Equitable Distribution

In a Florida divorce, the division of assets and debts is called Equitable Distribution. 

Equitable distribution requires three steps.  First assets and liabilities are classified as either marital, nonmarital, or mixed.  Second, assets and liabilities are valued.  Third, marital assets and debts are divided between the parties.

Step 1 – Classifying Assets and Liabilities

Marital Assets and Liabilities

Under Florida law, assets acquired during the marriage by either spouse, whether individually or jointly, are presumed to be “marital.”   (Unless an exception applies).  The same is true for liabilities.

Because the focus is on when the asset or liability was acquired, “title” does not really matter.  For example, a car that is titled to just one spouse, but which was purchased during the marriage,  would likely be marital.  Likewise, a credit card in the name of just one spouse would likely be considered marital, if the debt was acquired during the marriage.

Nonmarital Assets and Liabilities

Nonmarital assets and debts, are assets and debts acquired prior to marriage. Or, acquired during the marriage as gift from a third party, or as an inheritance.

Title does matter with nonmarital assets and liabilities.  If during the marriage a nonmarital residence, or bank account, is titled as a “tenancy in the entireties,” then the presumption is that the there was an intent to make the asset marital.  Caution:  it is not always necessary to use the magic words “tenancy in the entireties.”  In most cases, assets jointly titled to a married couple are presumed to be held as a tenancy in the entireties.  If you think this is an issue, you should talk to an attorney before jointly titling any of your nonmarital assets during your marriage.

Commingling

Nonmarital assets can also be turned into marital assets through “commingling.”  Commingling occurs when you mix nonmarital and marital assets together –  in a manner that the court is unwilling to untangle.  The classic example is a nonmarital checking or savings account.  For example, assume that the husband has $100,000 in a checking account prior to marriage.  The account is titled solely in the husband’s name, and stays that way throughout the marriage.  However, during the marriage the husband deposited his pay from work into this checking account.  The checking account in this example is likely commingled.  Why?  Because the husband’s pay from work is a marital asset.

Mixed Character Assets

Assets and liabilities can have a mixed characterization – part marital and part nonmarital.  For example, a retirement account may have a mixed characterization, if some of the retirement benefits were earned prior to the marriage, and and if some of the benefits were earned during the marriage.  Also, the enhancement in the value to a nonmarital asset during the marriage may in some instances be considered marital.  For example, under certain circumstances, a percentage of the appreciation of a nonmarital home, may be treated as a marital asset.

The characterization of assets and liabilities can be the subject of major disputes in Florida divorce cases.  Before agreeing to any division of assets and liabilities in a divorce case, you should consult with a lawyer to make sure that the characterizations are correct, and that no exception might apply to your specific situation.

Step 2 – Valuing Marital Assets and Liabilities

In most cases, marital assets and liabilities are valued on a “fair market value basis.”  That value is easy to calculate for assets like publicly traded stocks, or cash.  Also, debts are usually easy to value, because the amount owed to the creditor is a known fact.  For example, the current mortgage on the house is $200,000.

However, it is much harder to determine the value of assets like the marital residence, or the family business, or jewelry.  To value these types of assets, an appraisal is usually required.

The date the court uses to determine the fair market value of assets and debts is whatever date the court believes is fair.  And, the court can value different assets on different dates.  For example, if the stock market crashes after a divorce case has been filed, the court can use current stock values, rather than the values at the time the case was filed.

Step 3 – Dividing Marital Assets and Liabilities

Equitable Distribution starts with the presumption that marital assets and liabilities will be divided equally.  However, an equal division is just the starting presumption.  Equitable means “fair,” and not “equal.”  So, the court may order an unequal division of marital assets and liabilities if the court determines an unequal division is fair.   The court is required to consider the following factor in determining whether to order an equal or unequal division of marital assets and liabilities:

  • The contribution to the marriage by each spouse, including contributions to the care and education of 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 to the personal career or educational opportunity of the other spouse.
  • 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.
  • 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 nonmarital assets of the parties.
  • 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.
  • 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.
  • Any other factors necessary to do equity and justice between the parties.

Equitable Distribution does not require that every asset and liability is divided equally in two.  Instead, the court will try to equalize the net assets awarded each party.  (Total assets minus the total liabilities).  For example if the husband is awarded a car worth $20,000, and is also awarded the $20,000 car loan, the total equitable distribution to the husband is zero.  ($20,000-$20,000 = $0).

What if the court is unable to divide the marital assets and debts in a way that equalizes things?  This frequently happens when there is one asset that has a very high value, and which cannot be divided.  For example, a family business that one party is best suited to run after the divorce.  In that case, the court can require an equalization payment from one party to the other.  The equalization payment can either be in a lump sum, or paid in installments over a fixed time.

If you would like to investigate this topic further, I have provided the following links:

My article on dividing the family home

Chapter 61.075, Florida Statutes – the law governing equitable distribution in Florida

 

 

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