Tuesday, March 25, 2014

Equitable Distribution: The Marital Interest in a Non-Marital Property or Premarital Home

As couples marry later in life or have second marriages, one or both of the parties already owns a home. As a result, in many divorce cases, the parties live in a home owned solely by one of the parties.  In these cases, a common question is whether the non-owner spouse has any interest in the home.

Equitable distribution in Florida is governed by section 61.075, Florida Statutes.  When dealing with the division of a couple's assets and liabilities, the first step in the analysis is for the court to set aside any non-marital assets and liabilities.  The court is then tasked with distributing the marital assets and liabilities between the parties, with the premise that such assets and liabilities should be divided equally.

Under section 61.075(6)(a)(1)(b), Florida Statutes, marital assets are defined to include the "enhancement in value and appreciation of nonmarital 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."

If marital funds are used to enhance a non-marital asset, the value the enhancement is therefore marital. Accordingly, if the parties built a home on non-marital property, the enhanced value relating to the structure is marital.  The relevant statutory language also clearly provides that, under certain circumstances, the appreciation of a non-marital asset is indeed a marital asset. See Kaaa v. Kaaa, 58 So. 3d 867, 870 (Fla. 2010).  In particular, the passive appreciation of a non-marital asset, such as a home, is properly considered a marital asset where marital funds or the efforts of either party contributed to the appreciation.  Id.  The Florida Supreme Court has held that, if one party uses marital funds to pay the mortgage on a non-marital property and the non-owner spouse makes "contributions" to the property, some portion of the passive appreciation on the home is subject to equitable distribution.  Id. at 871.  

The Florida Supreme Court adopted the following methodology for determining how the appreciated value is properly allocated between the parties:
If a separate asset is unencumbered and no marital funds are used to finance its acquisition, improvement, or maintenance, no portion of its value should ordinarily be included in the marital estate, absent improvements effected by marital labor. If an asset is financed entirely by borrowed money which marital funds repay, the entire asset should be included in the marital estate. In general, in the absence of improvements, the portion of the appreciated value of a separate asset which should be treated as a marital asset will be the same as the fraction calculated by dividing the indebtedness with which the asset was encumbered at the time of the marriage by the value of the asset at the time of the marriage. If, for example, one party brings to the marriage an asset in which he or she has an equity of fifty percent, the other half of which is financed by marital funds, half the appreciated value at the time of the petition for dissolution was filed, § 61.075(5)(a) 2, Fla. Stat. (1993), should be included as a marital asset. The value of this marital asset should be reduced, however, by the unpaid indebtedness marital funds were used to service.
See Kaaa, 58 So. 3d at 872.

Thus, when non-marital real property is encumbered by a mortgage that was paid by marital funds, a pro-rata portion of the passive appreciation in the property's value that accrues during the course of the marriage is a marital asset subject to equitable distribution.

If you have questions concerning your Florida equitable distribution or property division rights, please contact an experienced Tampa family law attorney.

By Richard Mockler

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