative is litigation but in order to avoid future disagreements.  The most well known of this type of agreement is a prenuptial agreement which is entered into before a marriage and is intended to set forth in advance how economic issues will be resolved in the event of a divorce or in the event of death of one of the parties.  A midnuptial agreement is similar in many respects to a prenuptial agreement however it is entered during the marriage and can serve similar purposes to a prenuptial agreement.  Finally, Pennsylvania recognizes cohabitation agreements which are entered into by couples who do not intend to get married or are prohibited by law from getting married (for example same sex couples) but who wish to establish their rights, for example in real estate they intend to purchase together or that one party intends to purchase for both of the parties to live in, in the event the couple later breaks up.