Jacksonville Divorce Attorney Blog

Equitable distribution in Florida during a divorce can be a frightening prospect.  What are the rules regarding distribution of assets of a trust in a divorce?  Does the divorce court have the authority to distribute trust assets?

The appellate courts in Florida have addressed this issue.  The appellate court held that without consent from all beneficiaries to the trust, the trial court did not have the authority to distribute any asset of the trust.  See Sylvester v. Sylvester, 557 So.2d 599, 600 (Fla. 4^th DCA 1990).  In Sylvester, the court held that the trial court’s finding that the irrevocable trust, which was the only source from which the husband could comply with the judgment, could be terminated by husband at any time, was erroneous due to the court’s failure to have all indispensable parties before it.  The trust would have to be before the court joined with the trustee and beneficiaries.

Similarly, in Minsky v. Minsky, 779 So.2d 375 (Fla. 2^nd DCA 2000), the appellate court reversed the determination that trust funds are a marital asset and the resulting equitable distribution in a dissolution action.  The trial court incorrectly determined that because the parties had used the trust accounts as marital funds, the funds had “taken on the nature of a marital asset” and awarded the trust funds to the wife.  The appellate court indicated that, in effect, the trial court dissolved the trust created for the children’s benefit and the husband as trustee and declared it a marital asset.  The court held that the trial court does not have jurisdiction to adjudicate property rights of nonparties.

In a Florida divorce case, sometimes, a marital asset can become non-marital property of one spouse by contract.  Or one spouse can become the beneficial owner of marital property by transferring it to an irrevocable trust.

In Nelson v. Nelson, 206 So.3d 818 (Fla. 2^nd DCA 2016), a husband and wife transferred an out-of-state home to an irrevocable trust that had the wife as sole trustee.  The appellate court ruled that because the husband waived all right to alter, amend, modify, revoke, or terminate the trust, and the trust instrument did not contain a provision dissolving the trust upon divorce, the trust was irrevocable.  The court ruled that the out-of-state home was not marital property subject to equitable distribution in a divorce.  Neither the wife nor the beneficiary daughter had applied for modification or revocation of the trust, so the court could not dissolve the trust.

This case illustrates an example of how property can be classified in a divorce.  When the husband bought the out-of-state property and jointly titled it with his wife, the home became marital property.  When the husband transferred the home to the trust, it ceased being marital property and became non-marital.  In addition, the Nelson court cites to Hansen v. Bothe, 10 So.3d 213 (Fla. 2^nd DCA 2009) regarding the Former Husband’s Trust instrument not containing a provision dissolving the Trust upon divorce.  In Hansen, the court held that divorce of husband and wife who were co-settlors and co-trustees of a revocable trust, did not terminate the trust even though wife relinquished any rights she had under the trust as part of the divorce.  The trust in Hansen contained no provision terminating it upon divorce of co-settlors, and the trust explicitly provided for replacement trustees in the event the original trustees ceased to serve.

What happens to real estate or property that you jointly own when you get a divorce in Florida?  How does the Court handle your property when you and your spouse can’t agree on what to do?  How can it be distributed between you and your spouse?  In divorces, the court will partition your property absent an agreement as to the contrary.  Partition means simply “to divide into parts.”

The Court cannot order partition of your property without it being alleged in your dissolution of marriage petition.  Florida courts have long held that a judge may partition the jointly-owned property of the parties in a divorce action only if the due process requirements of Chapter 64, Florida Statutes, relating to partition are met.  See Sanders v. Sanders, 351 So.2d 1156 (Fla. 2^nd DCA 1977).  The complaint for partition can be incorporated into a divorce petition and no separate filing is needed.  F.S. § 64.041 specifies that the complaint must allege a description of the property, the names and places of residence of the owners, and the share held by each owner.  The partition complaint must be filed in the county where the property is located.

Typically, the parties will agree on a real estate broker to list the property for sale at current fair market price and the parties will split the proceeds according to the parties’ interest in the property (taking into account the costs and expenses put into the property) unless an agreement is made for one party to refinance the home and pay the opposing party their share.  After a divorce, property automatically converts into a tenancy in common and each owner has the right to sell, lease, or mortgage their interest in property.  See F.S. § 689.15.

You may wonder how Florida courts make a decision on what is income and what is not in divorce cases.  In addition, you may wonder how business income is considered in divorce cases by the courts.  The case of Marchek v. Marchek, 159 So.3d 1025 (2^nd DCA 2015) gives a great example of what can be considered income, especially when it comes to business income.  In this case, the husband appeals a final judgment of dissolution of marriage to his wife.  The court reversed an equalizer payment of $35,777 to the wife because there was not competent, substantial evidence supporting the court’s valuation of the business income.

The husband was an electrician that owned an electrical contracting business where the wife worked handling much of the administration such as bookkeeping, payroll, and accounts receivable for a time.  As of the trial date, the business had a pending job for which it billed $100,000 and accounts receivable of $40,000, some of which stemmed from the pending job.

The problem was the $100,000 for the pending job was the gross amount for the job, NOT a net amount.  The $40,000 accounts receivable figure was the amount the business had already received including the $100,000 job and any others from that same year, and the figure was still only a gross amount, not a net amount.