Marital Property vs. Non-Marital Property in Your Florida Divorce
Potentially one of the most contentious issues spouses face during a divorce occurs when the assets, property and debts must be divided up. Florida spouses can decide among themselves how property will be divided, however if they are unable to come to a mutual agreement on the division, a court could make those decisions, often in ways neither spouse is happy with. Before you can separate marital properties from non-marital properties, you must know whether you live in a community property state or an equitable distribution state.
Community Property vs. Equitable Distribution
It is a myth to believe that during a divorce you will automatically receive an equal share of the marital assets. Laws vary dramatically from state to state on who will get what once the marriage is over. Theoretically, of course, nearly everything you and your spouse acquire during your marriage is considered marital property. This marital property can include tangible items such as your home, your car and your bank accounts as well as non-tangible items such as your future retirement benefits. The theory is that marriage gives both partners the right to share in one another’s gains—and losses. In America, however, there are two very different standards applied in property distribution, known as equitable distribution and community property. Currently there are nine community property states, with the remainder being equitable distribution. The state of Florida operates under equitable distribution laws for divorcing couples.
- Equitable Distribution Laws
Since the majority of the states, including Florida, operate under equitable distribution laws, we’ll consider those first. Although the name implies that the division of property will be equal, don’t count on it—you will not automatically receive half of everything you and your spouse have accrued. In this particular system the court will decide what is fair, reasonable or equitable, and their decision could leave one spouse with much less than half of the marital assets by virtue of an number of combinations of divisions. The court has a duty to consider how long the marriage has lasted, what each person came to the marriage with, how much each person earns, who has the primary responsibility for the children, the potential tax consequences of the divorce and how much debt the parties have. Obviously, those who have a pre-marital agreement, or even a legal agreement signed during the marriage, will have more control over the division of assets during a divorce. Everything you and your spouse have acquired during your marriage will be subject, under the equitable distribution laws, to division, no matter whose name is on the asset or whose money was used to acquire the asset. In other words, even though only one spouse may have worked during the entire marriage, a vacation home which was bought with money this spouse made may still be subject to equal (or not so equal) division. Each spouse—or their attorney—has the burden of proving what assets exist. Many times, spouses will attempt to get rid of, or hide assets once they realize a divorce is imminent. If one spouse can prove the other is guilty of hiding assets, the court may award the “wronged” spouse a sum equal to the value of what was hidden or sold. As an “equal” partner in the marriage, each spouse must also receive an equitable portion of all debts accrued during the marriage.
- Community Property
Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington and Wisconsin are community property states—meaning the division is truly 50-50, splitting all assets as well as all debts squarely down the middle. Community property laws do not take into account financial need, earning ability or whose fault the end of the marriage can be attributed to. In other words, even if your spouse was cheating on you or doing other unsavory things, community property law does not factor this into a financial settlement. Unscrupulous spouses who reside in community property states are much more likely to try and hide or dispose of assets, or even increase debt to make their spouse equally responsible. The only types of assets disregarded in a community property state are gifts or inheritances which came to one spouse during or prior to the marriage, property excluded by a prenuptial agreement, or assets purchased with separate funds acquired by one spouse before the marriage.
Which is Better?
Generally, the spouse who is the higher wage earner will find more favor in an equitable distribution state, while, a stay-at-home mom would reap more benefits in a community property state. If you have residency in two states, and one is community property while the other (Florida) is equitable distribution, you should definitely consult a knowledgeable Ayo and Iken attorney prior to filing for divorce so you can file in the state which is most beneficial to you. Educate yourself, and hire the best divorce attorney available in order to prevent an award of the short end of the assets.
Marital Property vs. Non-Marital Property
After you have a sense of how the equitable distribution laws in the state of Florida may affect you during your divorce, it is time to determine whether you or your spouse have legitimate non-marital property which will be exempt from the asset division during your divorce.
Issues Related to Non-Marital Assets and Liabilities
Non-marital assets and liabilities generally include:
- Any liabilities incurred by either spouse, prior to the marriage;
- Any assets acquired by either spouse prior to the marriage, including non-interspousal gifts and inheritances which are kept separate from marital assets;
- Any assets acquired by either spouse during the marriage which came from a non-interspousal gift or an inheritance and is not commingled with marital assets;
- Any income received from non-marital assets during the marriage unless that income was treated by both spouses as a marital asset, or
- Any assets or liabilities which were excluded from marital assets and liabilities by virtue of a valid written agreement (pre or post-nuptial agreement) by both parties.
So, in general, property is considered non-marital property if one spouse owned it prior to the marriage or acquired it during marriage as a gift or inheritance meant solely for that spouse. The exception to this rule is when non-marital property is commingled after the marriage. For instance, if one spouse brings property into the marriage, but later adds the other spouse to the property title, then it becomes marital property. If money is brought into the marriage, perhaps from an inheritance, but that money is spent by the couple on a house or car, then that asset bought with the inheritance becomes marital property. Further, if a non-marital asset appreciates during the marriage, then the portion which has appreciated is considered a marital asset. Consider the following:
- Aunt Jane left you a house on a beautiful California beach prior to your marriage. If, during your marriage, you add your spouse’s name to the title of that beach house it becomes a marital asset. If you keep the house in your name only, but you use marital funds to remodel the house, then a portion of the house becomes a marital asset. If the beach house was worth $50,000 when you received it, but is worth $300,000 at the time of your divorce, that appreciation may be designated as a marital asset.
- Your father left you a $60,000 inheritance prior to your marriage. If, during your marriage, you add your spouse’s name to the bank account with that money, it becomes a marital asset. If the money was placed in a high-interest account, then any interest accrued over the years could be considered a marital asset.
- Likewise, any gifts given specifically to you during your marriage are considered non-marital assets, unless you co-mingle the asset with your marital assets. Gifts given from you to your spouse or from your spouse to you are considered marital assets. This means that if your spouse gave you a brand new sports car for your 40th birthday, you should not expect to walk away with that car during the divorce. It will be considered a marital asset and divided accordingly.
Other assets which are considered non-marital are those which are defined as separate in a valid written premarital agreement. Barring such a written agreement which states otherwise, all assets and debts acquired during the marriage are considered marital property. If your spouse opened a credit card account with only his or her name on it during your marriage, you are still jointly responsible for the charges on the card even if you were not responsible for any of the charges.
Marital Assets and Liabilities:
Marital assets are generally considered those which:
- Either spouse acquires or incurs either separately or together during the marriage;
- Are given from one spouse to the other during the marriage, such as gifts;
- Are the result of contributions from marital funds by either spouse during the marriage;
- Are non-marital assets which have increased in value as a result of the use of marital funds or spousal efforts during the marriage;
- Relate to retirement, including deferred compensation, insurance plans and programs, profit-sharing or annuities, and all vested and non-vested;
- Is property held by the spouses as tenancies by the entirety, or
- Is property which has been commingled during the marriage even if it was a non-marital asset prior to the marriage
While marital property is generally considered tangible property such as the house and car, it includes credit card debt, mortgages, businesses, pensions, checking and savings accounts and medical expenses as well. The “uniting” factor in all these forms of property is that they are used in furtherance of the marriage. Even when one spouse earns considerably more income than the other, that money is generally considered marital property, to be divided “equitably” during the divorce. When real and personal property is held as tenants by entireties, it is presumed to be a marital asset. This is a special form of ownership available only to married couples, with the following requirements:
- The property in question must be subject to joint control and ownership;
- There must be an identical interest in the property by both spouses;
- The spouses must have been married at the time the property was acquired;
- The interest in the property for each spouse must have been granted by the same instrument, and
- The interest in the property for each spouse must have begun at the same time.
Asset Division More Complicated for Older Couples
Although marital vs. non-marital property may sound fairly straightforward, it can become quite complex during a divorce, particularly during a so-called “gray” divorce, or one between a couple married for a considerable length of time. Gray divorces have become much more common across the United States. In fact, according to USA Today, in 2010 a full 25 percent of recently-divorced Americans were over the age of 50. Divorce rates among the same age group doubled between 1990 and 2010. Factors which can make property division particularly difficult for couples who divorce later in life include the following:
- Older couples tend to have more assets than younger couples, making it more difficult to categorize, value and divide assets;
- Older couples are more likely to have retirement accounts which can be complex to divide;
- There is a greater likelihood that non-marital property has been commingled among older couples, making it challenging to identify commingled assets and determine the fairest way to divide them.
Spouses who divorce when they are older may experience greater financial devastation because they have little time to rebuild their retirement savings—two separate retirements cost 50 percent more than one joint retirement. Since older spouses are likely to have reduced earning power, they have fewer options for rebuilding their retirement fund. According to the Chicago Tribune, while about 4 percent of couples over the age of 62 live at or below the poverty line, 14 percent of divorced men and 30 percent of divorced women over the age of 62 live at or below the poverty line.
Given the potential complications and complexities of determining marital and non-marital assets during a Florida divorce, it is extremely important to have an experienced Ayo and Iken family law attorney by your side during your divorce. Florida statistics show that property division results in the most requests for court-hearing time, even ahead of child custody and spousal support. Having a knowledgeable Florida attorney to guide you through the potential pitfalls can ensure you have the best chance of receiving a truly equitable portion of your marital assets.
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