Originally published in the 422 Business Advisor, and written by Kristen Doleva-Lecher
In Major League Baseball, a respectable batting average exceeds .300. For all you non-baseball fans, this means the batter will get a hit a few more than three out of the ten times he’s up to bat. Unfortunately in our society divorce has a higher batting average so to speak — statistically about five out of ten first marriages will end in divorce.
The emotional toll of divorce is of obvious and immediate concern to anyone facing that prospect. Almost as significant as the emotional toll is the impact a divorce will have on one’s financial situation. Obviously each divorce, like each marriage, is unique; however there are ways in which one can prepare and educate him or herself when facing divorce.
There are two key terms that are often heard in association with divorce: equitable distribution and alimony. Pennsylvania is an “equitable distribution” state, as opposed to a “community property” state. This means that all marital assets and debt will be distributed equitably (but not necessarily evenly) to each spouse in the event of dissolution of marriage, based on a number of factors spelled out in the Pennsylvania divorce law. Examples of assets which are frequently subject to equitable distribution are:
• Homes and other real estate
• Retirement plans
• Bank accounts
• Stocks, bonds, and mutual funds
• Personal property such as home contents, antiques or collectibles
• Business interests
• Life insurance policies
• Stock options
• Tax refunds
• Personal injury or workers’ compensation settlements
Pennsylvania divorce lawyers engage in a careful analysis of what is and what is not “marital property” when attempting to determine how any given marital estate should be split. In general, marital property includes any assets acquired by a couple between their date of marriage and date of separation, including the increase in value during the marriage of premarital property. Many assets can be excluded from consideration, however, and any particular situation should be reviewed with an experienced family law attorney.
In addition to equitable distribution of assets, divorcing parties frequently bring claims for spousal support, alimony pendente lite, or temporary or permanent alimony. In general, spousal support can be claimed by a lower-earning spouse while the parties are separated, and alimony pendente lite (“for the course of the litigation”) can be awarded when one party has actually filed for divorce. Temporary or permanent alimony can be awarded for a time after the parties’ divorce is final.
The amount of spousal support or alimony is determined by many factors spelled out in the Pennsylvania divorce and support laws. The earnings and earning capacities of the parties are the most significant factors used to determine both entitlement to and the amount of a support award. Spousal support and alimony pendente lite awards, if the parties cannot agree, must be litigated at first in the county Domestic Relations offices.
Typically, the Domestic Relations conference officer at a support hearing uses pay stubs, W-2 forms or 1099 forms as well as tax returns to determine the income of the parties. Several factors come into play as to what qualifies as income and sometimes parties are not as forthcoming as they should be in disclosing their earnings, but discovery tools are available to litigants to expose required financial information. Occasionally expert testimony is needed to help the court determine earnings or earning capacity.
Alimony, unlike spousal support, is determined either by the agreement of the parties or by the master or judge as part of the divorce process. In determining an alimony award, a main question is whether the party seeking alimony is incapable of self-support through appropriate employment. Other factors include the ages and health condition of the parties, the expectancies and inheritances of the parties, the length of the marriage, the standard of living of the parties established while married, the relative education of the parties, and relative needs, assets and liabilities of the parties.
It may be helpful in the event of an impending divorce to have access to copies of pertinent financial information so that the process of proving assets and income becomes easier. Some of these documents may include:
• Bank account, brokerage, and retirement account statements
• Recent tax returns
• Recent pay stubs
• Real estate appraisals
• Insurance appraisals
• Life insurance policies
• Health insurance policies and cards
• Wills and Powers of Attorney
• Trust documents
• Information regarding both spouses’ accountants or tax preparers
• The approximate family income for the previous year
As mentioned above, no divorce is the same. If you find yourself contemplating divorce, remember that your situation may not be at all similar to that of your neighbor or co-worker. A long and expensive divorce can and does happen, but today many people choose to settle their issues on their own or engage in voluntary mediation or arbitration to resolve their disputes, rather than going to court. Litigation is costly on both parties in terms of time, money, and emotional strain. On the other hand, working through a divorce amicably can save you time, money, and stress. Settling a divorce without litigation or court involvement offers the parties more control in their negotiations. Agreements reached outside of court can be memorialized and ordered and enforced by the court.
We all wish that batting averages will some day be higher than the divorce rate in Pennsylvania. However, with careful planning and good advice from experienced divorce counsel, you can avoid one of life’s curveballs, and reach home safely.