Category: Equitable Distribution

Running the Marital Business After Divorce

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By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Monday, January 25, 2016.

Over 1.4 million businesses are jointly owned and equally operated by husbands and wives, and 1.7 million businesses are jointly owned but run primarily by a husband. Can you run a business after divorce?

The Wall Street Journal has an article today on running a business during and after divorce. The article is primarily aimed at spouses who started and ran a business together during the marriage.

During a divorce, spouses who spent years building a company suddenly find themselves having to divide it up. One spouse may demand a bigger share of the company, another may get defensive about the business’s finances and refuse to divulge details. Old resentments can surface.

The worst case scenario is that you have to liquidate the business, and split any proceeds. When you’re going through a divorce, people don’t always act their best. If you have a bad relationship with your spouse, they may not be compelled to find another solution besides liquidating.

I’ve written about the impact of divorce on business values before. Selling a business is a likely scenario in divorce, whether you live in a Community Property state like California, or an Equitable Distribution state like Florida.

In Florida courts have to set apart the non-marital assets and liabilities, then distribute the marital assets and liabilities between spouses. The court starts with the premise that the distribution should be equal, unless there is a reason for an unequal distribution.

Some of the reasons for dividing property, including businesses, unequally are:

(1) The economic circumstances of the parties.

(2) The duration of the marriage.

(3) Interruption of personal careers or educational opportunities.

(4) The contribution to the personal career or education of the other spouse.

(5) The desirability of retaining an interest in a business intact and free from any claim or interference by the other party.

(6) The contribution of each spouse to the acquisition, enhancement, and production of income.

(7) The intentional waste, depletion or destruction of marital assets.

If spouses can’t live with each other, there’s a good chance they won’t be able to work together either. However, to stay in business together, couples need ask some questions:

– Will you be more successful together or apart?

– Are the children better off if the business closes?

– Can you communicate effectively with each other?

– Can you define new boundaries at work?

While it’s impossible to take emotions entirely out of the process, businesses do survive divorce, and the emotional turmoil can be minimized.

The Wall Street Journal article is here.

Mortgages & Divorce

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By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Tuesday, November 10, 2015.

It’s real estate tax time, and deciding how to equitably distribute the marital home in a divorce can be a headache – especially when both spouses are on the mortgage.

As the New York Times recently reported, when there is equity in the home, each spouse typically wants to take a share as part of the settlement agreement.

But if one person wants to remain in the home, rather than sell it and split any profit, then that spouse will likely have to qualify for a mortgage on his or her own.

There are a lot of issues involved in the marital home. I’ve written before about property divisions when the housing market was down. Now that the housing market is in recovery, different issues arise.

Spouses who choose to stay in the home may have to refinance the mortgage to cash out enough equity to pay off their soon-to-be Ex. But even a spouse who has the financial resources for a buyout will still have to get a mortgage in his or her name.

The spouse walking away from the house, not only wants their share of the equity in the property, but must get their name off the mortgage so their credit score won’t reflect the debt, and so they won’t be liable for any non-payment.

Once your name is on the mortgage, you are jointly and severally liable for the entire debt amount. The mortgage can tie up your credit, making it difficult to qualify for another mortgage, or even a car loan.

Worse still, if there’s a default or late payment of the mortgage – you are not only going to be sued – your credit report score could drop considerably, even though you are not at fault.

In order to determine who gets to keep the house, you must consider who qualifies for a new mortgage on their own. If you do, could you afford all the other expenses associated with living in that home: taxes, insurance, utilities, lawn, pool, maintenance etc.

As the New York Times reports:

This preparation should happen early on in the divorce process, but too often people are too busy arguing, litigating, fighting, and having no idea of the whole picture.

A few things to consider: find out from a mortgage broker how much mortgage you could afford early on in the case. Spouses planning to count child support and alimony as income to qualify for a mortgage should know that lenders will require proof of at least six months’ receipt of that income before closing. In addition, there are other Fannie Mae guidelines.

The New York Times article is available here.

Cosmetic Surgery & Divorce: Keeping Abreast of the Law

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By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Friday, October 23, 2015.

Mommy makeovers during a divorce are nothing new. Recent studies shows up to 40% of women with new ‘buns’ and breasts leave their husbands. But can your husband repossess them?

Plastic surgery is now a $10 billion industry, and is increasingly common. For divorce purposes, research shows an increasing connection between plastic surgery and divorce.

One recent study suggested that up to 40% of women who undergo plastic surgery end up leaving their partner who supported (read paid) them through the surgery.

I’ve written on this topic before. When your wife’s new lips, buns and breasts are paid for with marital funds – can they be considered a marital asset subject to division?

While the Florida Supreme Court has never really tackled these big issues, the North Dakota Supreme Court finally ruled on the issue for all of us, and you can read the decision yourself:

“Do we have any lines to be drawn? Is dental work a marital asset? Is a hip replacement a marital asset?” Justice Daniel Crothers asked attorney Christina Sambor during Supreme Court arguments on Thursday.

Citing cases from Hawaii, Delaware and Kentucky, Erik Isaacson invites us to hold that breast implants are a marital asset, the value of which are subject to distribution in the division of the marital estate. We decline . . .

Luckily, Mrs. Isaacson was saved from a very painful property division! Isaacson, and other state court opinions that address cosmetic surgery in divorce, have only done so in cursory manners, without regard to the surgery value as “property.”

There is little case law or statutory guidance on the value of cosmetic surgery enhancements, or their accompanying debt. With the increasing use of cosmetic surgery, the time has come to create some.

The UK Telegraph article is available here.

Can Your Pre-Marital Property Be Divided?

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By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Monday, August 10, 2015.

Florida law is clear your pre-marital property is non-marital, and is property which cannot be divided by the court in a divorce. Or is it? People are often surprised to find out their premarital property is really at risk.

In a recent case from Fort Myers, the Husband owned a premarital building worth $900,000. Before he separated, the Husband sold the building for $680,000, a big loss.

The property was subject to a mortgage though, and during the marriage, the mortgage was paid down by the amount of $23,651.16 using marital funds. During the divorce, the Wife contended that she was entitled to an equitable distribution in the amount of the reduction in the mortgage.

The trial judge denied the Wife’s claim because the Husband’s property went down in value. Had it gone up in value during the marriage, the trial court may have considered it. The Wife appealed, and argued that using marital funds to pay down the mortgage on the Husband’s non-marital building enhanced the value of the property.

She won! Paying down on the mortgage enhanced the equity value of the Husband’s nonmarital asset. Even through the building did not appreciate in value during the marriage, the use of marital funds to pay down the mortgage enhanced the value of the Husband’s equity in the property.

I’ve written about property divisions before. Without the pay down of the mortgage, the proceeds the Husband would’ve realized from the sale of the building would have been reduced by an amount equal to the pay down of the debt.

The court held that the resulting increase in the equity value of the building was a marital asset subject to equitable distribution. The general rule is that “[w]hen marital assets are used during the marriage to reduce the mortgage on nonmarital property, the increase in equity is a marital asset subject to equitable distribution.”

The opinion from the appellate court can be found here.

Splitting Up: Equitable Distribution and Waste

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By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Monday, June 22, 2015.

Everybody reacts to their divorce differently. One German man got angry and vented his anger by splitting everything in half. Literally, he divided all the marital property in half. Is that the right way to do it?

As Fox News reports, the heartbroken guy posted a video which shows him cutting things in half: his sofa, a big-screen Samsung TV, and even his Opel Corsa car.

You can see what he’s selling on eBay, after cutting his half, and how much it’s priced at:

Half a teddy bear – €51 ($58): “Although she doesn’t need a stuffed animal to snuggle, there are affectionate fellow workers for that.”

Half an iPhone 5 – €78 ($89): “I generously left her half of everything, even my beloved mobile phone. That way she can no longer secretly send WhatsApp hearts to a younger work colleague. She doesn’t need it anyway as she lives with one.

Half a Samsung TV – €24.75 ($28): “Of course, also the TV that I have purchased so she can comfortably watch ‘Germany’s Next Top Model’ on it.”

Half an Opel Corsa – €62 ($70): “My ex-wife wanted 50% of all our things, including our beloved little city car. Although it’s not clear to me why she’d still want a dinky old Opel. Her new guy is impressively motorized, I hear.”

Four nice chairs’ halves – €36.50 ($41): “The chairs are super as an art installation, or simply for people who like to sit on half-an-ass cheek.”

Half a MacBook Pro – €81 ($92): “The radical ‘conversion’ was more or less an idea of my ex-wife. She wanted to replace her husband, but keep the money and beautiful things.”

I’ve written about property divisions before. In Florida, marital property is divided according to our statute. Unlike in community property states, Florida is an equitable distribution state, and we start with the principle that marital property is divided equitably – not always equally.

In Florida, a spouse’s financial contribution to the asset, or a spouse’s destruction of an asset (and even infidelity) can be taken into consideration when dividing property.

You should familiarize yourself with how Florida courts divide property. It will go a long way in helping you when trying to negotiate with your spouse.

Letting your anger get the best of you, may look funny in the news, but for the German ex-husband who just destroyed all of his marital property, his behavior will cost him.

Underwater Property Owners Get Thrown an Anchor

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By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Friday, June 5, 2015.

Divorce can be caused by fighting over financial problems. And Florida cities make up more than half of the “seriously underwater” areas. For couples treading water while holding crushing debt, this week’s U.S. Supreme Court case is like being thrown an anchor.

The U.S. Supreme Court just issued its opinion in Bank of America v. Caulkett. The issue was whether in a Chapter 7 bankruptcy, debtors can void a second mortgage when the home is worth less than the first mortgage: i.e. the value of the house is “underwater.”

David Caulkett’s Florida home was worth $98,000 when he filed for Chapter 7 bankruptcy, but he owed $183,000 on his first mortgage and $47,000 on his second.

David filed for bankruptcy and asked the court to rule that his second mortgage was voidable. It did. After losing in the District Court and 11th Circuit Court, Bank of America complained to the U.S. Supreme Court.

The U.S. Supreme Court followed its earlier decision, holding that a debtor in a Chapter 7 bankruptcy cannot void a junior mortgage when the debt owed on a senior mortgage exceeded the value of the home.

All is not lost though. I wrote an article about how underwater homes in Florida can still have significant value during divorces and separation. This is especially true if the parties are splitting, and want to immediately buy another homestead.

One of the largest exemptions Florida homeowners are entitled to is the homestead exemption, which can shield up to $75,000 of the value of a home before its taxable value is determined.

The “Save Our Homes” Florida Constitutional Amendment caps any increases in your home’s assessment to the lower of 3% of the assessment for the prior year, or the percent change in the Consumer Price Index.

Before 2008, the cap ended when you sold your home. But in 2008, Florida voters approved Constitutional amendment 1allowing homeowners to keep a portion of their cap differential, and transfer that portion to a new homestead.

The Caulkett case could dampen the ability of divorcing couples to sell, refinance, renegotiate mortgages, get HAMP workouts or ask for principal forgiveness. Worse still, in Florida a bank can get a deficiency judgment if the house sells for less than the amount owed.

For a great in-depth analysis of Bank of America v. Caulkett, read Amy Howe’s articles at SCOTUSblog.

Divorce & Lottery Winnings: How to Keep Most of It

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On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Thursday, May 1, 2014.

Jose is one lucky guy. He won $2 million in an Indiana scratch off lottery game. Equitable distribution requires he split half the winnings with his wife in a divorce. Last week a judge ordered him to give her less than 3%. Why?

Jose and his wife Maria were married for about 4 years – they married in 2002 and separated in 2006. They never divorced, and over the next six years he moved out, they barely spoke, had separate bank accounts, and lived as single people.

Five years later, in 2011, Jose won $2 million in a scratch-off game. He quickly filed for divorce. In the divorce proceedings, Maria asked the court to give her 70% of Jose’s winnings, about $1.4 million.

Maria thought she was entitled to a 70/30 split because Jose admitted that giving her 70% of the cash was a “fair and equitable distribution.” She argued that this admission conclusively establishes how the court should divide the money. The judge said no.

Because Jose and Maria were legally married at the time, courts presume a 50-50 split. But the Indiana court ruled Maria shouldn’t even get her half. Why? Because of the extended separation, the lack of comingling, and each person living as individuals.

I’ve written before about the risks of long separations:

* You have less control of assets,

* Spouses have an opportunity to hide assets,

* Circumstances change, jobs are lost, and people get ill or retire,

* Relocation with children may become harder over time, and

* Alimony reform is changing laws all over the country.

Jose’s case is one in which a long separation was actually very helpful, but that’s not always true. Jose just got really lucky . . . twice!

You’re not Jose. Don’t base your divorce planning on dumb luck.

Do You Have to Split Premarital Assets?

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On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Wednesday, April 2, 2014.

In divorced, marital property is equitably distributed, but non-marital assets – things acquired before the marriage for instance – are not. However, there is a little-known exception when the value of non-marital assets appreciates. For Harold Hamm, the billionaire founder of oil company Continental Resources, that little exception is a big headache.

Hamm ranks #68 on Forbes’ list of Global Billionaires with a net worth estimated at $14.6 billion. The Oklahoma judge presiding over Hamm’s divorce has recently ruled that he will not have to give up his controlling interest in the company because his 122 million shares are pre-marital.

However, the judge also ruled that the value of the pre-marital stock’s appreciation during the 26-year marriage may still be divided as a marital asset.

The court is essentially saying he won’t have to divide his shares. But, the court still has a duty to make an equitable distribution of what we call: enhanced value.

If the increase in value is attributable to marital effort by either party to make it grow, as opposed to market conditions, then the increase may be considered a marital asset and divisible by the court.

In the trial, the judge will determine how much of Continental Resources’s gains were due to market conditions and how much to Harold Hamm’s efforts. Gains credited to the market probably wouldn’t be included among divisible assets.

Given the size of the fortune and the lack of pre-nuptial and post-nuptial agreements, it’s possible this divorce could become one of the largest publicly known divorces.

For more information on the Hamm divorce, click here.

Tips to Dividing Your Property

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On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Saturday, March 15, 2014.

In a Florida divorce we divide only the marital assets and debts. The process of dividing marital property starts with inventorying everything you acquired. Anything you brought into the marriage, anything inherited, and anything excluded by a prenuptial agreement, is generally not marital.

Hiding Assets

One of the worst thing you can do is hide assets. You may think you can get away with hiding assets, but keep in mind that we divorce attorneys are suspicious, and start with the assumption that assets are being hidden.

From the time you marry until the day your divorce is final you owe a “fiduciary duty.” If you violate this duty there can be legal consequences: a judge can order you to pay your spouse’s legal expenses, you could face an unequal distribution, and you will lose credibility with the judge.

Mediating

The best thing you can do for yourself is to try to settle your property division between the two of you, without mediators and out of court. But what if you can’t come to an agreement?

Hire a mediator to help resolve the tough issues that have kept you from agreeing with your spouse. Your attorney mediates cases very often, and he or she will try to select a mediator that they think can best help you settle your case. Since Florida requires mediation as part of the divorce process anyway, I frequently advise an early mediation – even before you file.

Don’t fight over ‘pots and pans’. No one wins if you end up in court arguing about who gets the Tupperware. Some things have emotional attachments, and try to decide before hand with your attorney what things are most important to you.

Going to Court

Martial property is divided according to Florida’s equitable distribution laws. Unlike courts in California and western states for instance, which are community property states, Florida is an equitable distribution state. In Florida, we start with the principle that marital property is divided equitably, not necessarily equally.

In Florida, a spouse’s financial contribution to the asset, or a spouse’s ability to support themselves post-divorce, or even infidelity can be taken into consideration when dividing property.

You should familiarize yourself with how Florida courts divide property. It will go a long way in helping you when trying to negotiate with your spouse. In fact, you should even consider reading up on Florida’s Chapter 61, the divorce statutes.

To summarize, try to work with your spouse, don’t squabble over the small stuff, don’t hide assets, and learn how Florida laws impact a judge’s decision if they have to make the call over how to divide your life.

Avoid Selling Your House in a Divorce Fire Sale

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On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Monday, May 6, 2013.

Divorce and dividing up your property go hand in hand. If you are going through a marriage breakup, you may need to sell your house in order to settle your case. If so, property owners beware!

Smart property investors know that lurking behind many “for sale” signs is a divorce. In fact many savvy house hunters check out court records precisely to find out if a property seller is going through divorce. Investors are keenly interested in this fact because when they hear the word divorce, everyone’s first thought is “Fire Sale!”

Maybe it doesn’t have to be that way. There are a few tips you can follow to help reduce the risk of your house being sold for peanuts in an already tough market. As the New York Times recently reported, there are real estate brokers specializing in divorcing couples.

For most agents, this is an accidental expertise. For others, it is a niche. “We specialize in it,” said Vicki Stout, an agent at Keller Williams Suburban Realty in Livingston, N.J., who proclaims herself to be a “divorce specialist.”

“But it is hard to advertise,” added Bob Bailey-Lemansky, her business partner. “No one is going to go to our Facebook page and ‘like’ divorce.”

There are a few useful tips for divorcing couples:

  • Hire a real estate firm having at least one man and one woman on the sales team.
  • Keep the word “divorce” out of the sale’s process.
  • Make your closets look less bare on one side.

The interesting article can be read in this month’s New York Times.