Category: Equitable Distribution

A Strange New World of Equitable Distribution

Divorce typically involves dividing up the marital property. Every case can be different in what there is for equitable distribution. Houses and retirement accounts are pretty common, and collectible cards and dolls are rarer, but actor William Shatner’s divorce involved something truly strange: horse semen.

Equitable Distrib Horse Semen

To Seek Out New Life

Actor, William Shatner, famous for his role as captain of the Star Trek Enterprise, was recently awarded horse breeding equipment in his divorce settlement with ex-wife Elizabeth Shatner.

The actor’s divorce was settled in Los Angeles Superior Court Tuesday, according to court records. They separated from one another in February 2019.

But the most interesting part of the former “Star Trek” actor’s divorce is what he wanted as equitable distribution. Shatner, who is a horse breeder, will get “all horse semen” as a part of the settlement.

Wine, pets, antique rifles, baseball cards, sports memorabilia are some of the more unique “assets” many of my cases involved. Like any important asset, horses can be a challenging asset to divide.

Valuation of horses can requires knowing their training, winnings, and earnings. Horse ownership also requires knowing the horse’s board, routine maintenance, insurance costs, breeding rights, showing rights, and cash earnings from breed organizations.

Interestingly, the horse’s frozen semen is often extremely valuable and must be spelled out in any divorce order or agreement along with rights to any potential offspring.

That’s because a horse’s DNA and cloning are big topics in the horse industry. The issue of equitable distribution is also complicated by the fact that it is not just the rights to a horse but also the rights to the horse’s DNA, and the rights to any cloning of the horse.

Florida Equitable Distribution

Does a family court have to distribute horse semen? I have written about property division, called “equitable distribution” in Florida, before. Florida is an equitable distribution state when it comes to dividing business assets in divorce.

That means that in a proceeding for dissolution of marriage, in addition to all other remedies available to a court to do equity between the parties, a court must set apart to each spouse that spouse’s non-marital assets and liabilities.

When distributing the marital assets between spouses, a family 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.

Boldly Going Where Few Men Have Gone Before

As additional equitable distribution, the Shatners divided their four horses between them. The captain will get “Renaissance Man’s Medici” and “Powder River Shirley”, while his ex-wife will get “Belle Reve’s So Photogenic” and “Pebbles”.

This is not the first horse semen rodeo for Shatner. He was sued in 2003 by ex-wife Marcy Lafferty Shatner, who claimed he violated the equitable distribution settlement in their 1995 divorce that allowed her one breeding privilege per calendar year with their American saddlebred stallions.

William and Elizabeth Shatner also divided their homes, including a home in Versailles, Kentucky that Elizabeth will get. In 2018, Shatner tweeted that he only visits his Kentucky home “once or twice a year.” But perhaps now it’s his old Kentucky home.

William and Elizabeth Shatner raised and trained American saddlebreds at their Versailles farm. He had homes in Kentucky, including Lexington, since the mid-1980s.

The couple will not receive any financial support from one another as a part of the settlement. They were married for 18 years.

The Lexington Herald Leader article is here.

 

A Slice of Equitable Distribution and Alimony

The wife of Papa John’s founder John Schnatter filed for divorce, claiming her marriage with the unemployed pizza executive is “irretrievably broken,” according to court papers filed in Kentucky. If there is no prenuptial agreement, how big a slice of equitable distribution of the stock and any alimony is Annette entitled to?

Slice of Equitable Distribution

When the Moon Hits Your Eye

Papa John’s is an American pizza restaurant franchise. It runs the fourth largest pizza delivery restaurant chain in the United States, with headquarters in Jeffersontown, Kentucky, a suburb of Louisville.

Papa John’s was founded in 1984 when “Papa” John Schnatter knocked out a broom closet in the back of his father’s tavern, Mick’s Lounge, in Jeffersonville, Indiana. He then sold his 1971 Camaro Z28 to purchase US$1,600 worth of used pizza equipment and began selling pizzas to the tavern’s customers out of the converted closet.

John’s pizzas became so popular he moved into the adjoining space. The company went public in 1993 and a year later it had 500 stores. By 1997 it had 1,500 stores. And in 2009, John got his Camaro Z28 back after offering a $250,000 reward.

Schnatter and Annette Cox, 59, had been married since April 11, 1987, and separated on April 1 of this year, the wife’s attorney Melanie Straw-Boone writer in papers filed in Oldham Circuit Court. Cox called Schnatter a 57-year-old Louisville resident who “is not employed,” according to the boilerplate, three-page petition.

“The marriage between petitioner and respondent is irretrievably broken”.

The couple have two children and share unspecified real estate holdings, the filing said. Schnatter stepped down as CEO in late 2017 after reports surfaced that he uttered a racial slur during a conference call.

Alimony, Equitable Distribution, and the Length of Marriage

In Florida, the duration of marriage is an important topping in divorce cases. I’ve written about the types of alimony awards available in Florida before. For instance, Florida Statutes dealing with alimony specifically limit the type of alimony awards based on the duration of the marriage.

So, for determining alimony, there is a rebuttable presumption that a short-term marriage is a marriage less than 7-years, a moderate-term marriage is greater than 7-years but less than 17-years, and long-term marriage is 17-years or greater.

Florida defines the duration of marriage as the period of time from the date of marriage until the date of filing of an action for dissolution of marriage.

The duration of marriage can also be a large slice of the property division. When a court distributes the marital assets and liabilities between the parties, the court begins with the premise of an equal split.

However, there are times and cases which justify an unequal distribution based on several relevant factors. One of the factors a court can consider is the duration of marriage, in addition to other factors.

Dividing assets between spouses – especially large companies such as Papa John’s – is not as simple as taking a pizza cutter to a hot pie; even with agreements. Very often assets have appreciated over the course of several years. The longer the marriage is, the more a business interest can appreciate. When property appreciates, you need to distinguish between passive and active appreciation. A passive asset could be an investment account which is never traded.

A business, on the other hand, is an active investment, and the percentage a spouse is entitled to may depend on different things. Even with the most sophisticated couples, such as the Schnatter/Cox family, unless you clairvoyant, issues will arise that no one considered in earlier agreements, and are prime for negotiation.

Pizza Ready?

Separate from the divorce case, Schnatter filed a lawsuit Thursday against an advertising firm which was at the center of the racial slur incident.

Schnatter allegedly uttered the slur during a call with advertising firm Laundry Service, which the pizza executive accused of recording him without his consent. The lawsuit claims that Laundry Service leaked excerpts of the conference call, which broke a nondisclosure agreement.

Two weeks ago, Schnatter accused his former company of making substandard pizza. He said his former company has failed in keeping up with its long-time slogan: “Better Ingredients, Better Pizza.”

“I’ve had over 40 pizzas in the last 30 days, and it’s not the same pizza,” Schnatter told WDRB, a Fox affiliate in Louisville, Kentucky. “It’s not the same product. It just doesn’t taste as good.

The NBC News article is here.

 

Enforcing a Gusher of an Equitable Distribution Award

After his divorce, Todd Kozel, a former oil executive, was ordered by a family court to transfer 23 million shares from his oil company to his wife as equitable distribution. When he didn’t, a $38 million judgment was entered against him. Why was that enforcement order overturned?

Equitable Distribution Oil

Striking Oil

Todd and Ashley married in 1992, and she filed for divorce in 2010. Todd is the chief executive officer of Gulf Keystone Petroleum, Ltd., an oil and gas exploration company.

When the parties divorced, much of their shared wealth consisted of Gulf Keystone stock, which is publicly traded in London. The parties settled after he agreed to transfer Gulf Keystone stock to Ashley as equitable distribution.

Under their Settlement Agreement, the husband was obligated to transfer twenty-three million shares of Gulf Keystone stock to his wife as equitable distribution on or before January 27, 2012. Upon delivery, the former wife would then be free to sell her stock to anyone at any time.

But Todd didn’t deliver his twenty-three-million shares by January 27, 2012. Instead, he transferred the stock to her in four batches at later dates: (1) 2,034,447 shares on January 30, 2012; (2) 3,798,886 shares on February 3, 2012; (3) 5,666,667 shares on February 21, 2012; and (4) 11,600,000 shares on March 1, 2012.

Invoking the trial court’s continuing jurisdiction to enforce the agreement, Ashley filed papers with the family court. Although her filings were styled as petitions to enforce the agreement, they alleged what amounted to claims for money damages for alleged breaches of their agreement.

After granting partial summary judgment on liability and holding a trial on damages, the family court found Todd in breach and awarded her: $34,611,702 as damages for his failure to deliver the stock on time and another $3,850,500 as damages for the breach to provide tax information.

Florida Equitable Distribution

Why was Ashley awarded so much of Todd’s Gulf Keystone stock? I have written about equitable distribution before. Florida is an equitable distribution state when it comes to dividing business assets in divorce.

In a proceeding for dissolution of marriage, in addition to all other remedies available to a court to do equity between the parties, a court must set apart to each spouse that spouse’s non-marital assets and liabilities.

When distributing the marital assets between spouses, a family 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.

When the Oil Runs Out

While Todd was in default for his failure to timely deliver the Gulf Keystone stock, he made all of the additional equitable distribution payments required. On November 28, 2012 — eight months after the final transfer of stock — Ashley argued that Todd’s breach of the agreement caused her to suffer substantial damages because it denied her an opportunity to sell the stock at a time when market conditions were favorable.

But Todd argued that a family court lacks jurisdiction to consider Ashley’s claim because what she was asking for amounted to a claim for general damages for breach of contract.

So, Ashley amended her petition, styling it as one to “enforce” the agreement. She alleged that the court had jurisdiction to enforce the agreement through an award of damages for losses that she allegedly incurred as a result of the failure to deliver the stock timely.

The family judge awarded her $34,611,702 and another for the tax basis dispute $3,850,500, to be placed in escrow (presumably pending the outcome of a refund request to the IRS).

The question in a case like this is whether and to what extent a family court’s continuing jurisdiction to enforce a final judgment extends to claims for money damages for breaches of a settlement agreement.

When a court orders compliance with the terms of a settlement agreement – when it requires a party to perform an obligation in the agreement — it is engaged in proper post-judgment enforcement over which it has continuing jurisdiction. But when a court awards damages as a substitute for a party’s performance, it is not engaging in legitimate post-judgment enforcement but a separate claim for breach.

The former wife sought and the family court awarded general, benefit-of-the-bargain damages for the breach of the agreement that was not specified in the agreement. In reversing the judgement, the appellate court ruled that “couching these remedies as “enforcement” of the [agreement] does not change what their substance is: general damages for breach.”

The opinion is here.

 

Can your Spouse Secretly Sell your House?

Real Housewives of New Jersey star Danielle Staub is claiming her estranged husband Marty Caffrey listed their Englewood, N.J. home for sale without telling her. Can that happen in an equitable distribution state?

equitable distribution

Real Listing?

According to People:

“Danielle did not know her home, where she lives, was listed for sale until she saw a story about it online,” the rep says. “This is yet another example of the blatant disrespect and emotional abuse she has endured in this relationship.”

Caffrey, 66, filed for divorce from the reality star in August—just four months after their wedding, and Staub, 56, has been vocal about how hurt she was by how public their split was.

In July, Caffrey posted a negative rant about Staub on social media. The pair took out restraining orders against each other that same month following a domestic dispute at the New Jersey home that is now on the market. The restraining orders were both later dropped.

The six-bedroom, seven-bathroom house features a gourmet kitchen, high ceilings, a media room, and a sauna. The property is listed for $2.195 million with Frances Aaron and Miriam Finkel of Prominent Properties Sotheby’s International Realty.

When asked about the sale of their home, Caffrey tells People, “Danielle’s version is untrue and other than that I have no comment.”

Real Equitable Distribution

I’ve written about the equitable distribution of houses before. New Jersey, like Florida, is an equitable distribution state. California, and many other western states, are community property states.

In Florida, in every divorce the family court will set apart to each spouse that spouse’s nonmarital assets and liabilities, and in distributing the marital assets and liabilities between the parties, the court must begin with the premise that the distribution should be equal.

All real property held by the parties as tenants by the entireties, whether acquired prior to or during the marriage, is presumed to be a marital asset in Florida. If a spouse makes a claim to the contrary, the burden of proof shall be on the party asserting the claim that the property is nonmarital.

It is unclear whether Staub and Caffrey have joint title to the New Jersey house, or it is titled in one of their names alone, or even a holding company. Generally, it’s a good idea to have all title owners sign a contract, or it may not be enforceable against the owner who did not sign.

Real Troubles

Back in New Jersey, although Staub claims she was unaware of her home being put on the market, she recently told People that she considers herself a “warrior,” and her experience with this divorce has been no different.

Prior to their public problems, the two had trouble agreeing over many things in their relationship, Staub said. Tense dynamics with their blended family (Caffrey has three adult children from a previous relationship) also came into play.

“He doesn’t like me and he doesn’t like my children,” Staub claimed. “My kids have never been anything but respectful and lovely towards him even though he hasn’t been the same towards their mom.

Caffrey, in a statement to People at the time, said, “This is not my world nor do I have any further interest in it. These are manufactured celebrities in manufactured lives who manufacture their own truths. I look forward to getting back to my reality among real people. My loving family and vast amount of friends.”

The People article is here.

 

New Property Division Law

Kaaa! That’s not a scream, it’s a Hawaiian name pronounced “Ka-ah-ah”. Florida divorce lawyers know Kaaa as a famous Florida Supreme Court case which changed equitable distribution here. Kaaa had its faults, but recently the Governor signed a bill to fix it.

Florida Property Divisions

I’ve written about property division before. Property division, or equitable distribution as it is called in Florida, is governed by statute and case law.

Generally, courts set apart to each spouse their non-marital assets and debts, and then distribute the marital assets and debts between the parties.

Marital assets and liabilities include, in part, assets acquired and liabilities incurred during the marriage, individually by either spouse or jointly by them.

Passive appreciation of a nonmarital asset, a house for example, encumbered with a mortgage paid down with marital funds, may be a marital asset the court must equitably distribute.

Can You Split Nonmarital Property?

Passive appreciation of a house without a mortgage, for example, is not subject to division in a divorce. But what about the passive appreciation of a house with a mortgage, where the principal balance of the mortgage has been paid with marital funds?

In 2010, the Florida Supreme Court held that “passive appreciation of a nonmarital asset … is properly considered a marital asset where marital funds or the efforts of either party contributed to the appreciation.”

The Kaaa court recognized that the marital portion of nonmarital house encumbered by a mortgage paid down with marital funds includes two components:

(1) a portion of the enhanced value of the marital asset resulting from the contributions of the nonowner spouse and

(2) a portion of the value of the passive appreciation of that asset that accrued during the marriage.

The Kaaa Problem

The Supreme Court created a formula for courts to use in determining the value of the passive appreciation of nonmarital real property for equitable distribution.

But the Kaaa formula was flawed because there is no relationship between the amount of marital funds used to pay down a mortgage during a marriage, and the passive appreciation of the property.

Also, the Kaaa case required a nonowner spouse to have made contributions to the property as a prerequisite to sharing in the passive appreciation of the property.

A lot of people argued that Kaaa conflicted with our equitable distribution statute, which said marital assets include the enhancement in value and appreciation of nonmarital assets resulting from the use of marital funds.

The Fix Bill

The Family Law Section of the Florida Bar helps create legislation, and also monitors proposals in the Florida Legislature. Members of the Section advise legislators and staff and even testify before the Legislature.

Governor Scott signed a bill to fix Kaaa. The bill amends our equitable distribution statute and establishes a statutory formula for courts to use.

The new statutory formula does not require the nonowner spouse to have made contributions to the property, as required under the Kaaa calculation.

The fix bill also bars the marital portion of nonmarital real property from exceeding the total net equity of the property on the valuation date in the divorce action, and even allows a party to argue that the formula shouldn’t apply.

The new law takes effect July 1, 2018.

The Kaaa fix bill is available here.

 

Gifts and Divorce

Kurt Cobain’s widow, Courtney Love, is dodging a final decision on who gets Kurt Cobain’s famous guitar: their daughter, Frances Bean Cobain, or her estranged husband. The dispute over Nirvana’s former lead singer’s famous guitar raises the issue of gifts and divorce.

Isaiah Silva – who’s in an ongoing divorce with Frances Bean Cobain (daughter of the late Kurt Cobain)) – claims Courtney’s refused to come to the door twice when his investigators tried to serve her with deposition papers. According to the documents, she’s also hiding from the L.A. Sheriff’s Dept.’s attempts to do the same.

I’ve written about the Nirvana guitar dispute before. At issue is the facts surrounding the 1959 Martin D-18E acoustic guitar Kurt played during Nirvana’s “MTV Unplugged” concert. ‘MTV Unplugged in New York’ is a live acoustic performance album by Nirvana.

The album debuted at number one, was Nirvana’s most successful posthumous release, went 5x platinum, and won a Grammy Award.

The guitar’s been a heated point of contention in the divorce. Frances says the “priceless family heirloom” belongs to her, but her husband says it’s his because, she gifted it to him during the marriage.

Florida Divorce Gifts

Florida is an equitable distribution state, unlike California, which is a community property state. As an equitable distribution state, in divorce, the court sets apart to each spouse’s nonmarital assets and liabilities, and distributes the marital assets and liabilities between the parties.

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. These factors include things like the contribution to the marriage by each spouse, the economic circumstances of the parties, and any interruption of personal careers or educational opportunities of either party for instance.

So, what are “marital assets and liabilities”? They include things like assets acquired during the marriage, and interspousal gifts during the marriage for instance. However, “nonmarital assets” include things like assets acquired before the marriage, and assets acquired by non-interspousal gift.

The fate of Kurt’s famous guitar then, could depend on whether the guitar was a gift from one spouse to another (as Isiah is alleging), and is therefore treated as marital property in an equitable distribution state, or whether it is non-marital.

About a Guitar

TMZ reached out to Courtney about the controversy, but her representatives claim she’s already publicly stated the guitar is a family heirloom and doesn’t belong to anyone other than family, which echoes what she stated previously.

If you don’t know Nirvana or the unplugged concert, stop reading and click here. You won’t be sorry.

Isaiah is claiming he owns Kurt’s former Martin D-18E guitar from the famed MTV performance. The guitar is a very rare; only 300 were made. However, the guitar’s sentimental value is immeasurable, as it was the last guitar played by Kurt before his suicide.

Silva is claiming he owns it because it was given to him by his wife as a wedding present, though she denies gifting it to him. Courtney Love takes her daughter’s side, and has said:

“It’s not his to take. It’s a treasured heirloom of the family’s”

If a judge were to determine that Kurt’s guitar was not a wedding gift from Frances – and given its multi-million dollar and sentimental value, a Cobain family heirloom – it would be Frances’. However, if a judge decides the guitar was a gift from Frances to her husband, an “inter-spousal gift”, the guitar would be marital property.

The TMZ article is here.

 

World Series Tickets and Divorce

By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Thursday, November 3, 2016.

It happens only once every 108 years, or so it seems. But, tickets to see the Chicago Cubs in the World Series can be a valuable property to divide in divorce. At least in Illinois it is, as one couple found out.

According to ESPN, court documents filed in a Cook County Circuit Court on Friday say a woman this week submitted an “Emergency Petition For World Series Tickets” to see Game 4 on Saturday against the Cleveland Indians.

Judge Marya Nega ruled after arguments that the husband can keep the tickets for himself and the couple’s 12-year-old son, but should pay for a new ticket for Nancy Riddle in a “comparable” section to his.

The Cubs haven’t won a World Series title since 1908, and long-suffering fans are paying a minimum of thousands of dollars per ticket at Wrigley Field.

The cheapest available tickets start at around $3,000. Even standing-room tickets on sites such as StubHub started at around $2,500, with some sellers asking for more than $100,000 for prime box seats.

I’ve written about equitable distribution before. Generally, courts have to distribute marital assets, and begin with the premise that a distribution should be equal, unless there is a justification for an unequal distribution. Courts can also, if good cause exists, order an interim partial distribution.

The husband’s lawyer, Michael Berger, described the legal tussle, saying his client landed the World Series tickets because he bought a season-ticket package deal with his friends this year before divorce proceedings began in April.

Berger said he objected to the issue being an emergency because the Cubs might not make it back to another World Series in the wife’s lifetime.

Berger is a fan of the Cubs’ crosstown rivals, the White Sox, and said he reluctantly acknowledged to the court during arguments before the judge that the Cubs “are a great team.

“Even if the Cubs lose this time, it is likely — regrettably — that they will be back to the World Series again soon,” he said in a Thursday phone interview.

One team, the NFL’s Green Bay Packers, has a clause in place to handle similar situations:

“Upon divorce or separation, we will honor a stipulation authorizing retention or transfer of tickets to one or both of the parties. Without stipulation or agreement, the tickets shall revert to the Green Bay Packers who shall have the right to divide them tickets between the parties.”

The ESPN article is available here.

Business Valuation Changes

I was honored last night to be sworn in as the President of the First Family Law American Inns of Court in Miami by the Hon. Reemberto Diaz, circuit judge. There was also a discussion on equitable distribution of business interests.

The American Inns of Court is an association of lawyers, judges, and other professionals from all levels and backgrounds who share a passion for professional excellence.

Our Inn was founded 20-years ago by the Hon. Richard Yale Feder, circuit judge. Judge Feder was not only a founder of our Inn, he was the primary motivator behind establishing the Family Division Courthouse in Miami-Dade County, Florida.

Last night’s presentation was not only a humorous look at family law statistics nationwide, but a cutting edge presentation on the new I.R.S. regulations impacting business valuations in matrimonial cases by Philip J. Shechter, CPA/ABV, CVA from Cherry Bekaert LLP.

I’ve written about equitable distribution before. Business valuations in divorces usually contain discounts. The two primary discounts are:

– discounts for a lack of control or a minority interest discount, and

– discounts for lack of marketability.

Initially the IRS stated that discounts were not available when valuing an interest in an entity that was controlled by family members. Discounts have become very popular in business valuations, and because of the increase in use if discounts the IRS has tried to limit claimed abuses and loopholes.

Section 2704 states that the Secretary of the Treasury may provide in regulations new restrictions that are to be disregarded in determining the value to a family member if the restriction reduces the value for estate tax purpose but does not ultimately reduce the value of the interest to the transferee.

The proposed regulations to section 2704 severely restrict the ability to use discounts in cases of family ownership. It anticipates work arounds, such as having a small portion of ownership in non-family members and prohibits using discounts in those situations too.

The new regulations could go into effect before year-end 2016.

A copy of the new regulations is here.

Divorce Asset Protection

By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Wednesday, August 17, 2016.

Nevada has little known laws to attract business in facilitating asset protection, including in divorce cases involving property division.

As the New York Times recently reported:

Over the last decade, for example, New Hampshire has passed nearly a dozen laws affecting trusts that expanded their life span, lowered taxes and made it easier to transfer assets. In 2013, the state created a special trust court subdivision to handle the complex litigation; last year, an overhaul of state banking laws simplified regulations.

Still, Nevada “is definitely the most aggressive. Starting with the absence of any state income tax and resilient secrecy protections, Nevada has added a passel of laws and regulations intended to lure trust business.

Individuals who establish irrevocable trusts have more flexibility to transfer assets to a new trust with more favorable terms. Creditors are blocked from access to money held in trusts.

I’ve written about equitable distribution before. In Florida, all marital assets are subject to equitable distribution. So, even if you leave assets to your children in a revocable trust, they can also be at risk to equitable distribution depending on the circumstances and how they are used.

However, if you create an Irrevocable Pure Grantor Trust (IPUG) and leave assets to your children in their own IPUG, there may be an argument to declare those assets as separate property.

The best way to protect assets in a divorce, of course, is to have a well-written premarital agreement covering the disposition of all of your assets in the event of divorce. Additionally, post-nuptial agreements can also be entered into during the marriage to cover the same ground.

In Florida, assets acquired before the marriage are your separate, non-marital assets. So are noninterspousal gifts, bequests, income from nonmarital assets and assets excluded in written prenuptial and postnuptial agreements.

The most important step to protect your separate assets is to keep them non-marital at all times. As soon as you put your non-marital or inherited money into a joint account with your spouse, that money will very likely be considered a marital asset to be divided in a divorce.

Even if you can show the judge the exact amount in a joint account that came from your inheritance or non-marital assets, the funds are commingled.

The New York Times article is here.

Dividing Premarital Property

By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Friday, July 22, 2016.

Bought your home before your marriage, it’s yours right? Not necessarily. Florida has some peculiar property division laws you should be aware of.

Most people believe that if you bought your home before you got married, the property is separate property, and therefore cannot be equitably distributed by a family court.

Florida has some unique rules about premarital property that clouds that general rule. Your spouse may have a right to some of the home’s equity upon divorce despite it being separate property.

Florida’s General Rule

A court must set apart to each spouse that spouse’s nonmarital assets and liabilities. Nonmarital assets include assets acquired prior to the marriage. That is the general rule in Florida, but there may be exceptions.

Appreciation in Value Exception

In dividing marital assets, Florida courts take into account the active appreciation of nonmarital assets during the marriage. Appreciation could have been caused by spending marital funds or management of a property.

Courts can take into account passive appreciation on nonmarital assets, such as inflation, which is not subject to division. But, Florida courts have long agreed that paying down of a mortgage with marital funds on nonmarital property during a marriage is a marital asset.

In Florida, “marital assets” includes the “enhancement 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.”

The Supreme Court of Florida has pronounced that “the trial court must make a finding that the non-owner spouse made contributions to the nonmarital property during the course of the marriage.”

There are certain steps a trial court should employ to determine whether a non-owner spouse is entitled to a share of the passive appreciation of property:

1) Determine the overall fair market value of the home;

2) Determine whether there has been a passive appreciation of the property;

3) Determine that marital funds were used to pay the mortgage, that the non-owner spouse made contributions to the property, and “to what extent the contributions of the non-owner spouse affected the appreciation of the property”;

4) Determine the value of the passive appreciation; and

5) Determine the share of appreciation deemed “marital.”

Prenuptial Agreement Exception

If a couple entered into a valid prenuptial or postnuptial agreement, and the agreement makes a provision for a spouse to obtain an equitable interest in the house over time, a court can consider this in any equitable distribution.

I’ve written about property divisions before. Equitable distribution can be tricky, even when you have clear-cut, nonmarital assets.