Dividing property during a divorce is rarely straightforward. Spouses often become financially intertwined through joint purchases, commingled accounts, and shared inheritances.
One concept that frequently surprises people, especially those who brought significant assets into the marriage, is the doctrine of the vanishing credit.
If you contributed separate funds to a shared asset, like a home, you might be wondering: Can I get that money back in a divorce? The answer may depend on how long you were married and how the asset was treated.
The vanishing credit is a legal principle that allows a spouse to retain some credit for separate, non-marital property they contributed to a jointly held marital asset, but that credit can diminish over time. In other words, your claim to that initial contribution may gradually “vanish” the longer you stay married.
In Pennsylvania, counties that have adopted the vanishing credit often apply a 20-year credit, meaning that 5% of the separate contribution converts to marital property each year. After 20 years, the entire contribution is considered marital and is subject to equitable distribution.
It is important to note: this doctrine only applies when a spouse takes a separate, non-marital asset and actively contributes it to the marital estate — for example, by putting separate funds toward a jointly titled home. If you kept an asset completely separate and never commingled it (i.e., did not retitle or use it jointly), it generally remains your separate property and is not subject to the vanishing credit.
Suppose the wife uses $200,000 of her separate, pre-marital funds as a down payment on a new jointly titled home with her husband. Three years later, the couple divorced. She may assume that because the money went into a joint asset, she has lost her entire contribution to the marital estate. But under the vanishing credit doctrine, that is not the case.
In this scenario, 15% of her $200,000 contribution (or $30,000) would be considered marital property (5% per year for three years), while the remaining $170,000 would still be recognized as her separate property. The longer the marriage continues, the more of her contribution is gradually reclassified as marital — it “vanishes.”
The rationale behind the vanishing credit is rooted in fairness. If both spouses have lived in, paid for, and maintained an asset, like a family home, it is difficult to argue that one spouse should be able to reclaim every dollar he or she initially contributed. At the same time, it is equally unfair to ignore the fact that one spouse made a significant contribution using their own, separate funds.
The vanishing credit provides a balanced approach. It acknowledges the initial separate contribution while recognizing that, over time, the asset becomes more integrated into the couple’s shared financial life.
If you brought significant assets into your marriage, especially when it comes to purchasing a jointly titled home, it is crucial to understand how the vanishing credit may affect you in a divorce. Whether you’re trying to protect your contribution or facing a claim from your spouse, this doctrine could have a major impact on how property is divided.
At Obermayer Rebmann Maxwell & Hippel LLP, our experienced equitable distribution attorneys are here to help. We will walk you through your rights and evaluate how the vanishing credit may apply in your case.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
Doylestown Family Law Litigation Attorney Adam is a highly regarded and seasoned family law litigation attorney serving the greater Doylestown, PA area. His practice includes prenuptial agreements, custody, domestic abuse and protection...
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