A Florida divorce means dividing what has been accumulated during the marriage. That includes the cars, the boats, the furniture, the bank accounts, the pensions, IRAs, jewelry, collections and the debts. Florida divides marital assets and debts through equitable distribution. Yes, equitable means fair, but during a divorce it doesn’t always seem that way.
Some people think that in a divorce, all assets are split 50/50. While such is the starting point for distribution, and the presumption under Florida law, it is not always the case. Before either spouse can judge a proposed settlement, the first job is to decide which property belongs in the marital estate.
Equal Is Where the Court Begins
Each spouse keeps his or her own nonmarital assets and debts. For the rest, Section 61.075(1) says “the court must begin with the premise that the distribution should be equal.”
The first step in the process is to identify all assets and debts of the spouses. Then those assets and debts are characterized as either marital, non-marital or a hybrid of both. If an asset or debt is clearly non-marital, then it is set aside to the owner spouse and left out of the division. Anything acquired during the marriage is presumed to be marital unless a spouse shows otherwise.
Once each asset and debt in the marital estate is assigned a value, the court will typically divide them. Rarely will the court simply order everything sold and split. If one of the spouses owns a business or professional practice, that spouse would usually receive the business. The other spouse would receive some other asset or payments in return for his or her 50% interest. The statute allows the court to order “a monetary payment in a lump sum or in installments paid over a fixed period of time.”
Marital, Non-Marital, or Both
The typical non-marital assets we see in our practice are homes, pensions or other assets owned by one spouse prior to the marriage. An inheritance received by one of the spouses during the marriage is another. Property can also be non-marital if a valid written agreement of the parties excludes it. If there is a prenuptial or postnuptial agreement, get a copy of it to your attorney early.
If the spouse with the non-marital asset co-titles it with his or her spouse or mixes it with marital assets, then it may become marital property under Florida law. Not every mixed account becomes marital, and bank records that trace the money can make the difference.
Some assets have both a marital and non-marital component to them. Say one spouse worked for the Florida Retirement System as a teacher before the marriage. If that spouse kept working there during the marriage, the court would typically do a calculation. The non-employee spouse would receive 50% of the marital part of the pension. The employee spouse would keep the other 50% and all of the non-marital part.
When Fair Is Not Equal
The court can divide unequally only if there is “a justification for an unequal distribution.” Judges consider many factors. That includes the length of marriage, individual contributions, economic disparities, liabilities, and more. One factor is each spouse’s contribution to the marriage, including care of the children and “services as homemaker.”
Florida is a no-fault divorce state. Client after client appears for their initial divorce consultation asking, “Does it matter that my spouse is cheating on me?” When it comes to dividing property, adultery is generally relevant only if the cheating spouse spent or wasted marital funds pursuing the affair. If this did occur, the innocent spouse may be able to recoup 50% of those funds in the property division. The statute lets the court look at “intentional dissipation, waste, depletion, or destruction of marital assets” within 2 years before the filing or after it.
The Dates That Matter
Under Florida law, the date of filing is usually the date the judge uses to decide whether assets and debts are marital or non-marital. Section 61.075(7) uses the earliest of three dates. They are the date the parties enter into a valid separation agreement, a date set in that agreement, or “the date of the filing of a petition for dissolution of marriage.”
This is important because money earned or debt incurred after the cut-off date is generally characterized as non-marital. Essentially, this means money you receive after filing for divorce is often yours, unless your spouse can prove that you actually earned it during the marriage or that it came from marital property.
The same subsection says the date for valuing marital assets and liabilities “is the date or dates as the judge determines is just and equitable under the circumstances.” Much like stocks, the value of cryptocurrency can vary by the minute. It is often difficult to determine a monetary value that can be used in your divorce.
Retirement Accounts, Businesses and Debts
Retirement savings are often among the largest assets a divorcing couple has. Any contributions to a retirement account during marriage are considered a marital asset, together with market gains on them. On the other hand, contributions made prior to the marriage or after the cut-off date are generally considered non-marital. Market gains on those contributions are likewise non-marital.
When valuing the marital estate, retirement assets may need to be “tax affected.” It’s important to “compare apples with apples.” One hundred thousand dollars in a money market account may be worth much more than one hundred grand in a pretax traditional IRA. If you cash out this money from a traditional IRA, you will generally have to pay income tax on the withdrawal. By contrast, a qualified Roth IRA distribution can be tax-free.
Be careful to separate the division of retirement accounts from the distribution of them. An employer based 401K must be divided using a qualified domestic relations order or QDRO. Distributions are taxable and, with some exceptions, subject to an early withdrawal penalty before age 59 1/2. In some cases, the non-employee spouse may take money from an employer plan under a QDRO without being subject to the IRS’s 10% penalty, but that exception does not cover IRAs.
Whether it’s a medical, dental or veterinarian practice or a homebuilder, electrician or restaurant, these businesses must be valued if they are marital assets. In many cases, the business or practice started prior to the marriage. It then grew in value significantly during the marriage. The increase in value of a pre-marital business during the marriage can be a marital asset. In most of these cases, it is necessary to engage an expert who is skilled and credentialed in business valuation.
Goodwill raises a separate question. Personal goodwill reflects a person’s own future earning power and is not a marital asset. Since July 1, 2024, the statute has said that goodwill “separate and distinct from the continued presence and reputation of the owner spouse” is enterprise goodwill, “a marital asset that must be valued by the court.”
Credit cards and other marital debts are also divided. Some student loans can also fall under this category. If a debt is secured by property, remember that the judge cannot force the bank to change the note in the divorce decree.
Getting Your Financial Picture in Focus
Once you decide to get a divorce, the work of organizing your finances should begin in earnest. The paperwork plays an important part in your settlement or in the court’s decisions on property, child support and alimony.
If you are concerned that assets are missing from the picture, records can help you get to the bottom of what might be happening. It helps to have copies of tax returns, pay stubs, checking, investment and retirement account statements as well as credit card statements. Mandatory financial disclosure is required in most Florida divorce cases. The attorney can also request additional documents to fill any gaps.
Most contested divorces resolve by informal or formal mediation. Mediation goes more smoothly when the parties are fully informed of their rights under Florida law and are prepared to compromise. If the case does go to trial, the judge must make “specific written findings of fact” about the division.
How Rice Law Firm Can Help
When contemplating a divorce or if confronted with one, it’s important to consult with a qualified family law attorney. A consultation can help sort out what is marital, value a business or pension, and test a proposed division before you sign. If you need legal advice concerning a divorce or family law matter, you can reach Paul Rice at our Daytona Beach office at 386-257-1222. He is board certified by The Florida Bar in marital and family law. Rice Law Firm has been helping Volusia County families through divorce since 1983.This article is for general information only and should not be construed as legal advice.