Articles Posted in Disposition of Assets

For sale signWhat 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. 2nd 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 (2nd 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.

business caculateThe 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.

military weddingThe Uniformed Services Former Spouses’ Protection Act (USFSPA) allows Florida courts to distribute military retired pay to a spouse or former spouse and provides a method of enforcing these orders through the Department of Defense. For orders dividing retired pay as property to be enforced under the USFSPA, the military couple must have been married to each other for 10 years or more during which to the military spouse performed at least 10 years of military service creditable towards retirement eligibility (the 10/10 Rule).

The USFSPA does not automatically entitle a former spouse to a portion of the military spouse’s retired pay. A former spouse must have been awarded a portion of the military spouse’s retired pay as property in their final court order (which can be a final decree of divorce, dissolution, annulment, and legal separation, and court-ordered property settlements incident to such decrees). The USFSPA also provides a method of enforcing alimony and child support arrears awarded in the court order. See 10 U.S.C. § 1408. Section 1408(h) of the USFSPA provides benefits to a former spouse of a member who, as a result of the abuse of a spouse or dependent child, loses the right to retired pay after becoming retirement-eligible due to years of service. A former spouse may enforce an order dividing retired pay as property under this Section if the special requirements of Section 1408(h) are satisfied in addition to all the regular requirements of the USFSPA. The right to payments under this Section terminates upon the remarriage of the former spouse, or upon the death of either party.  Section 1408(h) also provides for the enforcement of a court order awarding child support to a member’s dependent child, where the dependent child’s other parent died as a result of the member’s misconduct.

A property award of retired pay must be expressed as a fixed dollar amount or a percentage of disposable retired pay (gross retired pay less allowable deductions). If the parties are divorced while the member is still on active duty, the former spouse’s award may be expressed by an acceptable formula or hypothetical retired pay award. An award of a percentage of a member’s retired pay is automatically construed under the USFSPA as a percentage of disposable retired pay. A Qualified Domestic Relations Order is not required to divide retired pay as long as the former spouse’s award is set forth in the pertinent court order. The National Defense Authorization Act (NDAA) of 2017, in Section 641, signed by the President on December 23, 2016, amended the definition of disposable pay in the USFSPA, 10 U.S.C. § 1408. For Divorces entered after December 23, 2016, (in a case where the order becomes final prior to the member’s retirement) the military member’s disposable income is limited to “the amount of basic pay payable to the member for the member’s pay grade and years of service at the time of the court order” and increased by the cost-of-living amounts granted to military retirees from the time of the divorce to the date the member retires.

contract agreementCouples in Jacksonville and the Duval County area may need asset protection options in the event of divorce to eliminate costly litigation. A prenuptial or postnuptial agreement or even irrevocable trusts are great options. However, it is important that an experienced Family Law attorney constructs and reviews these documents.

A prenuptial agreement is an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage. See Florida Statutes section 61.079(2)(a). A postnuptial agreement is an agreement between spouses who are already married that is effective immediately upon signing. Both agreements are signed with the understanding that they will determine asset and property distribution in the event of divorce, among other things.

Parties to a premarital agreement may contract with respect to the rights and obligations of each of the parties in any property of either or both of them whenever and wherever acquired or located; the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property; the disposition of property upon separation, marital dissolution, death, or the occurrence of nonoccurrence of any other event; the establishment, modification, waiver or elimination of spousal support; the making of a will, trust, or other arrangement to carry out the provisions of the agreement; the ownership rights in and disposition of the death benefit from a life insurance policy; the choice of law governing the construction of the agreement; and any other matter, including their personal rights and obligations, not in violation of either the public policy of Florida or a law imposing a criminal penalty. See Florida Statutes section 61.079(4)(a)(1-8). In contemplation of a premarital agreement being signed, there must be a fair and reasonable disclosure of the property or financial obligations of the other party.

Negotiating a divorce settlement can be stressful, especially when tension is high and your spouse insists on contesting every last detail. One thing that often is last on people’s priority list, but which should not be overlooked, is insurance.

Insurance policies are standard parts of settlement agreements. The spouse who pays alimony or child support is commonly expected to maintain a life insurance policy that would cover the debt owed to the spouse or children on the receiving end of the money, in case the payer dies while a debt is owed.

If you’re the spouse who is the beneficiary, you must be certain that the policy amount is sufficient to cover your children’s educations, your mortgage and related debt. It’s important to consider sticking in guarantees that forbid a lapse, cancellation or change of beneficiaries to the life insurance policy.

Divorce is a hard enough process for anyone to go through and there are lots of complicated financial decisions that must be made. The money worries can multiply for small business owners who have the added concern of how the divorce will affect their livelihood and even employees.

First things first, your business will likely need to be valued in connection with the distribution of marital assets. This will mean a financial expert may need to go over the records of the company and ask questions about expenses and revenue streams. You’ll need to produce extensive documents to verify the numbers in this process. Sometimes valuations, especially complicated ones, can be expensive. Many times each party insists on having their own expert look at the books. The process can be time consuming and can serve as a distraction for employees who must spend time gathering documents.

Though the worst-case scenario in many business owners’ minds is that the company will have to be sold to pay the spouse his or her share of the marital assets, there are ways to minimize the impact of divorce on a small business.

Divorce and Annulment courts in Florida apply the legal concept of equitable distribution when it comes time to divide the assets of a divorcing couple. This means that the entire marital estate, assets and debts, must be divided in an equitable, though not necessarily equal, manner. There is no fixed standard for dividing property, each case will be decided on the merits, and the trial court’s discretion will not likely be disturbed on appeal without a showing of clear abuse.

Property includes anything of value, tangible or not: personal items (such as cars, furniture and art work) and real property (land and houses). Debts include anything you owe money on: mortgages, car loans, and credit card bills. Really anything the two of you possess is thrown into the mix before it’s all divided.

It’s important to know that not all property is subject to equitable division. Items that qualify as non-marital may include the following: property acquired by either party before the marriage; property acquired after certain stages of the divorce process; property excluded by a written contract between the parties (likely a prenuptial agreement); and any increase in value of non-marital property that did not result from efforts of the other spouse.

Thumbnail image for gavel.jpgAs a Jacksonville Divorce Lawyer the majority of my clients tend to be concerned about what will happen to their marital finances during their divorce proceedings. These clients are rightfully concerned because many individuals going through a divorce take the opportunity to start dissipating marital assets, by either selling items that would likely be equally distributed during the divorce or charging large amounts on credit cards.

However, as I tell all my divorcing clients, with every divorce proceeding in Duval County a Standing Family Law Court Order in entered. Among other things, this Order includes the following provisions:

“Neither party shall sell, transfer, encumber, conceal, assign, remove or in any way dispose of, without the consent of the other party in writing, or without an order of the court, any property, individually or jointly held by parties, except in the usual course of business or for customary and usual household expenses or for reasonable attorney’s fees in connection with this action.”

Whether or not an asset is “marital” or “nonmarital” is often a key issue in a divorce. Marital assets are generally considered jointly owned by both husband and wife, and it is usually up to the court to decide how those assets will be distributed. Nonmarital assets, however, are considered owned by only one of the spouses and are generally free from distribution in a divorce. You should be aware that liabilities –debts– are treated the same way as assets.

Florida Statute 61.075 addresses this issue and defines marital and nonmarital assets. Marital assets include assets acquired during the marriage, the increase in value of nonmarital assets (if the increase is the result of contribution from both spouses), interspousal gifts during the marriage, and all benefits accrued during the marriage, such as retirement funds, pension, profit sharing, and insurance plans.

Nonmarital assets include assets acquired prior to the marriage, assets acquired during the marriage by gift or inheritance, assets excluded from being considered marital by written agreement (such as a prenuptial agreement), and income derived from nonmarital assets, unless the income was “treated, used, or relied upon by the parties as a marital asset.”

ed.jpgFlorida is an equitable distribution state, meaning that marital assets are divided on an equitable basis. Or at least that is a court’s objective. Under Florida’s equitable distribution statute, marital property should be equitably divided between divorcing parties. 

Florida Statute § 61.075 requires that a court begin the process of dividing assets and liabilities by setting aside those assets that are defined as “non-marital.”

• typically those assets which either were owned prior to the marriage or inherited during the marriage and not mixed with marital assets,

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