Dividing property is often one of the greatest challenges when filing for divorce in Florida. It is very easy to get overwhelmed when trying to untangle the complicated financial issues, especially when also confronting the emotional aspects of a divorce. However, it is important to understand that there is a method to the madness, and your attorney can help guide you through the process.
In the following article I will explain the basic rules governing property division and divorce in Florida, and also touch on some practical considerations as well.
The general rule is that Florida is an “Equitable Distribution” state. Generally speaking this means that marital property, assets and liabilities acquired during the marriage with marital funds or labor, will be divided equally upon divorce. Nonmarital property, assets and liabilities acquired before the marriage, remains the sole and separate property of the spouse upon divorce.
What is “Property” Anyways?
As a preliminary matter, it’s worth taking a little time to discuss what “property” actually includes. Property includes assets, liabilities.
Assets include any real estate, bank accounts, brokerage accounts, retirement accounts, accrued sick and vacation pay, intellectual property (patents, trademarks, and copyrights), stock options, businesses and business interests, and tangible personal property. Tangible personal property which includes things like cars, jewelry, guns, art, and pets.
Liabilities include any kind of debt such as a mortgage, student loan, credit card debt, personal loan, medical debt, tax lien, or car loan.
What is Nonmarital Property?
Nonmarital property includes any assets and liabilities acquired prior to the marriage. In some limited instances property acquired during the marriage is also considered a spouse’s nonmarital property. Most commonly, these limited instances include inheritances and gifts from third parties to one spouse.
Unless steps are taken to change the title or the value of the property in the marriage, the following types of property are considered nonmarital assets:
- Assets or liabilities that a party came into the marriage with that retains its value;
- Assets or liabilities acquired by an exchange for a nonmarital asset;
- Assets or liabilities acquired by noninterspousal gift or inheritance;
- Income derived from nonmarital assets during the marriage (unless the income was used by the parties as a marital asset);
- Any assets and liabilities excluded from being considered marital property pursuant to a valid written agreement (i.e., a valid prenuptial agreement); and
- Any liabilities incurred where one spouse forged the other spouse’s name without permission.
The Conversion of Nonmarital Property to Marital Property
There are instances where nonmarital property is converted into marital property. This can occur when the nonmarital property is retitled from one spouse’s name into both spouses names. This also happens when commingling, the combining of marital and non marital assets, occurs and the value of the marital and nonmarital assets becomes indistinguishable. This commonly occurs when spouses open a joint bank account and add nonmarital funds to the account. In both retitling and commingling situations the entire value of the property is converted into marital property.
A third type of conversion occurs when the value of a nonmarital asset is enhanced due to the labor or financial contribution of either spouse during the marriage.
For example: H and W marry, and W brings a house into the marriage worth $100,000. The house remains titled solely in W’s name throughout the marriage, so the house is considered a nonmarital asset. However, if H and W decide to add a $20,000 garage onto the house while they are married, the $20,000 improvement is considered a marital asset.
What is Marital Property?
Generally speaking, marital property is property acquired during the marriage with marital funds or labor. Such property is considered marital property regardless of whose name is on the title of the property. If the property is acquired during a marriage with marital income or funds, those are marital assets.
Examples of marital assets include:
- Assets acquired during the marriage, either individually by either spouse or jointly
- Real property held as tenants by the entirety;
- Personal property held as tenants by the entirety;
- Gifts from one spouse to another;
- Insurance benefits acquired during the marriage;
- Any appreciation or enhancement in the value of non-marital assets resulting from the efforts of either party during the marriage, or from the contribution of marital funds;
- Pension benefits, workers’ compensation benefits, social security income, interests in pending lawsuits, and stock options acquired during the marriage.
Marital Property Cutoff Date
The cut-off date to determine whether an asset or liability is marital or nonmarital is either the date that the parties enter into a valid separation agreement, or the date of filing for divorce, whichever comes first. The parties can also stipulate to a cut-off date. This means that any assets acquired after the cut off date are considered nonmarital.
The date for determining the value of marital assets and liabilities is less clear. In Florida the judge has discretion to determine this valuation date, and he or she may decide to value different assets at different dates depending on the circumstances and what the judge things is fair.
Professional Degrees
Professional degrees such as a medical degree are not considered marital property.
However, it’s important to note that any professional practice associated with the degree is considered marital property, and can be factored into both division of property and in deciding alimony.
Treatment of Marital Property upon Divorce
As we already know, Florida takes an equitable distribution approach to marital property upon divorce, so all marital property is divided equally between the spouses. In order to accomplish this the court goes through 4 steps:
- The court identifies all of the marital and nonmarital property.
- The court classifies the property as either marital or nonmarital property. Nonmarital property is set aside and marital property is lumped together. The court uses the date of marriage and the date the parties enter into a valid separation agreement or the date of filing a petition for dissolution of marriage to determine the dates used for classifying the property as marital or nonmarital.
- The court values the marital property.
- The court distributes the marital property.
Generally, the presumption is that the property will be divided equally, but the court may allow the marital property to be divided unequally as long as the result is equitable (and in some instances an unequitable distribution is granted – see below). This is a fact heavy analysis that gets decided in a large number of factors, including:
- The contribution to the marriage by each spouse (including contributions to the care and education fo the children and services as homemaker;
- The economic circumstances of the parties;
- The duration of the marriage;
- Any interruption of personal careers or educational opportunities of either party;
- The contribution of one spouse ot the personal career or or educational opportunity of the other spouse;
- The desirability of retaining any asset, including an interest in a business or professional practice, intact and free from any claim or interference by the other party;
- The contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both the martial assets and the nonmarital assets of the parties;
- The desirability of retaining the marital home as a residence for any dependent child of the marriage;
- the intentional dissipation, waste, depletion, or destruction of marital assets during the marriage; and
- Any other factors necessary to do equity and justice between the parties.
Marital Misconduct and Unequal Distributions
Courts allow for unequal distribution of marital assets in instances of marital misconduct coupled with an intentional dissipation of marital assets (i.e., waste of marital assets). These situations can arise in instances where marital funds have been spent on an extramarital affair, were gambled away, or used to support a drug addiction.
It’s important to note that marital misconduct alone is not enough for a court to award an unequal distribution. There must be a depletion of marital assets as well. Oftentimes it can be difficult to prove these allegations.
Dividing Retirement Accounts in a Florida Divorce
Retirement accounts like 401ks, and IRAs are special tax advantaged accounts, while pensions can provide an income for life. These types of accounts require special consideration in a divorce. Dividing them improperly can result in a financial disaster. And sometimes these accounts are only partially marital. We sometimes use a formula called a coverture fraction to determine the marital portion of the account.
Often lawyers can use something called a Qualified Domestic Relations Order (QDRO) to divide retirement accounts without disrupting their tax-advantaged status.
Dividing Real Estate in a Florida Divorce
For many divorcing couples their house is their biggest asset. Unlike a bank account, you cant simply divide a house in half. For this reason we often pay special attention to structuring how the former marital home is accounted for in equitable distribution.
Usually in a divorce either the parties will agree to sell the house and split the proceeds, or one spouse will buy the other out. This may require the party doing the buy out to take out a loan or refinance their existing mortgage.
It’s important that this section of the divorce agreement be carefully considered. There are many terms to consider when dealing with real estate, and the goal of the agreement is to provide clarity to all the parties involved.
Equitable Distribution is Final
It is extremely important to note that once the division of marital assets and liabilities has been formally decided upon it is final.
This is different from child custody, alimony, and child support where the decisions can be subsequently modified due to a change in circumstances. You can’t go back and modify the terms of the equitable distribution in a divorce unless your former spouse agrees to the change.
It’s also important to note that there are less options for enforcing orders for equitable distribution than there are for enforcing an order for alimony or child support. In support cases the judge can find the defaulting party in contempt of court. It’s possible to go to jail for not paying alimony or child support. The remedy of contempt is not available for enforcing the terms of equitable distribution. For this reason the parties and their lawyers need to consider how they structure their equitable distribution agreements very carefully.
Property Distribution in a Florida Divorce – Final Thoughts
This was just a basic overview of how property gets divided here in Florida. This is by no means every piece of law surrounding the process, but I hope it helps provide a general overview when it comes to understanding property division and equitable distribution, and how the courts handle it in Florida.
Dividing property is almost always a complicated aspect of any divorce, and I recommend seeking out the advice of a family lawyer who can help guide you through the process and protect your rights and interests.
If you have any questions or need any help in regards to your Florida divorce it would be my honor to assist you. I represent clients in Southwest Florida from my office in Venice. Please do not hesitate to get in touch via phone (941 882-4367) or email (dan@danpolicastrolaw.com) to schedule a consultation.
