EQUITABLE DISTRIBUTION OR
HOW TO SPLIT THE MARITAL PIE IN DIVORCE
By: William G. Morris, Esq.
Florida is a no fault divorce state. Under Florida law, there are two grounds for divorce: the marriage is irretrievably broken or mental incapacity of one of the parties. If one of the parties claims the marriage is irretrievably broken, that is enough for the court to grant a divorce.
Determining a marriage is irretrievably broken is merely the tip of the iceberg. The biggest issue in most divorces is financial and often the biggest financial issue is division of marital assets.
Fighting can begin over determining what is a marital asset. The parties may also argue over what is a marital liability. Marital assets and liabilities are generally those acquired or incurred during marriage.
In simplest terms, marital assets do not include assets that were owned prior to marriage or received as gifts during marriage, both of which are known as non-marital assets. Things get confused when a party mixes non-marital with marital assets or uses marital assets to pay expenses of or improve non-marital assets. Courts also consider appreciation in value of a non-marital asset to be a marital asset, if the appreciation is due in any manner to effort of a party (i.e. managing a pre-existing stock account).
Mixing of marital and non-marital assets can cause the non-marital assets to lose their separate character. That happens with joint bank accounts. In other cases, such as pre-existing retirement accounts, contributions during marriage are marital. Growth in value, if not actively managed by the participant, would be allocated to marital and non-marital portions. Determination of marital and non-marital assets is first step in addressing financials in dissolution of marriage.
Determining what assets will be owned by each party after divorce has an affect on both alimony and child support. Alimony is based on need of one party and ability to pay of the other. Child support is generally based on a statutory formula that takes into consideration income of both parties. Division of assets can affect income, need and ability to pay of both parties.
Marital assets include real property and personal property titled jointly by the parties as tenants by the entireties. That includes assets where one spouse has voluntarily placed the other spouse on title, but has second thoughts now that the parties are divorcing. All assets held as tenants by the entirety are presumed to be marital assets and if any party makes a claim to the contrary, that party has the burden of proving the property or portion of the property is non-marital. In other words, a gift of an interest in property to a spouse becomes marital unless the giver can show it was really intended for another purpose (i.e. placing a spouse on title for estate planning purposes only and not intended as a gift).
Cut-off date to determine assets and liabilities classified as marital or non-marital is the earliest of the date the parties enter a valid separation agreement, any other date agreed upon by the parties in their separation agreement, or the date the petition for dissolution was filed.
Determining if an asset is marital or non-marital is not the end of argument; it can move on to determining value. By statute, date for determining value of marital assets and liabilities is left to the judge's discretion to determine what is just and equitable. Different assets may be valued as of different dates. The valuation date becomes another area for argument when assets increase or decrease in value, especially when a divorce case takes months or even years to conclude. Parties may also argue over assets that no longer exist. When assets are used to pay living expenses, the court generally rules they are not subject to division or set off. When assets or funds have been depleted by misconduct, the court will generally award the other spouse something of equivalent value.
Once assets are determined to be marital or non-marital, the court is mandated by statute to make an equitable distribution of the marital assets. The court must begin with the premise that distribution be equal, but is directed to consider a long list of relevant factors to determine if there is justification for unequal distribution. Those factors include:
(a) The contribution to the marriage by each spouse, including contributions to the care and education of the children and services as homemaker.
(b) The economic circumstances of the parties.
(c) The duration of the marriage.
(d) Any interruption of personal careers or educational opportunities of either party.
(e) The contribution of one spouse to the personal career or educational opportunity of the other spouse.
(f) The desirability of retaining any asset, including an interest in a business, corporation, or professional practice, intact and free from any claim or interference by the other party.
(g) 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 marital assets and the non-marital assets of the parties.
(h) The desirability of retaining the marital home as a residence for any dependent child of the marriage, or any other party, when it would be equitable to do so, it is in the best interest of the child or that party, and it is financially feasible for the parties to maintain the residence until the child is emancipated or until exclusive possession is otherwise terminated by a court of competent jurisdiction. In making this determination, the court shall first determine if it would be in the best interest of the dependent child to remain in the marital home; and, if not, whether other equities would be served by giving any other party exclusive use and possession of the marital home.
(i) The intentional dissipation, waste, depletion, or destruction of marital assets after the filing of the petition or within 2 years prior to the filing of the petition.
(j) Any other factors necessary to do equity and justice between the parties.
All of these issues can be addressed in a marital settlement agreement, which is almost always a preferred approach. In settling their dispute, the parties have some control of the outcome, can minimize expense of argument and often bring certainty to uncertain situation with minimum delay. But, when the parties are unable or unwilling to agree, Florida judges are called upon to make an agreement for them.
William G. Morris is the principal of William G. Morris, P.A. William G. Morris and his firm have represented clients in Collier County for over 30 years. His practice includes litigation and divorce, business law, estate planning, associations and real estate. The information in this column is general in nature and not intended as legal advice.