Divorces in Florida typically split the parties’ assets and liabilities down the middle as much as possible. Determining what is a marital asset or liability or a non-marital asset or liability can be key to whether an asset or liability will be considered in the calculations. Before filing for divorce, you should consider the following items when thinking about equitable distribution:
In Florida, the enhancement of value of a nonmarital asset could be declared by a divorce court to be a marital asset. Most of the time you see this when one spouse’s nonmarital asset is alleged by the other spouse to be a marital asset. If it cannot be declared a marital asset any other way, the court may look at enhancement of value of the nonmarital asset and award the other spouse an interest of that enhancement of value. The Mitchell case illustrates this concept.
In Mitchell v. Mitchell, 841 So.2d 564 (Fla. 2ndDCA 2003), the husband owned a Tampa Carrollwood home prior to the marriage and kept it titled in his name so it was nonmarital property. The trial court found that the home had been enhanced due to marital funds and efforts. Typically, the enhancement in value of a nonmarital asset resulting from either party’s nonpassive efforts or the expenditure of marital funds is a marital asset. The appellate court found that such enhancement in the Mitchell case was negligible. They performed primarily cosmetic or maintenance-related improvements, such as wallpapering. The most important factor in the increase in the value of the property was passive market appreciation, about 5 to 6 % annually. This produced a market value of $185,000. The appellate court found that where the increase in market value is attributable to inflation or “fortuitous market forces,” the expenditure of marital funds on the nonmarital asset does not transform the appreciated asset into marital property. However, an increase in equity due to the use of marital funds to pay down a mortgage balance is a marital asset subject to equitable distribution. The appellate court found that the wife’s interest in the home was limited to her one-half share of the amount by which the mortgage was reduced with marital payments.
The husband in Mitchell also had 41 acres of unimproved land in North Carolina that was solely titled in his name alone throughout the marriage. The circuit court characterized the entire appreciation in the value of the nonmarital North Carolina property as a marital asset subject to equitable distribution despite the fact that the appreciation was entirely attributable to passive inflation. As in the case of the Carrollwood home, this was error according to the appellate court. It was undisputed that the property was unimproved. It had no sewer, septic, electric, or water connections. The record showed that the parties used marital funds to pay mortgage payments, taxes, and a road assessment fee. The increase in the husband’s equity due to the use of marital funds to pay down the mortgage was a marital asset to be divided between the parties. Otherwise, the North Carolina property was found to be husband’s nonmarital asset.
In some marriages, a spouse’s parents may supplement the family income with monetary gifts, which may be an issue later on if the husband and wife divorce. Can one spouse argue that the other spouse will have higher income due to the monetary gifts from family members thereby raising alimony and child support payments? According to Florida law, it depends.
In Oluwek v. Oluwek, 2 So.3d 1038 (Fla. 2ndDCA 2009), Jonathan Oluwek, the husband, appealed an amended final judgment of dissolution of his marriage to Linda Oluwek, the wife. The trial court imputed $1500 per month contributed regularly by the husband’s parents to husband for alimony and child support. The husband argued the trial court erroneously imputed the $1500 per month as income to the husband. The record indicated his parents made regular monthly payments of $1500 over the last five years of marriage.
The Oluwek court held that as a general rule, the trial court may not consider financial assistance from family or friends in determining a party’s ability to pay alimony or child support. However, there is an exception that allows the court to impute income based on gifts “if the gifts are continuing and ongoing, not sporadic, and where the evidence shows that the gifts will continue in the future.” In Vorcheimer v. Vorcheimer, 780 So. 2d 1018 (Fla. 4thDCA 2001), the appellate court held that the trial court erred by imputing $1500 to the husband as income where there was no evidence that the payments would continue. The $1500 payments had been made on a monthly basis for twelve years, but the husband’s father testified at trial that he had stopped making the monthly payments and would not make them in the future. The court distinguished that case from Ordini v. Ordini, 701 So.2d 663 (Fla. 4thDCA 1997), in which regular monthly payments from the husband’s parents continued through trial and the husband’s mother testified that she would continue to make them in the future.
Former New York City Mayor Rudy Giuliani and his third wife, Judith, are currently involved in a heated divorce. A day after filing for divorce on April 4, 2018, the parties filed for each other to produce a statement of net worth to determine assets. The Giulianis have been married for 15 years and they do not have a prenuptial agreement.
In 2007, when Rudy Giuliani submitted his financial disclosure to the Federal Election Commission while running for president, he was worth an estimated $30 million. The couple own properties in Manhattan and Palm Beach, Florida. It is estimated that there is currently an estimated $60 million in assets at stake. When he married Judith, Rudy was pretty much insolvent and the money he has now was earned while he was married to Judith. New York is a separate property state, but her participation in his success could be a factor for the assets to be split 50/50.
In Florida, mandatory disclosure applies so the Giulianis would not need to file for a statement of net worth. Mandatory Disclosure is the procedure where financial information is automatically disclosed by the parties upon the filing of a divorce. The parties must exchange financial information in the form of a financial affidavit and additional documents such as tax returns, bank statements, credit card statements, deeds, vehicle titles, insurance policies, etc. Mandatory disclosure must be completed within 45 days after service on the respondent.
The Florida Supreme Court, on March 30, 2017, issued an opinion in Hooker v. Hooker, 220 So.3d 397 (Fla. 2017) finding a Florida horse farm and a New York summer home interspousal gifts and, therefore, subject to equitable distribution as marital property despite a prenuptial agreement in existence. The prenuptial agreement provided that, upon divorce, each party would retain his or her premarital assets and any appreciation of those assets. Both parties had independent sources of income from family inheritances and they maintained separate finances throughout the marriage. The parties were married for 23 years.
The Florida horse farm, “Hickstead,” was purchased in 1989 and the Hickstead deed listed “Alice I. Hooker Trust FBO, for the benefit of, Timothy I. Hooker” as the grantee. Husband and Wife signed the mortgage on Hickstead. When Hickstead was purchased, it was vacant land and it later became through the course of the marriage a working horse farm with 16 stalls, etc. and the marital home in one wing upstairs and the other wing was the staff apartment. Wife was “extremely and directly involved in all aspects of the Hickstead residence which was the family’s primary home for approximately 20 years,” according to the findings of the trial court. Wife was not limited or restricted in any way from incurring the costs and expenses of maintaining and operating a family home at Hickstead, from the Husband’s assets. Wife was provided unfettered access to the stables and horses to pursue her lifelong passion.
The New York summer home, “Lake George,” was purchased in 1997 and was titled only in the Husband’s name and only Husband signed the mortgage. It was purchased, built and maintained as a summer residence for the family. The Husband paid the expenses for Lake George with his independent funds and Wife was never a signatory on that account and never had access to that account. However, the Husband sent Wife a card for their tenth wedding anniversary with a picture of the property after the Wife had expressed a desire to have a home up north and both parties searched for a suitable property.
Equitable distribution of assets in Florida divorces can be a complex and divisive issue. Regarding trusts and divorces, you can walk a fine line between a marital asset and a non-marital asset. Enhancement in value and appreciation can be a marital asset in certain situations.
Oxley v. Oxley, 695 So.2d 364 (Fla. 4th DCA 1997) is a case that is especially relevant regarding a person placing their property in a revocable trust with themselves as trustee, hiring a financial manager to make the daily investment decisions, and thereby protecting themselves from the Florida Statute § 61.075(6)(a)(1). This section provides marital assets and liabilities to include the enhancement in value and appreciation of non-marital assets resulting either from the efforts of either party during the marriage or from the contribution to or expenditure thereon of marital funds or other forms of marital assets, or both. Meaning, technically, a non-marital trust’s appreciation of value could be considered marital property unless specific requirements are followed. Oxley spells out how to avoid appreciation being considered in the dissolution of marriage.
In Oxley, the parties’ marital income was primarily from trust distributions to the husband which he supplemented with a salary taken as president of a family holding company. The trust is revocable and was established prior to the marriage by the husband that provides that all income is payable to husband. The investment decisions for the trust was made for the husband’s exclusive benefit by the trustee based on the advice of the husband’s father and brother. It had multiple, active investments such as several working oil wells. On one occasion the husband invested $400,000 of trust funds through a separate money manager. At the time of the marriage, the trust was valued at $2 million and then increased to $7 million at the time of dissolution; and the increase was attributable to undistributed income that has accumulated during the marriage and upon which he paid personal income tax. The trust also owned and paid the expenses on the marital home. The husband also owned 50% of a corporation found to be a gift (technically purchased for a nominal amount) from his father. As company president, the husband’s activities were largely ministerial and ceremonial, and he left the management and investment decisions to others. The trial court in Oxley ruled that the trust, including the undistributed income, were non-marital assets, which significantly limited the wife’s equitable distribution.
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. 4th 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. 2nd 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. 2nd 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. 2nd 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.
Non-marital assets and liabilities are defined in Florida Family Law as 1) assets acquired and liabilities incurred by either party prior to the marriage, and assets acquired and liabilities incurred in exchange for such assets and liabilities; 2) Assets acquired separately by either party by noninterspousal gift, bequest, devise, or descent, and assets acquired in exchange for such assets; 3) All income derived from nonmarital assets during the marriage unless the income was treated, used, or relied upon by the parties as a marital asset; 4) assets and liabilities excluded from marital assets and liabilities by valid written agreement of the parties, and assets acquired and liabilities incurred in exchange for such assets. See Fla. Stat. § 61.075(6)(b)(1-4).
In a dissolution of marriage case, the court must set apart each spouse’s non-marital assets and liabilities and marital assets and liabilities and must begin with the premise that the distribution should be equal absent justification for unequal distribution pursuant to factors under the statute. See Fla. Stat. § 61.075(1). Assets acquired before marriage are not marital assets and remain the property of the owner spouse in the absence of evidence of a gift or conveyance of the assets to the owner’s spouse. See Moss v. Moss, 829 So.2d 302 (Fla. 5th DCA 2002); see also Canakaris v. Canakaris, 382 So.2d 1197 (Fla. 1980). Essentially, the court in Horton v. Horton, 433 So.2d 1386 (Fla. 5th DCA 1983) stated:
“When a marriage partner brings his or her own property to the marriage and does not make a transfer of the asset or any portion of it to the spouse then that asset remains separate property. Upon dissolution of the marriage the asset is still owned by the original owner. Unless the asset, or a portion of it, is awarded as lump sum alimony then the court must recognize the proper ownership of the property and not take it from the owner.”
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. 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.
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