When you enter the divorce process, you must figure out how to divide your marital property and debt. If you can come to an agreement with your spouse in regards to who gets what, you can come to a decision that makes sense for both of you. But if you disagree with one another, a judge may need to decide what happens in terms of property distribution.
Family court judges make decisions based on the law and unique factors about your marriage. The overall goal of property division in Pennsylvania is “equitable distribution.” In essence, this means the property division must be fair, which may not necessarily be a 50/50 split.
Separate Property vs. Marital Property
There are two categories of assets in a divorce proceeding: separate property and marital property. Separate property includes property either spouse acquires before marriage, gifts or inheritances to one spouse, property acquired after separation, or property excluded by a prenuptial agreement. Anything acquired during the marriage counts as marital property. This commonly includes real estate, retirement accounts, furniture, vehicles, investments and businesses. The same is true of debts accrued during the marriage, such as loans, mortgages and credit card balances.
When determining how to divide marital property, the court may consider the following factors. One is how long the marriage lasted. A second is whether either spouse was previously married to someone else. In addition, the court may consider the spouses’ age, health, vocational skills, employability, the extent of the estate, any liabilities the spouses face and each party’s needs. Each spouse’s opportunity to acquire assets and income in the future may be considered, as may each spouse’s sources of income and job benefits.
Each spouse’s contribution to the marital estate may be considered, including contributions as a homemaker. The standard of living the spouses enjoyed while married may be considered as may the economic circumstances of each spouse. Tax ramifications may be considered. Finally, whether a spouse will have custody of a child of the marriage may be considered.
If you are facing divorce, it would be a good idea to begin making a list of your assets. The list you make will be helpful to your attorney, so you want to include any assets you can think of.
You will probably begin by listing the obvious items, such as your home, automobiles, bank accounts and credit cards, but keep going. Here are six assets you might overlook when you are developing that list.
1. Capital losses
Take a look at your last tax return. If there was a capital loss that exceeded the capital gains as well as the allowable tax deduction, you can carry it forward. You should address this situation in the property division phase of your divorce since a loss could reduce your tax liability.
2. Intellectual Property
Do you or your spouse own royalty rights, copyrights, patents or trademarks? Do not forget to discuss intellectual property rights with your attorney in advance of your divorce settlement agreement.
3. Memberships
Perhaps you and your spouse have a country club or fitness club membership. There was probably an initiation fee when you joined, and you also pay annual fees. You and your spouse undoubtedly have views on who should keep those memberships.
4. Antiques and memorabilia
You may have thought of listing your art collection, which is certainly valuable, but what about those vintage baseball cards your spouse keeps under lock and key? Check your homeowners insurance policy, too, and add to your list any items that the policy specifically mentions.
5. Gifts given during marriage
Any gifts that you gave each other while you were married are marital property and will be divided during your divorce. Gifts made outside of marriage, such as your engagement ring, are separate property.
6. Rover
When it comes to divorce, the law usually considers pets to be property rather than family members. If you are both attached to the dog, there may be a tussle over ownership going forward. The court often assigns ownership to the person who was mostly responsible for Rover’s care and feeding. If you want to keep your pet, make sure your attorney is aware of your wishes.
Splitting Retirement Accounts: How a QDRO Works
One of the things divorcing spouses must agree on when ending their marriage is how they will split their joint assets and debts. This process includes homes, vehicles, investments and retirement savings.
Even though a retirement account like a 401K is in the name of one spouse only, it may well be deemed a marital asset and therefore subject to split.
Withdrawals from 401K accounts
When a person withdraws funds from their 401K for purposes other than retirement, they may be subject to penalties and income taxes on the amount received. These fees and taxes can take a significant bite out of hard-earned savings and reduce the amount of money they net. These fees and taxes may take quite a big bite out of their hard-earned savings and dramatically reduce the amount of money they net.
If the account owner follows this process to satisfy a property division settlement, they may end up having to withdraw more money than they would if they used a qualified domestic relations order.
The qualified domestic relations order
A QDRO allows the non-account-owning spouse to be listed as an alternate payee on a 401K account. The QDRO outlines the terms of all distributions that should be made from the account to the alternate payee pursuant to the divorce agreement. The QDRO outlines the terms of all distributions that should be made from the account to the alternate payee pursuant to the divorce agreement.
With the QDRO in place, money from the retirement account flows directly to the alternate payee. The account owner avoids incurring early withdrawal fees and income taxes on the withdrawal. The spouse also avoids paying early withdrawal fees. Taxes may be deferred by reinvesting the money into another retirement account.
Speak with a Pennsylvania Property Division Attorney
A fair property division resolution can be made in or out of court if all relevant factors are considered. It is important that you understand your rights when it comes to property division so you can make decisions that are in your best interests.
Pennsylvania property division cases vary widely depending on the length of the marriage, the assets involved, and other circumstances. An attorney at Jacobson, Julius & Harshberger can help you understand what you may be entitled to and how to protect your interests throughout the process
