Tag: agreement


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.

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.