Distinguishing Between Marital and Non-Marital Assets

23 Pa. C.S. §3501 contains the definition of "marital property."  The statute defines marital property as "all property acquired by either party during the marriage and the increase in value of any non-marital property acquired pursuant to paragraphs (1) and (3) as measured and determined under subsection (a.1).  However, marital property does not include:

(1) Property acquired prior to marriage or property acquired in exchange for property acquired prior to the marriage.

(2) Property excluded by valid agreement of the parties entered into before, during, or after the marriage.

(3) Property acquired by gift, except between spouses, bequest, device, or descent or property acquired in exchange for such property.

(4) Property acquired after final separation until the date of divorce, except for property acquired in exchange for marital assets.

(5) Property which a party has sold, granted, conveyed, or otherwise disposed of in good faith and for value prior to the date of final separation.

(6) Veterans' benefits except from attachment, levy, or seizure pursuant to the act of amended, except for those benefits received by a veteran where the veteran has waived a portion of his military retirement pay in order to receive veterans' compensation.

(7) Property to the extent to which the property has been mortgaged or otherwise encumbered in good faith for value prior to the date of final separation.

(8) Any payment received as a result of an award or settlement for any cause of action or claim which accrued prior to the marriage or after the date of final separation regardless of when the payment was received.

Subsection (a.1) of 23 Pa. C.S. §3501 concerns measuring and determining the increase in value of non-marital property and reads:  

"The increase in value of any non-marital property acquired pursuant to subsection (a)(l) and (3) shall be measured from the date of marriage or later acquisition date to either the date of final separation or the date as close to the hearing on equitable distribution as possible, whichever date results in a lesser increase.  Any decrease in value of non-marital property of a party shall be offset against any increase in the value of non-marital property of that party.  However, a decrease in value of non marital property of a party shall not be offset against any increase in value of the non-marital property of the other party or against any other marital property subject to equitable division."

Subsection (a.1) is substantial for a number of reasons.  First, a decrease in value of one non-marital asset can be used to offset an increase in value of another non-marital asset owned by the same party.  Second, a post-separation decrease offsets a pre-separation increase.  Third, it is not necessary to use the same valuation date for all non-marital assets.  Instead, a party may use the date for each asset that minimizes increase (the party may use either the date of separation or date as close as possible to hearing).  Fourth, decreases in a party's non-marital, assets cannot offset increases in marital assets.