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

Debtor's Prison: Is an Award of Florida Family Law Attorneys' Fees Enforceable by Contempt?

There is much confusion among parties in Florida family law cases - and certain practicing attorneys - regarding which obligations are enforceable by the court's contempt powers.

One of the more common questions that arises is whether a client "has to pay" an award of attorneys' fees ordered by the court.  Generally speaking, no one wants to pay "the enemy."

Long ago, our society determined that we should not have "debtors' prisons."  In other words, a free person cannot be threatened with imprisonment for failure to pay his or her debts.

This right is expressly protected by Article I, Section 11 of the Florida Constitution.  But, the courts  have fashioned an exception to that rule for family support obligations, such as child support and alimony.

The courts have reasoned that the obligation to pay spousal or child support is a personal duty owed to both the former spouse or child and to society rather than a debt within the meaning of article I, section 11.  See Gibson v. Bennett, 561 So. 2d 565, 570 (Fla. 1990).

"The courts have a duty to provide an effective, realistic means for enforcing a support order, or the parent or former spouse for all practical purposes becomes immune from an order for support."    Gibson, 561 So. 2d at 570.  This duty includes enforcement of a judgment through contempt because "a remedy at law that is ineffective in practice is not an adequate remedy."  Id.

The use of contempt in a family law case is premised on the assumed necessity for the special protection and enforcement of rights growing out of the family relationship.  See Fishman v. Fishman, 656 So. 2d 1250, 1252 (Fla. 1995).  This rule has been extended to include the enforcement of payments of attorney's fees related to family law proceedings.  Id.  Attorneys' fees in family law cases are considered a form of support, as the expense of litigating matters pertaining to family obligations should be borne by the family in the same manner as other expenses.

Although the Court may employ its contempt powers to enforce payment of an attorney's fee award, that power is not without limits.  Civil contempt is appropriate only if the party to be held in contempt has the present ability to comply with the court's order and thereby avoid incarceration or other sanctions.  See Bowen v. Bowen, 471 So. 2d 1274, 1278 (Fla. 1985).

Waste and Dissipation Claims: Is There a Statute of Limitations?

In a divorce proceeding, clients often ask how far back the Court will look when assessing whether a party engaged in waste or dissipation of marital assets. Equitable distribution of marital assets is governed by section 61.075, Florida Statutes.

Under section 61.075, the court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors. Section 61.075(1)(i) requires trial courts to consider intentional dissipation that occurs up to two (2) years prior to filing the petition.

Dissipation occurs where one spouse uses marital funds for his or her own benefit and for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown. See Roth v. Roth, 973 So. 2d 580, 585 (Fla. 2d DCA 2008) (citing Romano v. Romano, 632 So. 2d 207, 210 (Fla. 4th DCA 1994)).

Too often, a divorce attorney will advise clients that you can only prove waste or dissipation that occurred with the past two (2) years. The statute, however, is silent as to intentional waste or dissipation that may have occurred more remotely in time. If your spouse intentionally dissipated marital assets three years prior to the filing date, is there any recourse?

 Courts have held that the legislature did not intend to preclude consideration of waste or dissipation beyond two years. See, e.g., Beers v. Beers, 724 So. 2d 109, 114-15 (Fla. 5th DCA 1998); Amos v. Amos, 99 So. 3d 979 (Fla. 1st DCA 2012).  Intentional dissipation of marital assets occurring more than two years prior to filing a petition for dissolution may, in some instances, be a factor necessary to do equity and justice between the parties.  Clearly, a party should not be able to transfer significant assets outside the marital estate, wait two years, and then file for divorce.  Courts have considered waste and dissipation beyond two years under the catchall provision of section 61.075(1)(j).  Id.  But, the Court has great discretion in deciding whether to consider any evidence of waste or dissipation that occurred more years prior to the filing date.

Be Prepared: Get a Prenup Before Saying "I Do"

Most people like to think that they are prepared for the obstacles that they will face in life.  Like the Boy Scout motto, Americans like to “be prepared.”

And, just in case we are asleep at the wheel, there are people constantly reminding us every step of the way that we should protect ourselves.  It starts early.  For example, a parent might remind us to bring an umbrella – because it might rain.  As we get older, we learn to buy car insurance because we might have an accident.  People buy alarm systems to detect and deter intruders.  Working professionals buy insurance to protect against the unlikely risk of disability.  Most people buy life insurance to hedge against the risk that they might die.  And, if you have a mortgage, homeowner’s insurance is mandatory to protect against risks such as fire and wind.

Americans also like contracts.  Remember the license agreements that you had to accept just to install a game on your computer?  When you went off to college, your first credit card certainly came with a cardholder agreement.  If you wanted to rent an apartment, that definitely required a lease.  Did you want cell phone service?  You needed a contract.  If you go to work at a business, your employer might ask you to sign non-compete agreement.

But, for some strange reason, people enter into marriage with no contract or agreement whatsoever.  They just trust each other.  Remarkably, these are the same individuals who buy the life insurance and disability insurance, even though a 30-year-old man faces a 0.1% chance of dying before age 31 and less than 5% of wage earners are classified as “disabled.”  Yet, they turn a blind eye to the fact that more than 50% of marriages result in divorce.

A prenuptial agreement or “prenup” can protect you against losses that might result from your divorce.  If you don’t have a prenuptial agreement, what do you stand to lose?  You can start with giving away roughly half of the net worth that you worked so hard to accumulate during the marriage.  And, to the extent you earned them during the marriage, you will likely have to divide your pension, retirement benefits, and/or retirement accounts.  You may also have the privilege of paying a large percentage of your monthly salary to your “ex” as alimony.  And, without a prenup, you could be forced to pay off half of your ex’s bad debt.  You could even be saddled with half of your “ex’s” student loans. 

But, there is rarely someone in your corner to remind you about getting a prenup.  Until recently, that is.  Since the Great Recession, 3 out of 4 family law attorneys report that prenups are on the rise.  This may be due to the devastating impact of the financial collapse, which has made people questions how much they can earn in the future and makes them want to keep what they have earned. 

Recently, I have had several parents call my office about prenups for the children.  One retired military officer wanted a prenup for his son, who was about to start flight school.  The father was concerned that his son might lose half of his hard-earned military retirement pay if the marriage didn’t last a lifetime.  A mother recently called me because she had refused to pay for the wedding unless the couple signed a prenuptial agreement.  And, an accountant paying lifetime alimony called me last year in hopes that a prenup might avoid the same fate for his son.

In certain circumstances, a prenuptial agreement can make a marriage more likely to last.  A spouse is more likely to return to work or keep working if that he or she cannot rely on alimony in the event that the marriage breaks down.  And, in some cases, a spouse may be less likely to leave or look around if he or she knows that they will not be able to use the divorce to raid the other party’s retirement pay, pension, assets, and income.

Fortunately, despite what you might have heard, prenuptial agreements are enforceable under Florida law.  In 2007, the Florida Legislature passed the Uniform Premarital Agreement Act.  See Fla. Stat. § 61.079.  Under the Act, a premarital agreement must be in writing and signed by both parties.  Id.  The Act allows Parties to negotiate and agree upon the following issues:  (i) the parties’ rights and obligations concerning any assets and liabilities; (ii) the right to buy, sell, use, transfer, or dispose of property; (iii) the distribution of property upon separation, dissolution, death, or other event; (iv) the right to alimony; (v) the making of a will or trust; and (vi) the disposition of life insurance proceeds.  See Fla. Stat. § 61.079(4)(a).  And, one Florida court specifically held that a prenup may be enforceable to protect a pilot's pension and military retirement pay.  See Gordon v. Gordon, 25 So. 3d 615, 617-18 (Fla. 4th DCA 2009).

Florida courts have held that the parties do not need to attorneys for a prenuptial agreement to be enforceable.  See Casto v. Casto, 508 So. 2d 330, 334-35 (Fla. 1987).  The Florida Supreme court has also held, however, that a prenuptial agreement may not be enforceable if the agreement was procured by as a result of fraud, deceit, duress, coercion, misrepresentation, or overreaching.  SeeCasto, 508 So. 2d at 333.  Additionally, a prenup may be set aside if there is a showing that the agreement is unreasonable on its face for failure to provide adequately for the challenging spouse coupled with a lack of adequate financial disclosure.  Id.  So, even though a lawyer is not absolutely necessary, an agreement is far more likely to be upheld with the assistance of counsel.  

If you have questions about prenuptial agreements, please contact us to consult an experienced Tampa divorce and family law attorney.