How Is Property Divided In A Florida Divorce?

January 24, 2024 by Paul Shafranski

This is one of the most important questions in a divorce. While a marriage, and its undoing, can be fraught with complex and difficult emotions, the legal process of a divorce mostly comes down to who gets what and how to handle parenting issues. The first question, who gets what, is decided through the process known as “equitable distribution.”

What Is Equitable Distribution?

Equitable Distribution is the process by which all of the marital assets and liabilities, also known as all of the marital stuff you’ve accumulated over the years and all of the marital debt that is left, is distributed to both spouses. The concept comes from section 61.075 of the Florida Statutes, which outlines the entire process. The first step in determining equitable distribution is determining what is a marital asset/liability and what is a nonmarital asset/liability.

Marital vs. Nonmarital Assets and Liabilities

The simple rule is that assets that were obtained before a marriage are nonmarital, meaning they belong to one of the spouses individually and independent of the marital bonds, and the same goes for debts that were incurred before a marriage. For example, if you purchased an antique sports car before the marriage, that is presumed to be nonmarital and not part of the equitable distribution process. Similarly, student loans that you took out before you got married are presumed to be nonmarital and will remain your sole responsibility after the divorce.

The same analysis applies when determining whether something is a marital asset. If that antique sports car was purchased three months into your marriage, it is presumed to be a marital asset. If you took out student loans three months into your marriage that is presumed to be marital debt.

That’s the quick and easy way to determine what are marital assets and liabilities and what are nonmarital assets and liabilities. However, like many things in the law, it is never really that easy.

Common Issues in Equitable Distribution

Equitable Distribution can be complicated by a number of circumstances that families regularly encounter. While these are exceptions to the rules, they are not uncommon.

Valuation

One of the trickiest issues in Equitable Distribution is determining the value of certain assets. How much is your home worth? Are you having the home appraised? Do you and your spouse agree to the appraiser or will you each have your own appraisal performed? Are you using an online listing option, such as Zillow, to get a feeling for what your house could be worth? Or are you both simply agreeing to a value? The answer to these questions will directly impact what number gets placed in the Equitable Distribution Spreadsheet (see below). If you have a family business, it can be very tricky to determine the appropriate value of the business for Equitable Distribution purposes.

Pensions and Retirement Accounts

Another problematic area is with pensions and retirement accounts. It is very common for a spouse to come into a marriage with an existing retirement account that was established pre-marriage, which they then continue to contribute to after the marriage has begun. The pre-marital contributions, and interest derived therefrom, would be nonmarital, while any contributions and interest on those contributions after getting marriage would be considered a marital asset. Calculating the nonmarital portion of the retirement account and any interest derived from those pre-marital contributions can be complicated and requires expertise to determine.

Pensions can be even more difficult to calculate because of the nature of how they pay out. There is usually not a value that a pension can be traded in for until the time comes for one to retire. Pensions will state a current payout amount based on projections, anticipated age of retirement, and other factors. Even more complicated, if the pension was started before the marriage and continued throughout the marriage, it can be very difficult to find the precise nonmarital and marital values of the pension for Equitable Distribution purposes.

Active vs. Passive Appreciation

Another difficult area that can complicate Equitable Distribution is determining whether the increase in value of a nonmarital asset is due to active or passive appreciation. Generally speaking, if a nonmarital asset appreciates in value during the marriage due to the active efforts of one or both spouses, that increase in value is considered “active” appreciation and is likely considered a marital asset subject to Equitable Distribution. If, however, a nonmarital asset increased in value due to market forces, inflation, or other methods that neither spouse had any active involvement in, that increase in value is considered to stay nonmarital and not subject to Equitable Distribution. This is common in real property and in investment accounts in which one or both spouses spent considerable efforts during the marriage to manage the investments.

Inheritances

Inheritances are a big exception to the ordinary marital vs. nonmarital rules. Generally, if a spouse receives an inheritance or a gift that is not from the other spouse, that is considered nonmarital. Also nonmarital are any assets exchanged for such nonmarital assets. In other words, if you spend your inheritance while married on a yacht, that yacht is likely nonmarital even though it was purchased during the marriage. However, if an inheritance or gift is comingled with marital assets, they can lose their nonmarital nature. Thus it is very important if you receive an inheritance or non-spousal gift during the marriage and you would at least like the option to keep it nonmarital, to be careful how it is stored and what you do with it.

Equitable Distribution, Not Necessarily “Equal”

It is important to note that the term we use for the distribution of marital assets and liabilities is “Equitable” Distribution, not “Equal” Distribution. While the courts are instructed to start the process “with the premise that the distribution should be equal,” the court is also permitted to perform an unequal distribution of assets based on certain enumerated factors, which we will discuss in another post.

Gathering Information

Typically, the longer a marriage, the more assets and liabilities a couple has accumulated. It can be a very overwhelming process to gather all of this information into one place. How does one organize all of this financial information? A good place to start is an Equitable Distribution Spreadsheet. The Ninth Circuit in Central Florida has a helpful Equitable Distribution Spreadsheet which one can use to input all information about a couple’s marital assets and liabilities. If you are in litigation, your lawyer should prepare this form for you based on the information you and your spouse provide. While one would think financial information is cut and dry and the answers clear, it is not uncommon for both attorneys to have differences in their Equitable Distribution Spreadsheets (usually regarding whether an asset or liability is marital or nonmarital or the value of an asset or liability). If you are pursuing a collaborative divorce, the financial neutral will gather all of your financial information into their own Equitable Distribution Spreadsheet for the team to analyze and build options with together. In the collaborative process, this spreadsheet is a joint document that both spouses and their team members work together to create and ensure it is accurate.

Equitable Distribution, along with parenting issues, makes up the vast majority of issues to figure out during a divorce. It can be very helpful to talk to a lawyer about this process to figure out what, if any, issues might arise during the Equitable Distribution process and how to resolve them efficiently and fairly. Please schedule a consultation with our office today to discuss these and any other questions you might have. We look forward to hearing from you.

Don’t Forget These Things in Your Divorce Settlement Agreement!

September 19, 2023 by Paul Shafranski

If you resolve your divorce amicably, either through an uncontested divorce process, mediation, or a collaborative divorce, you will end up signing a Marital Settlement Agreement. The purpose of this document is to list out all of the terms of your divorce, including which of you will receive which assets and which debts, or some specific portion of various assets and debts (in other words, memorializing the terms of your equitable distribution). It is very important that your Settlement Agreement be as exhaustive as possible and include every asset of some significance.

Most couples can work out personal property (furniture, clothes, appliances, etc.) without needing to clutter up a Settlement Agreement with such minute details. However, failure to include important assets can lead to confusion in the future over who it belongs to after the divorce is finalized. Here is a list of assets we have found are commonly overlooked when divorcing:

Cryptocurrency. This has become a major source of investment for many people. As such, it should be treated like any other marital asset and distributed according to the couple’s wishes. All cryptocurrency accounts and amounts should be disclosed the same as bank accounts and investment accounts. You should consult with a financial specialist if you are unclear on the monetary worth of cryptocurrencies as some can have a very significant value.
Jewelry. If you have jewelry you believe to be of significant value (which is for each couple to decide for themselves), then there is a good chance it should be included in the Settlement Agreement. If the jewelry is of such a value, occasionally an appraisal will need to be performed to determine its total overall value. But remember, wedding rings and engagement rings are not considered marital assets and are not subject to equitable distribution.
Hotel or Vacation Points. These can be quite easy to forget about when you are navigating a divorce. But they can have value, and if nothing else it should be clear who is going to keep them and whether and how a transfer will be necessary to make that happen.
Future tax refunds for the prior year. If you are anticipating receiving a tax refund during or after the divorce, for a year in which you filed as married and are both entitled to a refund, you should ensure that is addressed in clear terms in your Settlement Agreement. Some tax refunds are for substantial amounts and should not be overlooked. The same goes true for tax liabilities as well.
Frequent Flyer Miles. Similar to hotel and vacation points, frequent flyer miles are easy to miss but can provide plenty of value. Check to see whether and how frequent flyer miles can be transferred from one spouse to another if that is part of the Settlement Agreement.
Paid Time Off/Sick Leave Time. Florida law provides that accrued vacation and/or sick time which is unused at the time of divorce is a marital asset and subject to equitable distribution. Not all vacation and sick time is created equal, however. The employee must be eligible to be compensated for unused hours upon termination of employment. This includes military vacation and sick time as well. The non-employee spouse cannot choose to exercise the vacation or sick time on behalf of the employee spouse, so the total value of the benefit should be determined so the employee spouse can “buy out” the non-employee spouse for their share of the leave time’s value.
Cemetery Plots. Many spouses make arrangements to be buried next to each other. This can be an expensive arrangement and should thus be addressed in the Settlement Agreement. Otherwise, if there is lack of clarity after someone has passed away, it can lead to a host of complications. Further, if one former spouse re-marries and wants to use the burial plot for their new spouse, if the agreement is silent as to who has claim to the burial plots, it is entirely possible that neither former spouse will be able to use the burial plots with a new spouse.

Equitable Distribution can be a daunting and complicated process, particularly for longer marriages which have had more time to accrue more marital assets. This is why it is important to have an attorney review your equitable distribution, even if you don’t need legal advice on how to split things up. Ensuring that you get your Marital Settlement Agreement done correctly and completely the first time can avoid uncertainty and potential legal intervention in the future. We at Artemis Family Law Group are ready to discuss your thoughts about equitable distribution and the status of your Settlement Agreement. Please click here to schedule a consultation at your convenience.

Can I Keep My House After A Divorce? Part 2

November 16, 2023September 5, 2023 by Paul Shafranski

In Part 1 we discussed whether your house is considered marital property, various factors that influence the decision to try to keep the house after a divorce, and some of the more common options for doing so. Now in Part 2, we will continue the conversation, in which we explore the legal process for valuing your house and some alternatives to keeping the house.

What Is My House Worth?

This is a key question if you are not going to be selling the house as a part of the divorce. If you agree to sell the house and split the proceeds evenly, then the value of the house will simply be whatever amount for which the house is sold. The market decides the value at the time of purchase and if you are splitting the proceeds evenly, it does not complicate equitable distribution. In other words, if the home sells for more than expected, you and your spouse will receive the benefit of that equally and if it sells for less, you and your spouse will both bear the burden equally.

While that is the simplest route, from an equitable distribution perspective, it is very common for individuals to instead want to stay in the marital home after divorce. That’s where it becomes important, and complicated, to ascertain the value of the home. You have a few options, in increasing cost and complexity:

Agree to Value:

The simplest manner to determine the home’s value for equitable distribution purposes is to agree to a value. This can be based on each of you doing your own research, online listing values (such as a Zillow estimate), or simply a strong belief you both hold as to the home’s monetary value. After all, you know your home better than anyone else. If you agree to a value, you can use that to determine what amount you will need to provide to your spouse, either in cash or in offsets from other marital assets, in order to buy out their share of the home so you can keep it. The Pros of this method are the simplicity and cost-effectiveness of agreeing to a price. The Cons of this method are the inaccuracy of the price as well as the difficulty some couples have in coming to any agreement during a divorce.

Comparative Market Analysis (CMA):

A CMA is somewhere between simply agreeing to a value and a full-blown appraisal. A CMA is performed by a real estate agent and involves comparing similar homes in the area that have recently been sold. Multiple factors go into a CMA, including but not limited to, location, lot size, and square footage, etc. A CMA is a great option if you and your spouse are not too far off in your personal estimates of the home’s worth—it will help determine what number to use. However, the bigger the difference in estimated values you and your spouse have, the less value a CMA will provide. If the CMA comes in at or near Spouse 1’s estimated value, then Spouse 2 is likely to reject it. If the CMA comes in at or near Spouse 2’s estimates value, then Spouse 1 is likely to reject it. If the CMA lands somewhere in the middle of both spouse’s estimates, they both may reject it. Ultimately, unless you both agree to be bound by the CMA, neither of you are required to agree to the price the CMA determines. The Pros of a CMA are cost (they are usually free) and speed (they are usually performed in a matter of days). The Cons of a CMA are that it is less accurate than an appraisal and require the parties to agree to a real estate agent to perform the CMA, which can be difficult in a high-conflict scenario.

Appraisal:

An appraisal is a more formal process than a CMA and requires a licensed appraiser to perform an appraisal. While a lot of the market comparison process is similar to a CMA, an appraiser will typically enter your home and physically inspect the condition of the house, noting any defects, outdated aspects, or flaws with the home. As such, an appraisal is more thorough than a CMA. An appraisal results in an appraisal report in which the detailed findings of the home are noted, with photographic evidence. Appraisals also take much longer to perform, typically 30-60 days, to obtain the appraisal report. They also carry a hefty price tag. And similarly to a CMA, either one of you may end up rejecting the appraisal report’s value of the home if it does not come close to what you already believe it to be. Neither of you are bound by an appraisal’s value unless you both agree to be. Often when a matter ends up in court, you end up with “dueling appraisals” with different values. The Pros of an appraisal is the accuracy and thoroughness it provides while the Cons are the price and length of time it can take to obtain.

Alternatives to Keeping the House

The primary alternatives to keeping the house are selling it or letting your spouse buy you out of your share of the equity in the home. It is often the case that the home is burdened with extensive family memories, which can make it difficult to let go of. However, divorces are typically difficult on your finances and maintaining a home with one income instead of two can be too difficult to realistically handle. Combined with all of the other financial and lifestyle changes that come with a divorce, sometimes it is better to say goodbye to the house and give yourself a clean break. It is very common for there to be a “resting” or “recovery” period after a divorce in which the parties live in simpler housing for a time while they adjust to the new normal and determine what they can afford and just as importantly what they actually want at this point in their lives.

Some people move in which family for a while after a divorce, which can help stabilize their finances and provide a steady place for them and their children. Still others move into smaller rental options, like a smaller home or an apartment, to get by during the adjustment period. It can be helpful to start out “smaller” with your options and then adjust upward if and when you think the time is right. Otherwise, it can be very difficult, if not impossible, to maintain the same life you had before a divorce without building back up to it. It can also be liberating to let go of an asset that is full of so many memories that are no longer a source of comfort; we have seen clients embrace a feeling of freedom when they let go of the struggle to keep the house and figure out how to maintain it. It is certainly not an easy decision to make, but it may be the best one for you and your family overall.

We welcome the opportunity to discuss your housing options with you. Please click here to schedule a consultation at your convenience.