One of the most contentious parts of a divorce is the division of the assets and liabilities of the marriage. We call this the marital estate. The marital estate needs to be settled between the parties by agreement or through a court-supervised equitable distribution process before a divorce decree can be entered (absent a bifurcation process, which is frowned upon by most courts). Keep in mind that the term “equitable” does not mean equal in this context – it means fair . So, it is always advantageous for the parties to divide the marital estate as they see fit, rather than leaving it to the equitable distribution process.
So, what is the marital estate? Generally speaking, the marital estate is comprised of the assets and liabilities acquired by either spouse during the marriage; and, any increase or decrease in value of separate, i.e. non-marital/pre-marital, assets or liabilities that occurs during the marriage. The Pennsylvania Supreme Court discussed the later concept of non-marital property value increase during marriage here: https://www.courtlistener.com/opinion/1956963/aletto-v-aletto/ . And, yes, your pre-marital business may be subject to equitable distribution under this theory. Furthermore, a business started by one party during the marriage is generally considered part of the marital estate. The best way to determine the marital estate is to work with an attorney to identify and inventory property, and then open discussions with the opposing party’s attorney to compare inventories and determine if further discovery is required.
How is the marital estate divided? Assuming the parties do not enter into a property settlement agreement on their own, then the division of the estate will be guided by the criteria set forth by Pennsylvania Statute 23 Pa.C.S. 3502(a)(1) – (11). The court will use these factors to effectuate economic justice between the spouses. Whatever decision the court reaches will be tough to overturn on appeal. So, careful attention must be paid to this process at the county level.
The identification and division of the marital estate is a tedious and detail-driven process. Sometimes, it requires the assistance of other financial professionals like actuaries or tax professionals. So, if you or someone you know are considering a divorce, contact me for a free consultation so that we can anticipate how best to proceed.