Equitable Distribution of a House in Pennsylvania
This guide analyzes a complex Pennsylvania case in which a house was purchased using separate as well as marital funds and in which one party gifted their interest to the other. How does Pennsylvania handle the equitable distribution of a house? What happens if only one party's name is on the deed? What happens when the parties mix non-marital property with marital property?
Introduction to the Case of Lowry v LowryThe case of Lowry v. Lowry (375 Pa.Super. 386) gives a complex analysis of the equitable distribution of a house that was built by the parties. The husband and wife purchased an empty lot. The husband "gave" his wife his interest in the lot to protect it from his former spouse. The Wife refinanced and later sold her first house to raise funds for construction on the new house. Husband argued that Wife's contribution of the proceeds of her house should have been included in the marital estate. The trial court had deemed those funds non-marital, and therefore were treated as Wife's separate property. But the Court disagreed, deciding that by putting Wife's name alone on the deed, Husband made it Wife's separate property, "except for the increase in value during marriage." Therefore a determination of the increase of the value of the property was necessary.
Putting a House into only One Spouse's Name is a GiftThe Court held that the home was excluded from Equitable Distribution and belonged to the Wife because the land had been deeded to her by Husband. "[P]roperty acquired by gift is excluded from marital property except for the increase in value thereof during the marriage." Husband pointed out that Wife had deposited $50,000 from the proceeds of her first house into a joint savings account. On this topic, the Court held that Wife had indeed made a gift to Husband of that money. However, he deeded the house to her after that deposit of money by her into the joint account. Therefore, he gifted it back to her. The Court wrote, "It matters not what husband's motive was in deeding the property to wife. As Justice McDermott opined in his concurring opinion in Semasek v. Semasek, 509 Pa. 282, 502 A.2d 109 (1985):?? "A gift may be given to anyone. The law is cold in its definition, it does not ask a reason for the giving, only an intention, delivery and acceptance of the thing are required.... The question ought not to be what is the subject or the purpose of the gift, but rather whether was it intended as a gift, delivered and accepted." Id. at 292, 502 A.2d at 113-14. ... The fact that husband states that his only intent in deeding the property to wife was to prevent his former spouse from taking the property does not undermine our conclusion. As the Brown court concluded, the fact that there is some financial gain to be had by the gifting spouse as a result of the gift, like a reduction in taxes, does not negate donative intent, but rather positively suggests it. Id. at 272, n. 3, 507 A.2d at 1225 n. 3. This is because the financial goal will only be attained if the gift is effected. The desire to achieve the financial goal is the source of the donative intent that supports a finding of a gift. ..."
Mixing Your Funds in a Property held only in Your Name is a GiftWife, however, could not claim that all of the proceeds of the sale of her first house was separate. She deposited $13,000 in their joint names for work on their house, and the improvements made were an increase in value that was joint. The Court wrote, "Our conclusion that wife made a gift of this $13,000 to the marital estate when she deposited it in joint names is further buttressed by the fact that the money was thereafter used to make further improvements to the Hemlock Farms property which, although held in wife's name, was the joint project and marital residence of the parties." Of the $87,000 market value at the time of the divorce, the Court looked at the following findings of the trial court: "In summary, we can conclude, even from the incomplete and unclear state of the record before us, that wife actually proved only that the Hemlock Farms property was gifted to her during the marriage when it was worth $14,300 and that she thereafter exchanged a total of $14,000 ($27,000 minus $13,000) in pre-marital assets for materials used in improving the property. This totals $28,300 of the value of the home that is non-marital property. The remaining $13,000 of wife's pre-marital assets that were invested in the Hemlock Farms property were contributed to the marital estate when transferred to joint names."
ConclusionSpouses mix their non-marital property with marital property all of the time, and sometimes, give their property away. From the court's view, a gift to your spouse is a gift and mixing is a gift to both you and your spouse as a couple. The other alternative is to act like you are not married. However, you should not expect the courts to separate out your contributions to the marriage. That is not how marriage works.