The divorce rate has been on the rise for the last three years. This follows a sharp decline that was likely tied to the recent recession and housing bust.

University of Maryland sociologist Philip Cohen recently published an article examining how the economy affects the U.S. divorce rate. His research links a decline in divorce rates with a struggling economy. By his estimate between 2008 and 2011, 150,000 divorces that would normally have happened did not. That equated to a four percent decline.

As the economy started to improve, however, the number of divorces increased too. History backs up the conclusion. In the 1930s the divorce rate also dropped. It was not that people were happier in their marriages, but they could not afford to divorce.

Along the same lines, underwater mortgages locked many couples in unhappy marriages. With rebounding house prices, many couples again have equity in their homes. How is home equity divided in a divorce?

General Pennsylvania property division factors

In a Pennsylvania divorce, the court uses an “equitable division” standard when dividing marital property. Instead of a straight 50-50 division, a judge takes into account the circumstances of each party in crafting a fair property award.

Some property is termed “non-marital” and is not subject to division. Some of the common categories include:

  • Property that was acquired before the marriage
  • Any property excluded by a valid prenuptial or postnuptial agreement
  • A gift or bequest to one of the spouses
  • Property obtained after final separation.

Awards or settlements for an injury that occurred prior to the marriage or after separation is also separate regardless of when the payment is received.

Dividing home equity

In the housing context, home equity generally is divided equitably. For a spouse who wants to stay in the home, it might be necessary to refinance a mortgage or transfer a larger portion of retirement accounts to pay the other spouse a portion of the equity. If a home would be too large, it might make sense to sell the property and divide the proceeds.

If the home was purchased with non-marital assets, it could affect the division of equity. Appreciation in the value could however be considered marital. For instance, a recent Superior Court of Pennsylvania decision held that the increase in value of an investment account funded with non-marital assets was marital and subject to equitable property division.

Failing to correctly characterize property during the divorce process can impact your finances going forward. Seeking the counsel of an experienced Pennsylvania family law attorney is a way to avoid costly errors.