Property Division in a Divorce
Equitable Distribution and Divorce Proceedings
When a petition is made for divorce, one of the critical questions to be addressed is the distribution of the assets and liabilities for the two parties involved. Depending on where the divorce is being filed the legal treatment of assets and liabilities may differ. Some states including Arizona, Nevada, Mexico, Washington and Wisconsin are ‘community property’ states. Like most other states, Florida is an ‘equitable distribution’ state which indicates that the common property of the two parties may be divided between them equitably in the divorce proceedings.
To put it simply, in community property states the law holds that the spouses have equal ownership in all income/ assets/ liabilities earned or incurred during the period of marriage. This means that even if only one spouse has earned the income, both are entitled to equal shares of it.
In equitable distribution states like Florida, the equal distribution is not mandatory. If the circumstances require it, the court may distribute more of the marital assets to one spouse than the other based on analysis of a range of factors. The objective is to ensure fair, balanced and equitable distribution to both spouses rather than a blind adherence to equal sharing of the property, assets and debts.
Distribution of property in divorce filings is covered under the Chapter 61 of the Florida Statutes. This equitable distribution law also applies to the debts acquired during the period when the two parties were married. Just like assets, a similar analysis of factors may be undertaken to determine fair and just allocation of liabilities.
Under Florida divorce law, the rule of equitable distribution only applies on marital property – that property which is acquired or earned during the marriage. The determination of which assets are categorized under the ‘marital property’ heading and which assets are non-martial is an issue of great importance. In fact the very first step in any Florida divorce proceeding is the analysis of the assets and debts of both parties through the process known as Discovery. This leads to the categorization of the existing assets and liabilities of both parties as marital or non-marital.
The First Step in Equitable Distribution- Discovery
Discovery is a legal process through which a Florida property division lawyer identifies and locates the assets and property of both parties to the divorce. Written questions about assets and debts may be submitted to either side. Written responses are normally required from the person receiving the questions. Apart from this, verification of necessary documents, testimony under oath and other legal procedures may be used to build an exhaustive and accurate list of assets and liabilities owned by the parties. All available discovery procedures available help determine which assets, properties, or debts have been acquired by either spouse during the marriage. In absence of any written agreement that states the contrary, these assets, properties, and debts are considered marital property and subjected to equitable distribution under Florida law.
Any property or assets owned by either spouse separately are not typically subject to equitable distribution or division during divorce. Property that has been under the ownership of one spouse from before the marriage, assets that are received by one spouse as gifts from persons other than the spouse during the marriage, property inherited by one spouse are all examples of non-marital property. Items that are non-marital, or parts of items that are designated non-marital are not divided during the divorce. Assets purchased with ‘non-marital’ funds are also not considered as marital property for the purpose of equitable distribution. Any property or assets that are clearly defined as separate in a valid written agreement such as a pre-nuptial contract are not subjected to division in a divorce.
The assets and liabilities that are ‘discovered’ through this process are then valued. For some marital assets and properties the value is evident; for example the present day monetary value of retirement accounts, cash balances in joint accounts, stock accounts, etc. For others, such as real estate holdings or a family business the value may be assessed by an independent professional. The same holds good for the debts accrued by both the parties if those debts are difficult to value. Typical independent professionals used by divorce attorneys are forensic CPAs, licensed appraisers, business valuators, and personal property valuators.
The Complexities of Co-mingling
In some cases complexities arise with equitable distribution because of co-mingling of non-marital property (or income derived from it) with the marital property. For example, if the payments due on non-marital property are made with marital earnings, the lines between the two are blurred. Co-mingling may also happen when marital funds are deposited into a pre-marital account or ‘non-marital’ funds or income is deposited into a marital – joint account. In such cases, the court may deem all the property as marital property since the co-mingling indicates a willingness and intent to share the asset with the non-owner spouse.
The owner may have to show detailed financial records to show how a portion of the funds, income, or asset is ‘non-marital’ while the rest is ‘marital’ property. This may pose substantial complications to the spouse contesting the ‘marital property’ status of the assets. Further, there is NO guarantee that the court will uphold his or her viewpoint and grant complete ownership of the asset even when financial records or transactions are presented as proof.
Factors Considered During Equitable Distribution (Marital Property Division)
The law states that in every divorce proceeding where equitable distribution needs to be made, the presumption is that both spouses receive half of the marital assets and debts, regardless of fault. However, one important consideration that may skew the presumption is the financial condition of either spouse. The objective of the court is to ensure that both spouses get fair and just treatment, which does not necessarily mean that properties adn debts are divided exactly equally between the two. There are several factors which are taken into consideration to make sure that the distribution is fair and balanced:
– What is the contribution made by either spouse to the marriage? This includes the contribution made by the two parties toward the education of children as well as non- monetary contributions such as care-taking of the children and the many activities/ services carried out as a homemaker. It is critical to remember that contribution is not merely of monetary nature.
** Normally this is not a major factor if both spouses lived a “normal” married life. Wrongful behavior such as criminal activity that drains assets may come into play for this factor.
– The period over which the parties have remained married.
** This factor directly ties in with Alimony issues. If alimony is justified but not financially feasible, a judge may award a greater share of assets to the spouse that should be paying alimony.
– The financial state of both parties to the divorce.
** Again, mostly an alimony related issue.
– Contributions made by one spouse to the career of another, or to his or her education.
** Under certain circumstances this factor can support an unequal distribution of debts. For example, if someone ran up a huge student loan immediately before the divorce, and the other spouse worked like crazy during the school years to support that person.
– Disruption in the career or education of either spouse that may or may not arise from the marriage or its attendant responsibilities.
** See above – alimony issue.
– The reasons behind either spouse’s request to retain assets free from the other’s claim or interference. The desirability and the practical aspects of such distribution may be considered in such cases.
**There are many reasons why a judge may award a asset to one spouse or another – while balancing out the picture with another asset or debt. For example, a personal business that can only be operated by one spouse should logically go to that person.
– Contribution of either spouse to the maintenance, acquisition, improvement of marital and non- marital assets. The role each spouse has played in the accumulation of liabilities is also considered. Intentional erosion of marital property within the period between the filing of the divorce petition and the actual court proceedings is also factored in.
** This factor frequently comes into play when considering a house purchased before the marriage. If marital income was used for an extended period to maintain, improve, and service the loan, a portion of the house will start to be considered marital.
– The practicality and desirability of retaining the marital home as the place of residence of any dependent children of the two parties. A common legal stance is to award right of residence to one spouse to live in the home for a specific time period until the children grow up. The two parties may be allowed to sell the home at a future date and share the proceeds.
** This is an outcome we see in many cases that involve children.
Although these factors may all be considered in divorce proceedings while addressing the equitable distribution of property, these are not the only aspects evaluated. The court will take into consideration any other factors that play a significant role in ensuring that fair and just distribution of the assets, properties, and debts take place. For example, a business that was started by one spouse during the marriage may be given entirely to the spouse who is primarily involved in running it. The other may get monetary compensation in lieu of his or her right to this marital property.
Increase in Value of Separate Property during Marriage
An asset or property that is owned by one spouse from a date preceding marriage may still be subject to equitable distribution to some extent. This happens if the property or asset has increased in value during the marriage owing to the efforts of either spouse or from an influx of marital funds. For example, a business that was already owned by the wife when she married may have been expanded using marital funds. In such case, the court may deem this increase in the value of the business as marital property.
The reasons behind the increase in value may also be non- monetary and non-tangible. For example, if the husband can prove that his expertise or efforts led to the business’ growth or increased profitability, then too the court may consider his plea to consider the business or a portion of it as marital property.
Monetary Value and Sentimental Value of Assets
When the assets are being distributed between the two parties, the law takes due care to ensure that equitable or equal distribution does take place. However, there is an important aspect to consider here. Many assets may have immense sentimental value or emotional ties associated with them. This may be the case with valuable assets like the home or a piece of jewelry or paintings or antiques. However, inexpensive items may also be very valuable to the divorcing couple. For instance, the baby’s crib may hold special value to both parties. It is critical for both parties to the divorce to understand that sentimental value is intangible and immeasurable. Hence, equitable distribution under existing laws may not completely satisfy their definition of equal distribution with respect to such assets that have more than monetary value.
When is Unequal Distribution Considered Just?
There may also be special situations where the court feels unequal distribution to be the correct outcome. This typically happens when there are extraordinary circumstances or factors that support such unequal distribution. Of course these extraordinary circumstances need to be supported with clear cut, verifiable evidence.
To give an example of inequitable distribution, if one party has substantial ‘non-marital’ property, then the court may award more of the marital assets to the other, if the latter’s total assets are worth significantly less. If one spouse is found to be responsible for eroding a disproportionately large portion of the marital assets and for acquiring huge debts, then a substantial portion of the debts or all of them may be deemed the responsibility of that spouse.
If the distribution is not equal, then the imbalance may also be corrected through the alimony paid. In special circumstances, the court may rule that the alimony be paid from one person’s non-marital property, if equitable distribution of marital property is impossible for some reason.
How Does Florida’s ‘No-Fault’ Divorce Policy work with Infidelity Allegations?
In more than 60% of divorce hearings across the country, infidelity and adultery are cited as factors leading to the dissolution of marriage. A common misconception among spouses filing for divorce is that infidelity has significant impact on the legal proceedings as well as the on the distribution of marital property and assets. Florida follows a ‘no fault’ divorce policy, which means that adultery or infidelity may not always be considered a relevant factor when determining equitable distribution of marital property and assets. The spouse who is proven to have had an adultrous affair may not be punished by the allocation of a smaller portion of the marital property.
However, if the spouse whose infidelity is established has also misappropriated the marital income or misused the marital property, then an exception is made to the ‘no fault’ divorce policy. For example, if the adulterous spouse has given gifts from marital funds or marital assets to a third party with whom he or she has extra marital relations, the court may take that into consideration when determining equitable distribution.
In effect, it is important to remember that while Florida law holds a ‘no fault’ divorce policy and follows the equitable distribution concept for determining the allocation of marital assets, fairness and justice take precedence. If the circumstances demand it, the court may make exceptions to the rule so that both parties are given a balanced and fair treatment and neither spouse is allowed to gain disproportionate and undeserved benefit from the marital property and assets.