High-asset divorce in Pennsylvania: business and pensions

Above a certain level a Pennsylvania divorce stops being about percentages and becomes an argument about classification and dates. Which estate owns the asset. What it was worth at the start of the marriage, at separation, and at the hearing. Whether the growth came from the market or from one spouse's work.

Pennsylvania answers some of those questions with unusual precision and leaves others completely open, and knowing which is which is most of the strategy.

What is different about a high-asset divorce in Pennsylvania?

The percentage split matters less than you would think, because section 3502(a) lets the court consider each marital asset or group of assets independently and apply a different percentage to each. A judge can award the retirement accounts sixty-forty and the business fifty-fifty in the same order.

What that means in practice is that a case with ten meaningful assets is ten arguments rather than one. Each has its own classification question, its own valuation date, and its own evidence, and the property division chapter covers the framework all of them run through.

How are pensions divided in a Pennsylvania divorce?

By coverture fraction, and only by coverture fraction. Section 3501(c) says the marital portion of a defined benefit retirement plan shall be allocated between its marital and non-marital portions solely by use of a coverture fraction. There is no room for an alternative method, however clever.

The fraction is the same both ways it is used:

• Denominator: the number of months the employee spouse worked to earn the benefit

• Numerator: the number of those months during which the parties were married and not finally separated

On a deferred distribution, the denominator is the months worked to earn the total benefit. On an immediate offset, it is the months worked to earn the accrued benefit as of a date as close to trial as reasonably possible.

The subsection then makes one adjustment that consistently surprises people. The benefit the fraction applies to includes all post-separation enhancements, except those arising from post-separation monetary contributions the employee spouse made, including the gain or loss on those contributions. A raise, a promotion, or a change in the plan's formula after separation feeds into the number the fraction is applied to. Money the employee actually put in after separation does not.

Dividing the plan itself takes an order the plan administrator will accept, which is drafted separately from the divorce decree, and the settlement chapter covers naming who prepares it in the agreement.

How is a business valued in a Pennsylvania divorce?

The statute does not say, and that is the point. Pennsylvania gives you no valuation standard for a closely held business, no prescribed date, and no default method. What it gives you is a rule about how the argument has to be presented.

Under Rule 1920.33(b)(1), the pre-trial statement lists each asset's value, the date of the valuation, the value of any non-marital portion, the facts and documentation the party relies on to support that valuation, and any liens. Under subdivision (b)(2), the name and address of every expert you intend to call goes in the statement with the expert's report attached, describing their qualifications and experience, the substance of the facts and opinions they will testify to, and the grounds for each opinion.

Then comes the sanction. Rule 1920.33(d) allows a party to be barred from offering testimony or evidence that is inconsistent with or goes beyond the fair scope of the information in the pre-trial statement. A valuation theory that appears for the first time at the hearing is a valuation theory you may not be allowed to present.

Where a business is partly premarital, the classification question sits underneath the valuation one. The premarital value is non-marital. The increase in value during the marriage is marital, on the measurement rule below.

Does separate property grow into the marital estate in Pennsylvania?

Yes, and this is the most consequential rule in a high-asset Pennsylvania case.

Section 3501(a) defines marital property to include the increase in value of non-marital property that was owned before the marriage or acquired by gift, bequest, devise or descent. The asset stays separate. Its growth does not.

Section 3501(a.1) sets the measurement, and it is deliberately asymmetric:

• The increase is measured from the date of marriage, or the later date the property was acquired

• To either the date of final separation or a date as close to the equitable distribution hearing as possible, whichever produces the lesser increase

• A decrease in the value of a party's non-marital property offsets increases in that same party's non-marital property, and nothing else

The "lesser increase" rule means the choice of endpoint is not strategic. You compute both and the smaller one wins. The offset rule means you cannot use a losing separate asset to shrink your spouse's share of a winning one, or to reduce the marital estate generally.

Getting those numbers right takes account statements running from the date of marriage, not from the date of filing. On a twenty year marriage with several brokerage accounts, a business interest and a couple of properties, that is thousands of pages of statements to reconcile before anyone can even state a position. Doing it by hand is slow and easy to get wrong, and it is the exact problem CounselPro is built to solve, with every figure traceable back to the statement page it came from.

What if money was moved before the divorce in Pennsylvania?

Three provisions apply, and they cover before, during and after.

• Before it happens. Under section 3505(a), where it appears a party is about to leave the jurisdiction, remove property from it, or dispose of, alienate or encumber property in order to defeat equitable distribution, alimony, alimony pendente lite or support, an injunction may issue and the property may be attached. Nothing is restrained until somebody asks, which the disclosure chapter explains.

• Where it already went to a third party. Section 3505(e) lets the court deem fraudulent and declare void an encumbrance or disposition of marital property to a third person who paid wholly inadequate consideration.

• Where it stayed hidden through the whole case. Section 3505(d) lets the aggrieved party petition at any time for a constructive trust over all undisclosed assets, where a failure to disclose left an asset worth $1,000 or more out of the final distribution. The court shall grant the petition on a finding of failure to disclose.

Dissipation is handled differently from a hiding case. It is factor seven in the equitable distribution list under section 3502(a), which asks about the contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property. Pennsylvania does not put a lookback period or a notice deadline on it the way some states do.

There is one carve out worth knowing when you find a transfer that looks bad. Under section 3501(a)(5), property a party sold, granted, conveyed or otherwise disposed of in good faith and for value before the date of final separation is non-marital and leaves the estate cleanly. A sale of the same shape at a friendly price to a friendly buyer does not, and that gap is where most of these arguments actually land.

How does support work above the guideline in Pennsylvania?

The child support schedule stops at $30,000 in combined monthly net income. Above that, Rule 1910.16-3.1 runs a three-step process: a preliminary figure of the $30,000 amount plus a percentage of the excess, then the shared custody adjustment, then an analysis of the child's reasonable needs that can move the number up or down. The obligation may never fall below the $30,000 figure, and the child support chapter has the percentages.

Spousal support and alimony pendente lite above the same threshold still start from the ordinary formula, then get the deviation factors and expense statements applied to them.

Where the money comes from a business rather than a paycheck, the income question gets harder before the support question does. Rule 1910.16-2(a) counts net income from business or dealings in property, interest, rents, royalties, dividends and distributive shares alongside wages, and ordinarily works from at least a six-month average.

Can you get money out before the case is over in Pennsylvania?

Three ways, and a high-asset case usually needs at least one.

• Interim partial distribution. Section 3502(f) lets the court, on the request of either party, enter an order at any stage providing for an interim partial distribution or assignment of marital property.

• Counsel fees pendente lite. Section 3702(a) lets the court allow reasonable counsel fees and expenses while the case is pending, which exists so that the spouse without access to the liquid assets can still litigate. The cost chapter covers what claiming them takes.

• Alimony pendente lite. On the formula, filed in the domestic relations section rather than as a count in the divorce.

There is also a way to secure what you are owed rather than collect it now. Under section 3502(b), the court may impose a lien or charge on a party's property as security for the payment of alimony or any other award. That is worth asking for when the paying spouse's wealth is illiquid and the whole award depends on them staying solvent.