Liquidation of Assets
Divorce takes not only a heavy emotional toll on the spouses involved, but a significant financial one as well. The steep costs involved frequently result in couples agreeing to liquidate (sell or otherwise transfer to cash) certain shared assets.
Some spouses may attempt to liquidate assets without the other spouse’s consent or hide assets when completing their Financial Affidavits. It is important to remember that Financial Affidavits are sworn statements that are supposed to be factual to the best of a person’s knowledge, and any knowing attempt to hide an asset or misrepresent one’s assets could be grounds for perjury.
Lawyer for Liquidation of Assets in Chester County Divorce Cases
Do you believe your spouse might be concealing assets or do you need assistance completing a Financial Affidavit for your divorce in southeastern Pennsylvania? Ciccarelli Law Offices understands all of the factors that courts consider in determining equitable distribution of property during the division of marital assets.
Call (610) 692-8700 or send an online message for a free consultation so we can act as soon as possible. We are based in West Chester PA and serve clients throughout Chester County, Lancaster County and suburban Philadelphia including West Chester, Kennett Square, Oxford, Avondale, Landenberg, West Grove, Paoli, Malvern, Downingtown, Coatesville, Exton, Parkesburg, Berwyn and Devon. We have convenient meeting locations in Lancaster, Philadelphia, Plymouth Meeting, Kennett Square, Malvern, Springfield, King of Prussia, and Radnor. Our family lawyers serve those with immediate legal needs in Chester County, Montgomery County, Delaware County and Lancaster County.
Overview of Liquidation of Assets in Pennsylvania Divorce Proceedings
- Which kinds of assets can be liquidated?
- How do spouses try to conceal assets?
- Where can I learn more about liquidation of assets in West Chester?
Commonly Liquidated Assets in Chester County Divorce Cases
While many of the assets involved in a marriage is deemed marital property that both spouses acquired during their marriage, some assets that were acquired before the marriage, after the separation, or by gift or bequest are considered non-marital property exempt from equitable distribution. Not all marital property is necessarily split 50-50, and certain types of assets (such as real estate) often need to be liquidated or have titles transferred.
A few of the types of assets that are frequently liquidated in Pennsylvania divorces include, but are not limited to:
- Antiques or collectibles;
- Bank accounts;
- Individual retirement accounts (IRAs);
- 401(k) accounts;
- Life insurance;
- Loans or debts owed by third parties;
- Mutual funds;
- Stocks; and
- Tax refunds.
Liquidating shared assets can be beneficial for spouses because it allows the spouses to no longer be responsible for the property. When the asset is a shared account, liquidation can often be preferable to allowing the other spouse to become responsible for something like an auto loan, where late payments could still negatively impact the credit of both spouses.
It is still wise to seek the advice of an experienced attorney, because there can be consequences to liquidating certain types of assets. It is often in the best interest of both spouses to transfer or trade assets because doing so will not involve the (sometimes significant) tax implications of liquidating property.
Ways Spouses Hide Assets in West Chester Divorce Cases
Paragraph (10) of 23 Pa. Cons. Stat. § 3502 includes the economic circumstances of each party at the time the division of property is to become effective as a relevant factor in the equitable division of marital property. Additional factors in this statute include:
(10.1) The Federal, State and local tax ramifications associated with each asset to be divided, distributed or assigned, which ramifications need not be immediate and certain; and
(10.2) The expense of sale, transfer or liquidation associated with a particular asset, which expense need not be immediate and certain.
Financial Affidavit require both spouses to disclose all relevant financial information, including their incomes, expenses, property, financial assets, and liabilities. Unfortunately, many spouses attempt to undervalue or hide certain marital assets out of fear, a sense of revenge, or possibly just a sense of entitlement.
Regardless of the reason behind any attempt to hide assets, doing so is considered unethical and illegal. Some of the most common ways that spouses attempt to hide assets include, but are not limited to:
- Creating fake debt — Spouses could claim that they owe payments on phony loans supposedly made by friends or family members when they know that they will ultimately get all money from such payments back upon the divorce becoming final.
- Deferring salary, commissions, or bonuses — When spouses know they have extra pay coming, they may ask to delay receipt “for tax purposes” when it actually keeps the additional income off the books during the divorce proceedings.
- Hiding cash — Whether spouses utilize cash back on debit purchases or simply stash cash in safety deposit boxes or under their mattresses, physical currency is usually the easiest asset for a person to hide because it does not have the same kind of paper trail as other assets.
- Luxury purchases — Spouses may make certain extravagant purchases for their businesses that supposedly cut into their profit—and thus, the share they are required to divide in a divorce.
- Overpaying Internal Revenue Service (IRS) — When one spouse pays the IRS too much (or uses a return to apply to the following year’s taxes), he or she can collect the overpayment after a divorce becomes final.
- Transferring assets — Spouses can transfer certain assets, such as stocks or other investments, to friends or family members who then transfer the assets back to the spouse after the divorce becomes final.
When a spouse is hiding assets or liquidates assets without the other spouse’s consent, it can have enormous impact on the divorce proceedings. You should avoid attempting to conceal any assets and if you believe your spouse has been trying to hide assets, you should have a lawyer review your case.
Pennsylvania Resources for Liquidation of Assets
Focht v. Focht, 32 A. 3d 668 (2011) — On November 23, 2011, the Supreme Court of Pennsylvania decided this case involving a man who sustained a serious injury in an accident at a raceway in Leesport in 1999. He and his then-wife filed a lawsuit against the raceway in September 2000 and the case was settled in November 2004 for $410,000. The husband and wife received, respectively, $231,618 and $14,784 from the settlement three years after the couple separated in August 2001. They filed a divorce complaint in February 2004 and had a divorce decree entered in January 2009. The man spent his entire portion of the settlement proceeds during the first year after the settlement, and he was ultimately only able to recover $60,206 from the sale of a residence he purchased but stopped making mortgage payments on. That amount was the subject of this dispute, which a trial court ruled the woman was entitled to 75 percent of but the Superior Court vacated because the “settlement in the negligence suit had been reached after the parties’ final separation.” The state Supreme Court reversed the opinion of the Superior Court, writing:
The decision advocated by Appellee and reached by the Superior Court is untenable in light of the plain language of subsection 3501(a)(8); our long-established understanding of the concept of accrual of a cause of action; and this Court’s and the Superior Court’s decisions in, respectively, Drake and Nuhfer. Paraphrasing Drake, the “critical question” here is whether Appellee’s right to seek damages for personal injury by filing a negligence suit accrued during his marriage, not whether his suit was settled during his marriage. See id. at 726. Appellee errs by conflating two very different concepts: accrual of a cause of action and settlement of a cause of action. By the explicit text of subsection 3501(a)(8), the date of accrual of a cause of action is the only date of relevance.
There is no question that Appellee’s cause of action in negligence accrued during his marriage: the accident in which Appellee was injured occurred during his marriage, and he became aware of his serious injuries and of the Raceway’s negligence during his marriage, as shown by the fact that he retained counsel and filed suit against the Raceway during his marriage. See Notes of Testimony, 12/12/07, at 34-35. All of these events occurred one to two years before the parties’ final separation. Thus, because Appellee’s cause of action accrued during the marriage, before the parties’ final separation, proceeds from the settlement of the suit are marital property. The marital property exception set forth in subsection 3501(a)(8) does not apply, and it is irrelevant that the parties had finally separated by the time the suit settled and the settlement award was liquidated. Accordingly, we reverse the order of the Superior Court.
Finally, we recognize that some prior opinions from the Superior Court concerning subsection 3501(a)(8) have not been consistent with our holding here, nor with Drake and Nuhfer. In the present case, the Superior Court reached its erroneous holding primarily by relying on Pudlish v. Pudlish, 796 A.2d 346 (Pa.Super.2002), another case involving a workers’ compensation claim in the context of subsection 3501(a)(8). In Pudlish, husband sustained a work-related injury during the marriage, but his employer denied his workers’ compensation claim, leading to nearly two years of litigation before a settlement was reached. By the time that husband’s claim was settled for a lump sum, husband and wife had separated. Id. at 347. Focusing on when the claim was settled — and not on when the claim had accrued — the Superior Court held that the lump sum settlement was not marital property because husband and wife had separated before husband’s claim for benefits was settled. Id. at 349-50. For all the reasons discussed in this opinion, we conclude that the Superior Court wrongly decided Pudlish, and it is hereby overturned.
Pre-Separation Dissipation of the Marital Estate — View this document discussing division of marital assets from the Family Law Section of the 2012 Philadelphia Bar Association Bench Bar Conference. As the document notes, the “assignment of marital property becomes complicated when one spouse intentionally, fraudulently, or recklessly decreases the value of the marital property and marital estate. It is relatively easier to recognize this type of deception once the parties have separated or once the complaint has been filed, but accounting for dissipation of assets before either of these events is more difficult.” The document includes a background of equitable distribution in Pennsylvania, factors supporting pre-separation dissipation claims, and several case summaries.
Ciccarelli Law Offices | West Chester Liquidation of Assets Lawyer
If you need help completing a Financial Affidavit or you think your spouse is hiding assets in your divorce case, it is in your best interest to seek legal representation. Ciccarelli Law Offices helps clients all over southeastern Pennsylvania achieve the most equitable division of assets and debts so you get everything you are entitled to.
Our divorce attorneys in West Chester have offices in Philadelphia, Kennett Square, Springfield, Lancaster, Plymouth Square, Malvern, Radnor, and King of Prussia. You can have them provide a full evaluation of your case when you call (610) 692-8700 or fill out an online contact form to schedule a free consultation.