January 26, 2017
Before Pennsylvania’s Act 102 became law in late 2016, parties to a divorce in most Pennsylvania counties were unable to meet with a divorce Master until they had established grounds. Without both parties filing Consents to the divorce, the delay put the business owner’s livelihood at risk. To establish grounds in a unilateral no-fault divorce, a Complaint must be filed and an Affidavit must be filed and served stating the parties have been living separate and apart for a period of at least two years. If an opposing spouse does not deny the allegation set forth in the affidavit, grounds are met, however, if that spouse denies the stated date of separation, the parties will litigate for several months over the date of separation before they address distribution of assets upon divorce. Once grounds are established, the parties face delay in updating discovery as the value of the business at two dates: date of separation and current date must be presented to the Court.
Businesses suffer due to delay caused by litigation. The two year waiting period previously required for no-fault divorce often unduly burdened the business owner. Furthermore, disputes related to date of separation, discovery, valuation at two dates, as well as delays caused by busy Masters and judges led to a trial in three, four or five years after separation. A spouse who is consumed by divorce litigation will likely give less attention to the success of her or his business. A manipulative spouse who is the business owner, will have more time to run the business into the ground, or hide assets and income connected to the business so the dependent spouse cannot easily value the business assets available for equitable distribution.
Pennsylvania law requires valuing business interests as the date of separation and the date of litigation for equitable distribution to determine the most fair valuation date for the purposes of the divorce. Masters and judges legitimately wrestle with the most fair date of valuation due to factors unique to the parties’ action as well as market conditions which have affected the business value over time.
Now the unilateral no-fault grounds are established after one year of separation. With a shorter waiting period, it minimizes the multitude of variables, making it easier for the courts to value a business. The shorter waiting term decreases the chance that the value of the business will fluctuate significantly. When the disposition of the business is resolved, the consequences of divorce can be resolved more quickly to stabilize business health and growth.. Most importantly, the owner will get back to work leading the greater productivity. A successful business post divorce is good for the family: the business owner will be better able to pay ongoing support for the parties dependent children, and in some cases, alimony for the dependent spouse. The financial future of the children is as important, if not more so, than the future of the business.
The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.