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Chapter Five

Carving Pie with a Spoon: Equitable Distribution of Marital Property under the Divorce Code of PennsylvaniaBrian C. Vertz

The third and final step in equitable distribution (after the identification and valuation of marital property) is the divi-sion and distribution of marital assets and allocation of lia-bilities. In Pennsylvania, equitable distribution is governed by 23 Pa.C.S. § 3502(a). The goal of equitable distribution, as described in the preamble to the Pennsylvania Divorce Code, is to “[e]ffectuate economic justice between parties who are divorced or separated and . . . insure a fair and just determination and settlement of their property rights.” 23 Pa.C.S. § 3102(a)(6).

U.S. Supreme Court Justice Potter Stewart famously said that pornography was hard to define, but “I know it when I see it.” Jacobellis v. Ohio, 378 U.S. 184 (1964). If Justice Potter had ever considered divorce litigation, the word “eq-uitable” could have been easily substituted for “pornogra-phy” in that sentence. Judicial discretion is the watchword in equitable distribution cases. The trial courts have broad discretion to divide marital property. Their discretion is not unlimited, however. The Pennsylvania Divorce Code sup-

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5 Carving Pie with a Spoon

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plies a specific list of 13 statutory criteria, however subjec-tive, for the trial judge’s studied consideration. 23 Pa.C.S. § 3502(a).

Like carving pie with a spoon, it is possible to divide marital assets and debts equitably under the law of Pennsylvania, but it can be imprecise and messy.

5-1 Advising Clients

Many clients possess preconceived ideas about property divi-sion that may be inaccurate. The family lawyer must dispel myths and assuage feelings while maintaining professional integrity and detachment. The lawyer who personalizes the issues or champions a cause may be counterproductive to an efficient resolution of the case. On the other hand, clients need and deserve compassionate understanding and forceful advocacy.

Most of the proof in an equitable distribution trial will be re-lated to the identity and value of marital assets. Yet, evi-dence and testimony related to the statutory criteria at 23 Pa.C.S. § 3501(a) is essential. Tax returns and pay stubs are typically offered to support a claim for support or alimony, but they are also relevant to equitable distribution. A Social Security earnings history may illustrate the history of the parties’ careers or their retirement prospects. Property divi-sion orders or settlement agreements from prior marriages may help to prove what a spouse brought to a subsequent marriage, whether valuable assets or burdensome obliga-tions. Testimony about physical and mental health symp-toms and treatment may assist the court in envisioning a spouse’s future prospects. Estimates for home repairs, health insurance premiums, furniture replacement, and ed-ucational expenses may help to project substantial ex-penses. Estate tax returns, trust agreements, and probate inventories may prove past or future gifts, inheritances, or

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5-2 Equitable Distribution Distinguished from Other Methods


expectancies. These and other types of evidence must be pro-cured in discovery, so advance preparation is the key to suc-cessful results and client satisfaction.

Whether a lawyer is negotiating settlement or preparing for trial, there is no surefire way to predict the outcome of an equitable distribution hearing. Stipulating to the identity and value of marital assets may help, as does the experience of the family lawyer. Still, the equitable distribution factors may be interpreted and weighted differently by judges, law-yers, and litigants. Results may vary from county to county, judge to judge, perhaps even case to case. This explains why the identification and valuation of marital property are so significant. Lawyers and litigants have limited control over how the marital estate is divided, so it becomes important to influence what is in the marital estate and how much it is worth.

5-2 Equitable Distribution Distinguished from Other Methods

The method prescribed by the Divorce Code is a dual classi-fication equitable distribution scheme because marital prop-erty is distinguished from nonmarital or separate property (terms that are used interchangeably). In other jurisdictions governed by an all-property equitable distribution scheme, the divorce courts do not distinguish between marital and nonmarital property.

Pennsylvania does not recognize community property, which is a method by which married persons may hold title to prop-erty in certain jurisdictions, creating mutual fiduciary duties between spouses and usually resulting in an equal division upon divorce. See Drake v. Drake, 725 A.2d 717, 720–21 (Pa. 1999); Willcox v. Penn Mutual Life Ins. Co., 55 A.2d 521 (Pa. 1947). Instead, married persons in Pennsylvania may hold joint title to property as tenants by the entireties (“per tout et non per my”), which cannot be severed by partition or at-tached by creditors of an individual spouse. See In re Estate

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of Fazekas, 737 A.2d 1262 (Pa.Super. 1999). Entireties prop-erty ceases to exist upon marital dissolution, 23 Pa.C.S. § 3507(a), and unlike community property, is not presumed to be divided equally.

Pennsylvania is in the minority of jurisdictions where the in-crease in value of separate property is subject to equitable dis-tribution, regardless of whether the appreciation is active or passive. In most states, the appreciation of separate property due to inflation or market forces is not divided in equitable distribution. This approach was advocated in the early days of the Pennsylvania Divorce Code. See (Hon.) Emanuel A. Ber-tin, Equitable Distribution: Preparing the Case for Settlement or Trial 92–94 (PBI 1982). The Superior Court soon took a dif-ferent view. Aletto v. Aletto, 537 A.2d 1383 (Pa.Super. 1988); Anthony v. Anthony, 514 A.2d 91 (Pa.Super. 1986).

5-3 Judicial Discretion

Contrary to popular belief, and unlike community property, marital property is not divided equally. Drake v. Drake, 725 A.2d 717 (Pa. 1999); Williamson v. Williamson, 586 A.2d 967 (Pa.Super. 1991); Fratangelo v. Fratangelo, 520 A.2d 1195 (Pa.Super. 1987). The law of Pennsylvania does not recog-nize a presumption of a 50%–50% division of marital assets. Platek v. Platek, 454 A.2d 1059 (Pa.Super. 1982). In fact, the trial court may not consider 50%–50% as a starting point. Fratangelo, above; compare Paul W. v. Margaret W., 130 P.L.J. 6 (1982). The court may divide marital property equally only if warranted by the statutory criteria. LaBuda v. LaBuda, 503 A.2d 971 (Pa.Super. 1986). The criteria for equitable distribution are set forth at 23 Pa.C.S. § 3502(a); see Bacchetta v. Bacchetta, 445 A.2d 1194 (Pa. 1982).

The Divorce Code grants the trial court a broad measure of discretion in deciding how to divide marital property. Drake v. Drake, 725 A.2d 717 (Pa. 1999); Sutliff v. Sutliff, 543 A.2d 534 (Pa. 1988); Biese v. Biese, 979 A.2d 892 (Pa.Super. 2009); Trembach v. Trembach, 615 A.2d 33 (Pa.Super. 1992);

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5-4 Mechanics of Property Division


Semasek v. Semasek, 479 A.2d 1047 (Pa.Super. 1984). The list of section 3502 factors serves as a guideline for consider-ation, although the list is neither exhaustive nor specific as to the weight to be placed on each factor. Fonzi v. Fonzi, 633 A.2d 634 (Pa.Super. 1993); Sergi v. Sergi, 506 A.2d 928 (Pa.Super. 1986). The trial court may divide the marital property in any such proportions as it deems appropriate to effectuate economic justice between the spouses and may consider each marital asset independently, applying a differ-ent percentage to each asset. 23 Pa.C.S. § 3502(a); Ruza v. Ruza, 1 Pa.D.&C.5th 25 (C.P. Delaware 2009); Zegan v. Ze-gan, 79 Pa.D.&C.4th 86 (C.P. Monroe 2005). In practice, dis-tributions more disparate than 65%–35% are exceptional.

Few of the statutory criteria for equitable distribution are objective or quantitative. Nearly all factors are subjective and qualitative, giving a wide measure of discretion to the trial court. Because the statutory criteria are so subjective, it is essential to communicate a narrative in each case, a story that creates an impact—logical and emotional—in the mind of the fact finder.


The trial court generally determines the percentage of the marital estate to be awarded to each of the parties, based upon the statutory criteria, and then proceeds to assign indi-vidual assets to each of the parties to effectuate the overall percentage. The court usually does not divide each individ-ual asset between the parties. See, e.g., Osial v. Cook, 803 A.2d 209 (Pa.Super. 2002). The court may distribute marital assets in kind or compel a sale or liquidation of some or all of the marital assets. Nagle v. Nagle, 799 A.2d 812 (Pa.Super. 2002); Gill v. Gill, 677 A.2d 1214 (Pa.Super. 1996); Zollars v. Zollars, 579 A.2d 1328 (Pa.Super. 1990). An equitable distri-bution award may be vacated on appeal where a marital as-set was omitted from the trial court’s distribution. Uhler v. Uhler, 594 A.2d 688 (Pa.Super. 1991).

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How to distribute marital assets, once the proportions have been determined, is a practical dilemma to be resolved by the courts (or the lawyers and litigants, in cases that are settled). Experience suggests that assets titled in the name of an individual spouse or having a special connection to one spouse (such as premarital property or gifts from a spouse’s family) are more likely to be awarded to that spouse unless there is a good reason to liquidate. Lee v. Lee, 978 A.2d 380 (Pa.Super. 2009); Moran v. Moran, 839 A.2d 1091 (Pa.Super. 2003); Brojack v. Brojack, 561 A.2d 788 (Pa.Super. 1989). Assets that are jointly titled or untitled may be awarded to an individual spouse, divided in kind, or liquidated. Barletta v. Barletta, 485 A.2d 752 (Pa. 1984); Miller v. Miller, 783 A.2d 832 (Pa.Super. 2001). The court has authority to order a forced buyout when in-kind distribution is not practical. Ryan v. Ryan, 596 A.2d 140 (Pa. 1991) (business interests); Nagle v. Nagle, 799 A.2d 812 (Pa.Super. 2002); Gill v. Gill, 677 A.2d 1214 (Pa.Super. 1996).

The courts strive to sever the economic ties between divor-cing spouses. Ryan v. Ryan, 596 A.2d 140 (Pa. 1991) (in-kind division of business interest not mandated); Gill v. Gill, 677 A.2d 1214 (Pa.Super. 1996). To effectuate the decreed pro-portions, it may be necessary for a spouse to transfer money, real estate, investments, or retirement benefits to “buy out” the other’s interest. See Ryan, above; Barletta, above; Miller, above; Brojack v. Brojack, 561 A.2d 788 (Pa.Super. 1989). Pennsylvania applies, but does not explicitly endorse, a fair market standard of value. See, e.g., Anthony v. An-thony, 514 A.2d 91 (Pa.Super. 1986). Yet, some property is more valuable in the hands of its owner (its intrinsic value) than the price for which it could be sold. Furniture and household goods, for instance, are valued in equitable distri-bution at the price they would bring in an estate sale or auc-tion, a price for which they could not be replaced. Stubborn insistence on liquidating such assets would merely impover-ish the marital estate and spouses. For this reason, an in-kind distribution is preferable to liquidation.

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In cases involving defined-benefit pensions, the courts and lawyers must choose between two possible methods of divid-ing pensions: immediate offset or deferred distribution (dis-cussed at length below). Difficult problems arise when law-yers or courts confuse or try to combine these methods. In Zollars v. Zollars, 579 A.2d 1328 (Pa.Super. 1990), the par-ties submitted a pension appraisal to prove the net present value of the husband’s pension annuity, worth $176,689. The wife wanted to retain the marital residence, worth $52,104. The trial court wanted to award 60 percent of the estate to the wife (or $137,276, including the house), but no other assets existed. To achieve the desired result, the court would have to award the wife additional property worth $85,172. The trial court devised a formula to be applied to the pension annuity payments, giving the wife a 60 percent share reduced by her payment to buy out the husband’s in-terest in the house. The Superior Court vacated and re-manded, suggesting other methods of distribution: the wife could obtain a mortgage to pay the husband; or the wife could pay annual installments to the husband with interest. The Superior Court did not endorse a hybrid deferred distri-bution of a defined-benefit pension where the nonemployee’s share was based upon a net present value pension appraisal. See also Liciardello v. Liciardello, 570 A.2d 1062 (Pa.Super. 1990).

The mechanics of distribution may have been complicated by the 2005 amendments to the Divorce Code, which require the courts to consider the costs of sale and tax consequences associated with marital property, whether hypothetical or remote in time. 23 Pa.C.S. § 3502(a)(10.1). Experienced practitioners have always considered the tax characteristics of marital assets in devising settlements. After-tax assets (such as cash and bank accounts) are more valuable than pre-tax assets (such as retirement accounts and appreciated investments) if their values are not discounted. A 50%–50% division of assets would not be equal if one spouse were awarded bank accounts while the other were awarded re-tirement accounts having the same gross value. Under the

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2005 amendments to the Divorce Code, the courts typically discount assets for income taxes and the costs associated with the sale of assets, such as realtors’ commissions and transfer taxes. When distributing the assets, however, dis-counted assets must be restored to their gross values. Other-wise, some of their value would go undistributed.

If a marital estate consisted of a retirement account worth $5,000 and cash worth $5,000, for instance, the court might discount the retirement account by, say, 20 percent (the in-come tax rate applicable in the future when the retirement account might be liquidated). The discounted value of the re-tirement account would be $4,000. To achieve an equal divi-sion of marital asset, each of the spouses should receive as-sets worth $4,500 after tax. It would be error, however, to award $500 cash plus $4,000 from the retirement account to one spouse and $4,500 cash to the other spouse. The retire-ment account actually contains $5,000 at the time of trial, and its entire value must be distributed since no actual tax is incurred upon distribution. Instead, one spouse should re-ceive $500 cash plus $5,000 from the retirement account, which will be worth $4,000 when the income tax liability is paid upon withdrawal.

Some marital assets, such as stock options, stock apprecia-tion rights, forgiveable loans, and mineral rights (oil, natu-ral gas), present special problems in equitable distribution because their value is contingent or difficult to quantify. An immediate offset distribution requires asset valuation tech-niques, such as the Black-Scholes method, that some practi-tioners and courts deem too speculative. But see Dearlove v. Genzyme Transgenics Corp., 70 Pa.D.&C.4th 314 (C.P. Phil-adelphia 2004). Perhaps an in-kind distribution is more ap-propriate in those cases. Fisher v. Fisher, 769 A.2d 1165 (Pa. 2001) (in-kind distribution of stock options); MacAleer v. MacAleer, 725 A.2d 829 (Pa.Super. 1999) (stock options).

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5-5 Liabilities


5-5 Liabilities

Debt secured by marital property, such as a mortgage, must be allocated by the courts in equitable distribution. The Divorce Code excludes “[p]roperty to the extent to which the property has been mortgaged or otherwise encumbered in good faith for value,” recognizing the interests of third-party creditors. 23 Pa.C.S. § 3501(a)(7); Biese v. Biese, 979 A.2d 892 (Pa.Super. 2009) (home equity loan). Nothing in the Divorce Code expli-citly authorizes or requires the courts to allocate debts. Section 3502(a)(3) authorizes the court to consider liabilities as one of the equitable distribution factors. Still, our courts routinely designate debts incurred during the marriage prior to separa-tion as “marital debts” and allocate responsibility between divorcing spouses in equitable distribution, regardless of whether the debts are joint or individual. In Hicks v. Kubit, 758 A.2d 202 (Pa.Super. 2000), the Superior Court endorsed the proposition that debts incurred during coverture are mari-tal debts, regardless of the purpose for which the debts were incurred. While finding that the trial court erroneously failed to count student loans incurred by the wife during the mar-riage as marital debts, the court nevertheless affirmed the trial court’s allocation. The Superior Court in its decision cited Drake v. Drake, 725 A.2d 717 (Pa. 1999), and Litmans v. Lit-mans, 673 A.2d 382 (Pa.Super. 1996). Student loans incurred by an individual spouse during the marriage, the court held, should be treated no differently than joint consumer debt or business partnership loans.

In Litmans, above, the Superior Court affirmed the trial court’s allocation of a loan taken against the husband’s re-tirement plan to finance the children’s private school educa-tion but refused to allocate loans for which insufficient docu-mentation was produced. Debts of an individual spouse that were incurred without the knowledge of the non-debtor spouse (particularly if the loans were made by family mem-bers) are typically viewed by the courts with suspicion un-less well-documented. See Tolbert v. Tolbert, 64 Fayette Leg. J. 88 (2001), aff’d, 797 A.2d 1032 (Pa.Super. 2002).

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In Zullo v. Zullo, 613 A.2d 544 (Pa. 1992), the Supreme Court of Pennsylvania upheld an award of alimony or equi-table reimbursement intended to assist a spouse in satisfy-ing a mortgage loan against a marital residence that had been remortgaged to pay marital debts. This case does not speak to the allocation of unsecured debt.

Practically speaking, a decree of equitable distribution does not bind third-party creditors, creating a paradox. While the court may allocate debts between divorcing spouses, the creditors are not bound by the equitable distribution order. As the Superior Court held in Kronz v. Kronz, 574 A.2d 91 (Pa.Super. 1990), a family court has neither the power to al-ter or delay the rights of creditors in order to facilitate equi-table distribution, nor the jurisdiction over third-party cred-itors to bind them to its allocation of debts. The divorce court cannot remove the name of a spouse from a joint debt. If a joint marital debt is not paid by the spouse to whom it is al-located in equitable distribution, the creditor may pursue collection from either or both spouses. Adverse credit re-ports, dunning letters, telephone calls from collection agen-cies, and other headaches may afflict either or both spouses. Neither indemnification nor contempt can fully protect the spouse whose credit is inextricably mingled with that of a recalcitrant former spouse. If a spouse who is responsible for marital debts under an equitable distribution order subse-quently discharges his or her liabilities in bankruptcy, the former spouse may be left holding the bag. See Hogg v. Hogg, 816 A.2d 314 (Pa.Super. 2003).

5-6 Procedural Requisites

The first requirement of equitable distribution is the issu-ance of a divorce decree. 23 Pa.C.S. § 3104(a)(1) (property rights may be determined “in conjunction with any decree granting a divorce or annulment”); Dech v. Dech, 492 A.2d 41 (Pa.Super. 1985). A divorce decree is required so that liti-gants may not misuse the equitable distribution laws to evade creditors or for other illegitimate purposes.

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5-7 Advances


In practice, particularly in no-fault divorce cases, the equita-ble distribution hearing often results in a property division order before the divorce decree is issued. The property divi-sion order is not ripe for appeal until the divorce decree is entered. Wilson v. Wilson, 828 A.2d 376 (Pa.Super. 2003); Colagioia v. Colagioia, 523 A.2d 1158 (Pa.Super. 1987). Yet, an appeal might not be quashed if the divorce decree is promptly obtained. Busse v. Busse, 921 A.2d 1248, n.2 (Pa.Super. 2007); Schenk v. Schenk, 880 A.2d 633 (Pa.Super. 2005); Isralsky v. Isralsky, 824 A.2d 1178 (Pa.Super. 2003); Lowry v. Lowry, 544 A.2d 972 (Pa.Super. 1988); Hutnik v. Hutnik, 535 A.2d 151 (Pa.Super. 1987); Campbell v. Camp-bell, 516 A.2d 363 (Pa.Super. 1986).

5-7 Advances

Prior to 2005, the law of Pennsylvania did not explicitly ac-knowledge the power of courts to grant advances or interim partial distributions of marital property. In 2005, the Divorce Code was amended to authorize interim partial distributions. 23 Pa.C.S. § 3502(f).

Similarly, the courts are authorized by statute to award ex-clusive possession of a marital residence on an interim basis pending equitable distribution. 23 Pa.C.S. § 3502(c); Lacz-kowski v. Laczkowski, 496 A.2d 56 (Pa.Super. 1985). Exclu-sive possession may be awarded to the spouse who remained in the home while the other spouse willingly vacated. Id., Gaither v. Gaither, 44 Pa.D.&C.3d 1 (C.P. Lehigh 1987). If the residence is nonmarital property or titled in the name of one spouse, the titled spouse may have an advantage. The level of conflict between the parties, the ability of a spouse to afford alternate housing, and the effect upon custody ar-rangements are other likely considerations. See Chappell v. Chappell, 81 Pa.D.&C.4th 235 (C.P. Lawrence 2007); Duz-gun v. Duzgun, 76 Pa.D.&C.4th 538 (C.P. Monroe 2005); Groff v. Groff, 33 Pa.D.&C.4th 380 (C.P. Lancaster 1996); Merola v. Merola, 19 Pa.D.&C.4th 538 (C.P. Luzerne 1993); McGinnis v. McGinnis, 7 Pa.D.&C.4th 58 (C.P. Crawford

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1990); Alva v. Alva, 45 Pa.D.&C.3d 86 (C.P. Somerset 1986); Garrison v. Garrison, 43 Pa.D.&C.3d 190 (C.P. Monroe 1986); Vuocolo v. Vuocolo, 42 Pa.D.&C.3d 398 (C.P. Lawrence 1987); Uhler v. Uhler, 41 Pa.D.&C.3d 3 (C.P. Lan-caster 1985); Cross v. Cross, 24 Pa.D.&C.3d 643 (C.P. Erie 1981); Smith v. Smith, 18 Pa.D.&C.3d 703 (C.P. Northum-berland 1981). An exclusive possession order does not pre-clude the court from awarding the residence to the excluded spouse in equitable distribution. See, e.g., Kokolis v. Kokolis, 83 Pa.D.&C.4th 214 (C.P. Allegheny 2006), aff’d, 927 A.2d 663 (Pa.Super. 2007).

5-8 The Statutory Criteria—23 Pa.C.S. § 3502(a)(1) through (11)

Each of the statutory criteria must be scrutinized in light of the facts, which will dictate the weight to be applied to each factor. Conceptually, the criteria may be grouped into sev-eral categories: the “statistical data” factors, such as age of the parties, duration of the marriage, prior marriages, etc. (sections 3502(a)(1), (2), and (3)); the “prospects for recovery” factors, such as current and future income and assets, medi-cal condition, and employability (sections 3502(a)(3), (5), and (8)); the “contribution” factors, such as premarital property, gifts and inheritance, business owner efforts, and home-maker contributions (sections 3502(a)(4) and (7)); the “stan-dard of living” factors, such as living expenses (sections 3502(a)(6), (9), and (10)); and the “cost of transfer” factors (sections 3502(a)(10.1) and (10.2)).

5-8.1 § 3502(a)(1)—Length of Marriage

There is a dearth of case law to interpret this factor, but some judges and practitioners subscribe to a theory: in the course of a lengthy marriage, it is perhaps more likely that the spouses have sacrificed other financial opportunities, contributed most or all of their separate estates and efforts, and intertwined their financial affairs with each other. See

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5-8.3 § 3502(a)(3)—Age, Health, etc. of Parties


Wang v. Feng, 888 A.2d 882 (Pa.Super. 2005). On the other hand, after a brief marriage, the spouses’ finances may not have been closely intertwined; they may not have sacrificed other financial opportunities; or they may not have made substantial contributions to the marital estate. See Schenk v. Schenk, 880 A.2d 633 (Pa.Super. 2005). In cases of short marital duration, the court should perhaps endeavor to re-store the parties to their original financial positions. In cases of lengthy marital duration, a more equal division of assets might be warranted.

5-8.2 § 3502(a)(2)—Prior Marriages

Again, the case law is moribund, but theories abound: per-haps assets that were subject to equitable distribution in a prior divorce should not be subject to “double jeopardy” in a subsequent divorce. Or, perhaps, a party who has been pre-viously divorced should be aware of the need to protect his or her assets through the use of a prenuptial agreement, as-set titling, or other means. A better theory: a spouse who has contributed to the care of children born to a spouse’s prior union should be entitled to some consideration.

5-8.3 § 3502(a)(3)—Age, Health, Station, Amount, and Sources of Income, Vocational Skills, Employability, Estate, Liabilities, and Needs of Each of the Parties

These criteria speak to economic factors specific to each of the divorcing spouses, looking both forward at their future prospects for income and employment and backward at their past contributions. Earning capacity must be considered as well as actual earnings. See Drake v. Drake, 725 A.2d 717 (Pa. 1999); McClain v. McClain, 693 A.2d 1355 (Pa.Super. 1997); Smith v. Smith, 653 A.2d 1259 (Pa.Super. 1995).

The courts and practitioners may also consider the parties’ proximity to retirement age. Upon retirement, many parties cease to earn income and begin to consume their savings

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and assets. If both parties are approaching retirement age, particularly after a lengthy marriage, perhaps an equitable distribution of assets should be crafted to equalize income and assets. Teodorski v. Teodorski, 857 A.2d 194 (Pa.Super. 2004) (trial court did not err in ordering a 50%–50% split, finding that the economic situation between the two parties at the time of husband’s retirement would likely be very similar in terms of monthly incomes).

Where there is a significant disparity between the parties’ in-comes, earning capacities, and employability, the lesser-earning spouse may require a greater share of the marital property. Lee v. Lee, 978 A.2d 380 (Pa.Super. 2009); Drake v. Drake, 725 A.2d 717 (Pa. 1999); Lowry v. Lowry, 544 A.2d 972 (Pa.Super. 1988); Dolinar v. Kapton, 80 Pa.D.&C.4th 156 (C.P. Allegheny 2006) (disparity in ages and earning capacities).

A substantial nonmarital estate owned by one of the divor-cing spouses is frequently cited as a justification for an un-equal division of marital property. While inheritance and premarital assets may be considered by the court, a mere ex-pectancy (e.g., the wealth of a living parent) is not to be con-sidered in equitable distribution.

5-8.4 § 3502(a)(4)—Contribution to the Education, Training, or Increased Earning Power of the Other Spouse

A spouse’s contribution to the education, training, or career advancement of the other spouse may be considered in divid-ing the marital estate. Bold v. Bold, 574 A.2d 552 (Pa. 1990); Lehmicke v. Lehmicke, 489 A.2d 782 (Pa.Super. 1985); com-pare Schenk v. Schenk, 880 A.2d 633 (Pa.Super. 2005).

A case on point is illustrative. In Wang v. Feng, 888 A.2d 882 (Pa.Super. 2005), the wife of a physician testified that she had worked to finance her husband’s medical school ed-ucation and relocated to accommodate his career, sacrificing her own career opportunities. As soon as her husband com-pleted his residency and fellowship, he separated from the

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5-8.6 § 3502(a)(6)—Sources of Income and Other Benefits


wife, leaving her alone in a city where she had no employ-ment, family, or established roots. The court awarded her 100 percent of the modest marital estate plus equitable re-imbursement (discussed at length below).

5-8.5 § 3502(a)(5)—Opportunity for Future Acquisition of Capital Income and Assets

One of the stated goals of the Divorce Code is “to mitigate the harm to spouses and their children caused by the legal dissolution of the marriage.” When divorce occurs, the mari-tal enterprise is severed into two economic units, each of which must be capable of supporting a spouse, preferably without financial ties to each other or public assistance. Thus, in dividing marital property, the trial court must con-sider the relative economic circumstances of the parties and consider each spouse’s ability to recover from the adverse economic consequences of divorce. See, e.g., Ressler v. Ressler, 644 A.2d 753 (Pa.Super. 1994); Hayward v. Hay-ward, 630 A.2d 1275 (Pa.Super. 1993).

5-8.6 § 3502(a)(6)—Sources of Income, and Medical, Retirement, Insurance, or Other Benefits

The parties’ incomes, earning capacity, employability, and benefits may be a significant factor in determining the ap-propriate distribution of marital property. Hutnik v. Hutnik,535 A.2d 151 (Pa.Super. 1987); however, an “income equaliz-ing” approach may not be appropriate. Powell v. Powell, 577 A.2d 576 (Pa.Super. 1990).

The amount of spousal support or alimony pendente lite that a spouse received during separation may have influenced the court’s refusal to a greater share of property to the de-pendent spouse. Busse v. Busse, 921 A.2d 1248 (Pa.Super. 2007); Schenk v. Schenk, 880 A.2d 633 (Pa.Super. 2005).

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In connection with the “marital enterprise” theory, it is fre-quently held that a spouse who sacrificed other economic op-portunities to become a homemaker may be entitled to a greater share of the marital assets. Zulick and Zanan, Penn-sylvania Divorce Code Annotated at 423 (Bisel 2007), citing Rhodes v. Rhodes, 43 Bucks Co. L. Rep. 309 (1984), and Lang v. Lang, 44 Bucks Co. L. Rep. 213 (1984). Although Social Se-curity retirement benefits are not marital property, they may affect equitable distribution insofar as a disparity may prompt the court to award a greater share of marital property to the spouse having lesser benefits. The need for medical in-surance (particularly for spouses who do not work) is fre-quently cited as a factor in equitable distribution.

5-8.7 § 3502(a)(7)—Contributions to the Acquisition or Preservation of Marital Property

In dividing marital property, the trial court must consider each of the spouse’s contributions to the acquisition and preservation of the marital estate. In Mercatell v. Mercatell, 854 A.2d 609 (Pa.Super. 2004), the court contrasted the wife’s work ethic and fiscal responsibility with the hus-band’s inability to hold down a steady job and prolifigate spending on personal hobbies. In Anzalone v. Anzalone, 835 A.2d 773 (Pa.Super. 2003), the Superior Court considered gifts and loans received from the wife’s family as well as her post-separation payment of marital debts and expenses to maintain marital property.

A spouse’s status as breadwinner did not entitle him to more favorable treatment in equitable distribution. Hutnik v. Hutnik, 535 A.2d 151 (Pa.Super. 1987).

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5-8.9 § 3502(a)(7)—Homemaker Contributions


5-8.8 § 3502(a)(7)—Contribution of Premarital Assets

A spouse who contributes his or her premarital assets to the marital estate may be entitled to credit for his or her contri-butions in the division of marital property. Lee v. Lee, 978 A.2d 380 (Pa.Super. 2009); Sergi v. Sergi, 506 A.2d 928 (Pa.Super. 1986).

5-8.9 § 3502(a)(7)—Homemaker Contributions

The contribution of a homemaker is equally as important as that of the breadwinner. Fonzi v. Fonzi, 633 A.2d 634 (Pa.Super. 1993); Hutnik v. Hutnik, 535 A.2d 151 (Pa.Super. 1987); Johnson v. Johnson, 529 A.2d 1123 (Pa.Super. 1987); Pascoe v. Pascoe, 133 P.L.J. 142 (1985). However, where the wife did not contribute substantially to the husband’s busi-ness, the trial court did not err by awarding the entire value of the business to the husband. Williamson v. Williamson, 586 A.2d 967 (Pa.Super. 1991).

Practice tip: When representing a stay-at-home spouse, it may be helpful to prove that the spouse was an active homemaker whose efforts enabled the breadwinner to devote more time and attention to his or her career. A homemaker’s contributions might include:

meal planning and shopping

cooking

cleaning

researching and selecting furniture, carpets, wall coverings, decorations, vehicles, appliances, cloth-ing, service providers

scheduling and supervising home repairs, service calls, and maintenance (plumbers, appliance repair technicians, tree service, etc.)

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child care (including feeding, bathing, dressing, making school lunches, administering discipline, attending school conferences, assisting with home-work, arranging extracurricular activities, schedul-ing and keeping appointments with doctors, pick-ing up children at school when ill, etc.)

caring for elderly or disabled family members

bill paying and budgeting

entertaining clients and business associates

vacation planning

participating in community and charitable organizations

When representing a working spouse, it may be help-ful to prove that these tasks were not performed by the stay-at-home spouse or were shared.

5-8.10 § 3502(a)(7)—Dissipation

The trial court may also consider a spouse’s conduct that re-sults in a dissipation of the marital estate. Twilla v. Twilla, 664 A.2d 1020 (Pa.Super. 1995); Beener v. Beener, 619 A.2d 713 (Pa.Super. 1992). The husband’s incarceration and fail-ure to pay mortgage loan payments constituted dissipation warranting an unequal division of marital assets. Ruza v. Ruza, 1 Pa.D.& C.5th 25 (C.P. Delaware 2009) (60%–40%).

Although marital misconduct is irrelevant to equitable dis-tribution, it may give rise to an argument that the offending spouse dissipated marital assets through gambling or spending money for alcohol, drugs, or extramarital affairs. See Bova v. Bova, 37 Leb. Co. L.J. 199 (1999), aff’d, 754 A.2d 13 (Pa.Super. 2000).

194

5-8.13 § 3502(a)(10.1)—Tax Ramifications

SUP12C05.fm 5 Thursday, November 29, 2012 12:12 PM

5-8.11 § 3502(a)(8)—Separate Estates/Gifts/Inheritance/Family Resources

While the trial court may not divide the spouse’s separate property, it may award a smaller share of marital property to a spouse who has the benefit of a substantial separate es-tate. McGinley v. McGinley, 565 A.2d 1220 (Pa.Super. 1989).

If a premarital agreement excludes property from the mari-tal estate, creating a separate estate for one of the parties, the magnitude of the separate estate may warrant an un-equal division of marital property.

5-8.12 § 3502(a)(9)—Standard of Living

Although the statutory criteria require the trial court to con-sider the standard of living established during the marriage, the courts have recognized that it may be impossible or inap-propriate to maintain that standard of living after divorce. Viles v. Viles, 610 A.2d 988 (Pa.Super. 1992).

5-8.13 § 3502(a)(10.1)—Tax Ramifications

Pursuant to the 2005 Divorce Code amendments, any poten-tial tax liabilities (such as income taxes or capital gains taxes that might be incurred upon the sale of the asset) and/or transfer expenses that might be associated with a marital asset must be considered, regardless of whether those costs may be “immediate and certain.” Previously, the case law provided that tax consequences and transfer costs were not to be considered unless the taxable event were certain to oc-cur as a result of the divorce and the amount of tax could be reasonably predicted. Hovis v. Hovis, 541 A.2d 1378 (Pa. 1988). In Balicki v. Balicki, 4 A.3d 654 (Pa.Super. 2010), the Superior Court affirmed the trial court’s decision to discount the value of a family business, taking into account the tax ramifications and expenses of sale, despite the master’s finding that the business was more likely to be bequeathed than sold. The court held: “It is crystal clear that the Legis-

195



lature intended to stop the practice of the lower courts ana-lyzing the prospect of sale of an asset, and [the master] was mistaken to do so.”

5-8.14 § 3502(a)(11)—Custody of Children

A parent who has forsaken job opportunities or limited his or her working hours to accommodate the needs of minor children might be entitled to a greater share of marital prop-erty. See Soncini v. Soncini, 612 A.2d 998 (Pa.Super. 1992).

5-9 Marital Misconduct

Marital misconduct, such as infidelity, abandonment, or abusive conduct, is not relevant to the division of marital property. 23 Pa.C.S. § 3502(a); Smith v. Smith, 749 A.2d 921 (Pa.Super. 2000); Perlberger v. Perlberger, 626 A.2d 1186 (Pa.Super. 1993). Certain types of misconduct, such as ex-cessive drinking or gambling, may have economic conse-quences that are relevant to the issue of dissipation of mari-tal assets.

5-10 Pre- and Post-nuptial Agreements

The parties may by written agreement predetermine the pro-portion of each party’s distribution, method of distribution, or other relevant details. For instance, the parties may agree that marital property will be divided equally upon divorce. 23 Pa.C.S. §§ 3105, 3106; 3502(a)(2). A post-February 1, 1988, marital settlement agreement is enforceable as a court order even if the agreement was not explicitly incorporated or merged into a decree in divorce, and even if the complaint in divorce did not include a claim for equitable distribution. An-nechino v. Joire, 946 A.2d 121 (Pa.Super. 2008).

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5-11.2 Deferred Distribution


5-11 Defined-Benefit Retirement Plans

A defined-benefit retirement plan is essentially a promise by the employer to pay an annuity to its employees, as deter-mined under a unit benefit formula based on the employee’s salary and years of service, commencing on the date of his or her retirement. Unlike a defined-contribution plan, there is no account that can be divided in equitable distribution. There are two alternative methods of dividing a defined-benefit retirement plan: (a) immediate offset, or (b) deferred distribution.

5-11.1 Immediate Offset

If there are sufficient assets in the marital estate, the em-ployee-spouse may retain his or her entire pension, and the nonemployee may be compensated with other marital as-sets. To accomplish this type of distribution, it is necessary to determine the actuarial present value of the pension. The immediate offset method is the preferred method of distrib-uting pension benefits. Comment to 23 Pa.C.S. § 3501; De-Marco v. DeMarco, 787 A.2d 1072 (Pa.Super. 2001); Miller v. Miller, 617 A.2d 375 (Pa.Super. 1992); Elhajj v. Elhajj, 605 A.2d 1268 (Pa.Super. 1992); Lyons v. Lyons, 585 A.2d 42 (Pa.Super. 1991); Lowry v. Lowry, 544 A.2d 972 (Pa.Super. 1988); Hutnik v. Hutnik, 535 A.2d 151 (Pa.Super. 1987).

5-11.2 Deferred Distribution

Often, there are insufficient marital assets to effectuate an immediate offset distribution of pension benefits. Instead, the trial court may enter a qualified domestic-relations order (QDRO) to divide the pension benefits when they are received after the employee’s spouse’s retirement. Under the deferred distribution method, it is not necessary or appropriate to de-termine the actuarial present value of the pension. Brown v. Brown, 690 A.2d 700 (Pa. 1997); Berrington v. Berrington,633 A.2d 589 (Pa. 1993); Elhajj v. Elhajj, 605 A.2d 1268 (Pa.Super. 1992); Endy v. Endy, 603 A.2d 641 (Pa.Super.

197



1992); Lyons v. Lyons, 585 A.2d 42 (Pa.Super. 1991); Zollars v. Zollars, 579 A.2d 1328 (Pa.Super. 1990); Flynn v. Flynn,491 A.2d 156 (Pa.Super. 1985); King v. King, 481 A.2d 913 (Pa.Super. 1984).

5-12 Stock Options and Restricted Stock

Like retirement benefits, stock options and restricted stock granted during the marriage may be designated as marital property even if unvested. Like retirement benefits, stock options and restricted stock may be nontransferable due to legal or contract restrictions. Yet, unlike retirement bene-fits, stock options and restricted stock generally cannot be divided by qualified domestic-relations order. Instead, the courts may impose a resulting trust over the stock options and restricted stock, forcing the employee-spouse to hold the options or stock as a fiduciary for the benefit of the nonem-ployee-spouse until they are matured, redeemed, or sold. Fisher v. Fisher, 769 A.2d 1165 (Pa. 2001); MacAleer v. MacAleer, 725 A.2d 829 (Pa.Super. 1999).

5-13 Fair Rental Value of Marital Residence

A party who is excluded from possession of the marital resi-dence during separation may be entitled to a credit equal to one-half of the fair rental value of the marital residence, re-duced by the spouse-in-possession’s payments toward the mortgage loan, real estate taxes, insurance, and mainte-nance. Gaydos v. Gaydos, 693 A.2d 1368 (Pa.Super. 1997); Ressler v. Ressler, 644 A.2d 753 (Pa.Super. 1994); Schmidt v. Krug, 624 A.2d 183 (Pa.Super. 1993); Beener v. Beener,619 A.2d 713 (Pa.Super. 1992); Trembach v. Trembach, 615 A.2d 33 (Pa.Super. 1992); Powell v. Powell, 577 A.2d 576 (Pa.Super. 1990); Gee v. Gee, 460 A.2d 358 (Pa.Super. 1983). However, the fair rental value credit is within the trial court’s discretion and is not mandatory. Middleton v. Mid-

198

5-15 Credit for Post-separation Payment of Liabilities


dleton, 812 A.2d 1241 (Pa.Super. 2002); Cerny v. Cerny, 656 A.2d 507 (Pa.Super. 1995); Gordon v. Gordon, 647 A.2d 530 (Pa.Super. 1994), rev’d on other grounds, 681 A.2d 732 (Pa. 1996); Butler v. Butler, 621 A.2d 659 (Pa.Super. 1993).

A protection from abuse order against the dispossessed spouse did not preclude the dispossessed spouse from seek-ing a fair rental value credit. Lee v. Lee, 978 A.2d 380 (Pa.Super. 2009). A finding that the spouse-in-possession urged the dispossessed spouse to vacate the marital resi-dence was held to be sufficient foundation for the fair rental value credit, even where the dispossessed spouse had been found ineligible to receive spousal support due to an entitle-ment defense. Id.

5-14 Diminishing or Vanishing Credit

A spouse who commingles nonmarital assets with the mari-tal estate may be entitled to a “diminishing credit” for his or her contributions in the division of marital property. Sergi v. Sergi, 506 A.2d 928 (Pa.Super. 1986). In Sergi, the Honor-able Lawrence W. Kaplan of Allegheny County held that the credit for a party’s contribution of nonmarital assets would diminish over a period of 20 years, such that the most recent contributions would be mostly reimbursed while older con-tributions would not be reimbursed.

5-15 Credit for Post-separation Payment of Liabilities

A spouse is entitled to full credit for his or her post-separation payment of joint debts if the payment is made from marital funds. 23 Pa.C.S. § 3502(e)(5); Duff v. Duff, 507 A.2d 371 (Pa. 1986); Grandovic v. Grandovic, 564 A.2d 960 (Pa.Super. 1989).

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The trial court may grant full credit, partial credit, or no credit at all for a spouse’s post-separation payments of joint debts if the payment is made voluntarily from his or her in-come or separate assets. Diament v. Diament, 816 A.2d 256 (Pa.Super. 2003); Middleton v. Middleton, 812 A.2d 1241 (Pa.Super. 2002); Plitka v. Plitka, 714 A.2d 1067 (Pa.Super. 1998); Jayne v. Jayne, 663 A.2d 169 (Pa.Super. 1995); Smith v. Smith, 653 A.2d 1259 (Pa.Super. 1995); Schneeman v. Schneeman, 615 A.2d 1369 (Pa.Super. 1992).

5-16 Equitable Reimbursement

Where the marital estate is insufficient or illiquid, the trial court may order one spouse to pay installment payments to compensate the other spouse for his or her share of marital property. This type of installment payment is not alimony, but is known as “equitable reimbursement.” Wang v. Feng, 888 A.2d 882 (Pa.Super. 2005); Schenk v. Schenk, 880 A.2d 633 (Pa.Super. 2005); Twilla v. Twilla, 664 A.2d 1020 (Pa.Super. 1995); Fonzi v. Fonzi, 633 A.2d 634 (Pa.Super. 1993); Zollars v. Zollars, 579 A.2d 1328 (Pa.Super. 1990); Zullo v. Zullo, 576 A.2d 1070 (Pa.Super. 1990); Wayda v. Wayda, 576 A.2d 1060 (Pa.Super. 1990). The trial court may not garnish proceeds from the sale of property owned jointly by a husband and his new wife to collect equitable reim-bursement payments owed to the former wife. Johnson v. Johnson, 908 A.2d 290 (Pa.Super. 2006). The trial court acted within its discretion by awarding 60 percent of the value of a business to the non-owner-spouse via equitable re-imbursement payments. Dalrymple v. Kilishek, 920 A.2d 1275 (Pa.Super. 2007).

200

5-17

Illustrative O

utcomes

201

in Allegheny County, Pennsylvania. al.

ble Distribution Alimony

l estate 50%-50%. n 60%-40% in favor .

Granted to Wife due to budgetary gap.

l estate 100%-0%r of Wife, plus 0 in equitablersement since

was insufficient.

l estate 96%-4% in f Wife.

Wife gets modifiable alimony until age 65.


5-17 Illustrative Outcomes

The following chart illustrates the variety of outcomes observedVolume and page references are to the Pittsburgh Legal Journ

Date Name of Case Fact Summary Equita

Vol. 154at page 211J. Hertzberg4/13/2006

Danko v. Danko Married 30 years, Husband 54 years old. Two grown chil-dren and one minor child residing with Wife. Husband is police officer earning $85,000; Wife is cafeteria worker earning $15,000.

MaritaPensioof Wife

Vol. 153at page 123J. Wecht2/22/2005

Wang v. Feng Married 18 years. Moved to U.S. so Husband could advance medical career. Wife earns $50,000; Husband earns $225,000 in his first year with UPMC.

Maritain favo$83,83reimbuestate


Martino v. Martino Married 28 years. Wife is 54 and earns $40,000 but possi-bly will be disabled. Husband earns $200,000.

Maritafavor o

5 C

arving P

ie with a S

poon

202

arital estate 50%-50%. Wife gets permanent alimony.

arital estate 55%-45% in vor of Wife but Wife must

ay marital debt.

Wife gets alimony for four years.

arital estate 55%-45% in vor of Wife.

Wife gets alimony for five years.


No alimony as Wife was receiving installment pay-ments.


arital estate 53%-47% in vor of Wife. Lump sum C settlement not cluded.

Wife gets alimony until age 65.

quitable Distribution Alimony


Vol. 153at page 78J. Kaplan11/4/04

Hervert Jr. v. Hervert Married 31 years. Husband earned $137,000/year.

M

Vol. 153at page 75J. Della Vecchia7/20/04

Giovengo v. Giovengo Married 21 years. Husband is 49 and earns $100,000. Wife also 49 and earns less than $18,000.

Mfap

Vol. 152at page 238J. Eaton2/9/04

Olszewski v. Olszewski Negligible marital estate after debt.

Mfa

Vol. 153at page 232J. Eaton 1/22/04

Harvanek v. Harvanek Married over 30 years; large marital estate including family business; both spouses worked for business.

Mfa


Roolf v. Roolf Married 22 years, Wife was primary wage earner.

Mfa


Thomas v. Thomas Husband is 63 and retired. Wife is 61 and not employed.

MfaWin

Date Name of Case Fact Summary E

5-17

Illustrative O

utcomes

203

l estate 50%-50%. No alimony.


Wife gets alimony for 11 years.


No alimony.

ible marital estate; nd went bankrupt.

Wife gets 10 years ofalimony.

l estate 50%-50%. Wife receives alimony.

l estate divided by installments to

Wife gets 10 years ofalimony.



Vol. 150at page 115J. Scanlon12/21/01

Waddell v. McCormick Husband is research chemist earning over $100,000. Wife earns under $50,000 and suf-fers from breast cancer.

Marita


Arthur v. Mitchell Family plumbing business; substantial value.

Maritafavor o


Virgi v. Virgi Married 22 years. Wife is a teacher; Husband is self-employed.

Maritafavor o

Vol. 149at page 207J. Mulligan12/29/2000

Ziese v. Ziese Married 20 years, Husband lost job 6 years before sepa-ration. Both spouses are age 46.

NegligHusba


Lukens v. Lukens Husband is age 45; Wife is age 43.

Marita

Vol. 145at page 659J. Mulligan12/30/1997

King v. King Husband is 60 and inherited half of his father’s businesses.

MaritapayingWife.


5 C

arving P

ie with a S

poon

204

inimal marital estate. Wife gets 13 months ofalimony.


No alimony.





Wife gets permanentalimony.

quitable Distribution Alimony


Vol. 144at page 502J. Folino6/17/1996

Salucci v. Salucci Married 6.5 years; Husband acquired family business a few months before separation.

M

Vol. 143at page 277J. Baldwin3/7/1995

Ikhanipour v. Ikhanipour Husband and Wife are 62-year-old physicians.

Mfa

Vol. 143at page 224J. Baldwin2/2/95

Gaydos v. Gaydos Wife was age 61. Husband was age 65 and self-employed dentist.

Mfa

Vol. 143at page 123Strassburger5/7/1992

Friday v. Friday Married 30 years. Husband is 58-year-old engineer; Wife is age 56, returned to workforce after raising kids.

Mfa


Berrington v. Berrington Married 32 years. Mfa

Vol. 137at page 348J. Kelly7/26/89

Kyle v. Kyle Long-term marriage; Hus-band is pilot; Wife is home-maker.

Mfa

Date Name of Case Fact Summary E

5-17

Illustrative O

utcomes

205


Wife gets alimony until Husband’s 65th birthday.


No alimony.



Wife gets permanentalimony.

l estate 50%-50%; nd keepssses.

No alimony or counsel fees.




Barton v. Barton Long-term marriage. Maritafavor o

Vol. 136at page 404J. Wettick8/17/1988

Turner v. Turner Husband operates detective and real estate agency. Wife is disabled.

Maritafavor o


Cohen v. Cohen Wife is age 46 and Husband is age 51. Husband is adentist.

Maritafavor o


Dibert v. Dibert Married 22 years; Wife was homemaker but enrolled in college after separation.

Maritafavor o


Aletto v. Aletto Married 16 years; owned 2 Burger King franchises.

MaritaHusbabusine


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