The quick answer: possibly, but unlikely. There are two reasons why assets and debts are not equally divided 50/50 in a divorce.

First, it is generally not efficient to divide each asset and debt. Dividing each asset results in a high number of transactions and high transaction costs.

Second, the Pennsylvania Divorce Code provides that assets and debts should be equitably divided, not equally divided.

The best way to show a division of assets is by a simple example.

Chart #1 below shows a simplified personal financial statement of a family before a divorce. The chart identifies the asset, the asset value, and the “title owner” of each asset and debt.

Chart #1 – Example of How Assets are Held During the Marriage

In Divorce, where the assets and debts are divided, dividing each asset and debt 50/50 would result in 5 transactions, with 5 separate transaction costs. That would not be efficient.

Chart #2 below is a sample 45/55 divorce division of the assets and debts from Chart #1. Spouse 1 receives 45% of the assets and debts, and Spouse 2 receiving 55% of the assets and debts. In Chart #2, we’ll assume the parties agreed to a 45/55 division because Spouse 2 has less income and will need time to increase earnings. Income is not the only factor considered in division of assets and debts, however, it is a factor that is highly considered. We will also assume that each asset is a “marital asset”—when the parties were married, they had $0.00 in assets and debts.

Chart #2 – Example of How Assets and Debts May Be Divided During Divorce Process

In Chart #2, there are only 2 transactions to divide the assets and debts: (1) transfer of the house to Spouse 2, and (2) distribution of cash savings.

This example highlights real financial planning issues in divorce. Spouse 2 received the house, and in this scenario, we’ll assume Spouse 2’s number one priority was to keep the house. However, Spouse 2 is what a financial planner would call “house poor,” with minimal retirement and cash savings. Spouse 1 has retirement assets, but if Spouse 1 wanted to purchase a house, Spouse 1 will incur the initial cost of purchasing a house, including closing costs, realtor fees, and a down payment.

The issues identified above require careful consideration of financial planning, and Levin Hoover Family Law Firm regularly works with financial planners to discuss the most productive distribution of assets and debts for a client’s future.