Tag: asset protection trust divorce

Divorce and Annulment in Florida

Posted by Ron Kauffman on

An annulment is more uncommon in Florida than a divorce. A recent appeal decided whether a court case should proceed as a divorce or an annulment. A Florida husband tried to avoid his obligation to divide his marital property and pay alimony to his wife by alleging in court that his marriage was a fraud because he never consummated it. How did the trial and appellate courts review his argument?

Annulment

A Case of Annulment?

In the Florida case, a Husband testified he met his wife in 2000 when he attended a retreat. Twenty years later, he was re-introduced to his wife by a colleague. They traveled to Colombia and shared a residence. He argued that he never proposed to his wife, they just mutually agreed to marry. He claimed that all he wanted a companion as he grew older.

At trial he also testified that he never consummated the marriage. He also claimed that he had never seen her naked, didn’t know her bra size or any intimate detail about her body. He testified that she only married him to obtain legal status.

Also during the trial, the wife admitted she never received an engagement ring, but said she signed a prenuptial agreement, that they had consummated the marriage, and had intercourse on several occasions, but only in the dark. Accordingly, she had never visually inspected his body.

The husband’s girlfriend testified he told her he was married and was in process of divorcing. Based on those facts testified to at the trial court found it was a real marriage, that they did have sex, and the case could not proceed as an annulment. The husband appealed.

Florida Annulments

I’ve written about divorce and annulment in Florida before. In Florida, the legal term for ending a marriage is “dissolution of marriage,” not “divorce.” The process is initiated by filing a petition for dissolution of marriage. The term “divorce” is not used in the Florida Statutes.

There are different types of dissolution of marriage in Florida, depending on the circumstances, such as whether there are children, marital property, or if the dissolution is simplified. A judgment of dissolution of marriage is how a spouse returns to “the status of being single and unmarried.”

Annulments are different. An annulment in Florida is a procedure that declares a marriage null and void, as if it never existed. The grounds for annulment in Florida include bigamy, fraud, duress, mental incapacity, and incestuous relationships.

Because Florida is one of the handful of states that has no annulment statute, annulments in Florida are purely a question of common law, decided pursuant to the inherent equitable powers of the circuit court.
The historical common law “impediments” to marriage traditionally fell into two general categories: lack of consent and lack of capacity.

Lack of consent would include, for example, people who are related within certain degrees, and minors without parental consent. Lack of capacity includes marriages involving fraud, mental illness, sham marriages, and shotgun weddings.

That is where consummating the marriage comes in. It is established law in Florida that someone who has become a party to a wedding ceremony by fraud of the other party can secure an annulment if the marriage has not been completed by sexual intercourse.

The Appeal

On appeal, it was found that the trial court record contained ample evidence supporting the holding that the parties consummated their marriage, and the wife did not enter the marriage to commit fraud.
Additionally, in this case no asserted ground or evidence justified a decree of annulment in favor of the husband.

Here the parties entered into a valid marriage contract. The evidence did not establish the existence of any of the grounds for annulment. So, the appellate court ruled the petition was properly denied.

The written decision is available here.

Transforming Nonmarital Property Into Marital Property

Posted by Ron Kauffman on

For many clients going through divorce, there is a concern that their nonmarital property can transform into marital property, and then get distributed by a court. Believe it or not, divorce lawyers know that in certain cases, it is easy for your nonmarital asset to be transformed into a marital one. One couple in north Florida found out how courts look at whether your nonmarital property has been transformed into a marital property during a divorce.

marital property

Defining Marital and Nonmarital Property

Understanding a little about Florida’s equitable distribution statute will help you protect your premarital assets from being wrongly divided. In Florida marital assets and liabilities include assets acquired and liabilities incurred during the marriage, individually by either spouse or jointly by them.

Many people forget that marital assets also 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.

Another area of transforming nonmarital assets into marital one is by gifts. Under Florida law, marital assets include gifts between spouses during the marriage.

Conversely, nonmarital assets and liabilities include things like assets acquired and liabilities incurred before the marriage, and assets acquired separately by either party by non-interspousal gift, bequest, devise, or descent. For example, an inheritance may initially be considered nonmarital property absent anything else.

Before a court will classify your assets as either marital or nonmarital, the court will consider numerous factors. One of the factors a court will look at is the title of the property. A court will also consider whether you commingled your marital funds with your nonmarital funds. Were there any increases in the value of your nonmarital stock accounts because of marital efforts, or control of the funds? If so, a court may consider that too. They will also look at the length of the marriage, and your intent concerning the marital or nonmarital status.

Transforming Marital Property

In a recent case in Florida’s panhandle, a husband and wife divorced. During the trial, the family judge added to the equitable distribution schedule one of the husband’s Certificate of Deposit accounts. However, there was no evidence that the CD account, which was acquired ten years before the marriage, had transformed into a marital asset.

On appeal, the appellate court reversed the decision. The appellate court found that there was no evidence at the trial that there was any enhancement of the CD account through the husband’s efforts. The court also noted that there was no evidence that the husband commingled his nonmarital funds with marital funds. Lastly, there was no evidence that he had given to his wife the CD account as a gift.

Gifts between spouses are an important and frequent way in which a nonmarital asset becomes a marital asset. Believe it or not, there are even cases in Florida where spouses accidentally gifted non-marital homes to their spouse by birthday card, not realizing they would be found to have the proper donative intent.

Florida’s New Anti-Gift Law

This year the law changed in Florida. The revised equitable distribution statute now prohibits interspousal gifts of real estate unless there is written documentation that complies with the provisions for conveyance of real property under the statute governing deeds to property.

The mere inference of a gift of real property will now not meet the threshold required for an interspousal gift unless there was written documentation for a conveyance.

The new law in Florida also makes it clear that when a spouse merely signs a deed for the sole purpose of conveying a homestead property – other than the other spouse or both spouses jointly – the deed does not change the character of the real property from nonmarital property to marital property.

Finally, the new amendment to the equitable distribution statute changes the definition of nonmarital assets and liabilities so that real property acquired separately through non-interspousal gift, bequest, devise, or descent and in which legal title has not been transferred to both parties as tenants in the entireties, remains non-marital property.

The appellate decision is here.

AAML, Trusts & Divorce

Posted by Ron Kauffman on

I was honored to be invited to speak at the American Academy of Matrimonial Lawyers (AAML) Florida Chapter’s 45th Institute on Family Law on the topic of trusts and divorce. I spoke with co-presenters: AAML Fellow, J.J. Dahl, and estate and trust attorneys, S. Dresden Brunner, and Sarah Butters. The AAML Institute is the premier, advanced continuing education opportunity for family law in Florida.

Trusts and divorce 2

Trust Basics

Divorces typically involve the equitable distribution of marital property, the payment of spousal support, maintenance and alimony to a spouse, and child support for the children. Worryingly, trusts have increasingly become a problem in divorce proceedings.

Estate planners love to use acronyms to describe their estate planning tools: ILIT, QTIP, QPRT, SLAT, and of course, APT (asset protection trusts). An asset protection trust is just that, a trust designed to protect a donor-spouse’s assets from creditors, while still allowing some discretionary access to the assets for the donor.

By design, APTs don’t allow the donor-spouse to have complete access to the funds, and decision making about paying distributions is usually in the hands of an independent trustee.

Florida does not permit asset protection trusts. However, Florida residents create them in other states, most notably Nevada, and even in other countries.

Trusts can raise several issues when divorcing. Some types of trusts are created by third party grantors, while others are self-settled trusts. In divorces, one of the two spouses is the beneficiary, and may have other roles. The assets in third party trusts belong to the trust, not the spouse. These types of trusts are not usually subject to equitable distribution, but the income may be calculated for determining support. There is also the possibility that assets may be subjected to attachment by the court.

Trusts may be revocable and irrevocable. Irrevocable trusts are generally created by one of the spouses and may be marital unless solely separate funds were used to fund it. A key distinction of revocable trusts is that the grantor keeps control over the assets, and in a divorce, a court can order trust assets to be distributed.

Untrustworthy

Irrevocable trusts are not themselves marital assets subject to distribution, even if a spouse intentionally funds it with marital property. Trusts are governed by the probate code, and there is no corresponding ability to ‘pierce the veil’ in trust law as there is for corporations.

Trusts may also be an obstacle when trying to recover unpaid alimony and child support. This is where the different public policies supporting probate law and family law clash. People create trusts legally, for the purpose of protecting property and income for the beneficiary. Some trusts are created to protect beneficiaries from themselves. During a divorce, Family law seeks an equitable distribution of marital assets, not asset protection.

Trusts typically have spendthrift clauses to protect beneficiaries. A spendthrift clause prevents a creditor who is owed money by a beneficiary from forcing the trustee to pay over the beneficiary’s share of the trust.

In essence, as long as the trust assets are still held by the trustee, they are out of reach of the creditor. If not for spendthrift clauses, trust beneficiaries who owe creditors money could see their trust benefits attached by a court when trust funds are distributed.

Spendthrift clauses, which are an essential part of trusts, can be a huge problem in divorce. Former spouses may be owed alimony and child support by a trust beneficiary. In those cases, former spouses are considered creditors of the beneficiary who is obligated to pay. When alimony and child support are owed by a trust beneficiary, many factors will impact whether a court will be able to order alimony and child support to be paid from trust assets.

More about the AAML Florida Chapter and the Institute is available here