Equitable Distribution in Florida - An Overviow
A general discussion of the Equitable Distribution procedure in the State of Florida
IntroductionIn the course of a Dissolution of Marriage, absent the agreement of the Parties, the Courts are charged with the responsibility of the division and assignment of assets and liabilities of the parties. This is very similar to the “wind up” of a business partnership and the procedure and process is guided by Florida Statutes. There are two relevant statutes at issue in the division of the marital estate. Florida Statute §61.075 is referred to as the “Equitable Distribution Statute” and governs the process. Florida Statute §61.076 is also involved in the division of assets but specifically addresses the division of Retirement Pensions, Retirement Accounts and Investment Accounts. This pamphlet is intended to provide an overview of these processes. It is important to remember that the presumption of a “50/50" division is applied. It is also necessary to be aware that the Courts only divide “marital assets” which are defined by statute and determined by the Courts. Florida is not a “community property” jurisdiction and the statutes cited above govern and guide equitable distribution in Florida. The essential steps in the performance of equitable distribution by the courts are (1) Identification, (2) Determination of when to value, (3) Valuation, (4) Distribution, and (5) equalization.
Identification - What are marital assets?In the most basic terms “marital assets and liabilities” are those assets or debts acquired or accumulated during the course of a marriage. Excluded from “equitable distribution” are “non-marital assets.
Non-marital assets are those assets and debts held by the Parties prior to the date of the marriage. Non-marital assets include assets acquired during the marriage from third party strangers to the marriage by way of gift or inheritance. This would seem to be easily determined. However, how such assets are managed during the marriage can result in the “transmutation” of a non-marital asset into a marital asset. There are potential traps for the unwary. For example, the deposit of inherited monies (non-marital by definition”) into a joint marital account results in the transmutation (conversion) of the asset into being a marital asset subject to distribution by the Court. The same would hold true on real property owned by one Party in his/her name alone at the time of the marriage. The non-marital home may be converted in whole, or in part, to being marital by transfer of title into joint names or the expenditure of marital monies and/or labor which enhances the value of the real property. In such cases the property may become a “mixed asset” having both marital and non-marital value. Always keep in mind that the Courts can only distribute and control marital assets and debt.
The importance of the accurate determination as to the marital or non-marital status of assets and debts cannot be over stated. It is important that both the attorney and the client are well versed in the applicable statutes. Any error in characterizing of assets and debt has financial consequences which in some cases may be of significant consequence.
Determination as to when to set valueThe date set for what point in time an asset or debt value is established cannot be overlooked.
Pursuant to the plain reading of the statutes there are various dates available for the Court to set as the proper date to determine value. However, it is possible that not all marital assets and debt will have the same date applied. The general rule is the date of the filing of the divorce is the date for valuation to be determined. Irrespective, the Parties may between themselves agree to an alternative date which the Court will then apply. In the absence of the agreement of the parties the Court may determine that an alternative date may be more appropriate given the nature of a specific asset or debts. This portion of the equitable distribution process can be very confusing and fact specific. This means that each side of the divorce will have to make arguments before the Court as to what dates should be applied and why. It is generally in all Parties better interest to attain agreement as the Courts may be inconsistent in the determination of the valuation date depending upon the experience of the Judge, the ability of Counsel to communicate the client’s position before the Court, and the specific facts at hand in any given case. Again, it is important that both the attorney and the client are well versed in the applicable statutes.
Valuation: How much is a five year old living room set worth??The value ascribed to any asset or debt is typically a mixed bag of subjective and objective determination. The value of some assets rest in the hands of a competent appraiser, or convenient reference matter such as “Kelly Blue Book”, and sometimes the value simply stated by the Parties. Not every case involves the hiring of an expert appraiser to determine the value of the assets at hand, the Parties are free to agree as to the value of any or all assets and debts and the Court will accept such values. In the absence of agreement matters become more uncertain. Should there be a hired expert, which comes with costs, the expert will typically be required to appear before the Court and being subject to examination by the respective attorneys the Court will accept, reject, or modify the value stated on any items at issue. Should no expert testimony be offered, it will be the Court’s obligation to ascribe value based upon the evidence received. The evidence may be written or oral and the Court will determine the weight of the evidence in formulating it’s determination. As a general rule, the value assigned by the Courts range from auction value, yard sale value, appraised value or as otherwise determined by the Court. The sofa and love seat you paid $10,000.00 for eight years ago may be only worth $750.00, it depends.
I would caution that the Court will reach a decision and it may be one you do not like. The better course is to treat this as a business transaction and agree wherever agreement is possible.
Distribution/EqualizationOnce all marital assets have been identified and value assigned the Court will proceed to allocate the assets and debts in somewhat of a spreadsheet fashion. The end goal being an equal division as to value not “in kind”. The Husband may get the living room suite and the Wife the kitchen or vice versa. The division is, like all matters, subject to agreement or argument. It should be also noted that under some circumstances an “unequal distribution” may occur due to misconduct during the course of the marriage. There is also the opportunity for argument of special need or purpose for any item subject to equitable distribution. The end game is largely a matter of math rather than emotion. Should the “spreadsheet” allocation result in a difference in the net gain/loss to either party the Court generally requires an “equalization payment” from one Party to the other to achieve the stated 50/50 goal. The Court may require transfer of title or the submission of a Qualified Domestic Relations Order for the redistribution of a portion or all of any Retirement or Pension Accounts to be transferred as the consequence of Equitable Distribution.