Tag: Equitable Distribution

Underwater Property Owners Get Thrown an Anchor

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.

Who Keeps The Engagement Ring?

On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Monday, October 15, 2012.

It’s been said that a diamond is a girl’s best friend. Mount it in a ring and hand it on bended knee and its value goes well beyond mere money. In divorce court the old adage takes on a new meaning. Few people know that the engagement ring tradition started for a specific legal purpose. As Slate.com notes:

[T]here was another factor in the surge of engagement ring sales-one that makes the ring’s role as collateral in the premarital economy more evident. Until the 1930s, a woman jilted by her fiancé could sue for financial compensation for “damage” to her reputation under what was known as the “Breach of Promise to Marry” action. As courts began to abolish such actions, diamond ring sales rose in response to a need for a symbol of financial commitment from the groom, argues the legal scholar Margaret Brinig -noting, crucially, that ring sales began to rise a few years before the De Beers campaign. . . The “Breach of Promise” action had helped prevent what society feared would be rampant seduce-and-abandon scenarios; in its lieu, the pricey engagement ring would do the same.

Florida abolished the appropriately termed “heart balm statutes”. Heart balm statutes were laws allowing couples to sue each other to recover money for the alienation of affections and breaches of contract to marry. As one court poetically noted:

[A] gift given by a man to a woman on condition that she embark on the sea of matrimony with him is no different from a gift based on the condition that the donee sail on any other sea. If, after receiving the provisional gift, the donee refuses to leave the harbor – if the anchor of contractual performance sticks in the sands of irresolution and procrastination – the gift must be restored to the donor. A fortiori would this be true when the donee not only refuses to sail with the donor, but, on the contrary, walks up the gangplank of another ship arm in arm with the donor’s rival?

So where does that leave the engagement ring in divorce? Our statute requires a trial judge to set apart each spouse’s non-marital assets. The general rule which developed is that an engagement ring given before the marriage becomes a non-marital gift if the marriage is completed. If so, the ring becomes the non-marital property of the Wife.

Return to Underwater Treasure: More Gold

On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Wednesday, October 3, 2012.

The year 2008 saw the birth of a new marital asset in Florida, and its divorced upon divorce can be easily overlooked. The ‘Save Our Homes’ Amendment (SOHA) limits increases in your home’s assessment.

In 2008, the Florida Constitution was amended to allow homeowners to keep a portion of their SOHA differential after their home is sold, and port it to a new homestead. I wrote an article examining the equitable distribution implications of SOHA after divorce. The article, published in the Florida Bar Journal, is available here.

There was a big limitation with the old law if spouses wanted to divide the SOHA benefit unequally. The Department of Revenue, under its Emergency Rules, interpreted the statute to mean a husband and wife who divorcing and both abandoning the homestead, would each take their 50% share of the assessment limitation difference, and the property appraiser could not accept a stipulation designating the difference otherwise.

In light of the Department’s interpretation, dividing the asset in divorce became trickier. An amendment to the statutory language was needed to allow couples the freedom to designate the percentage share of the benefit. That amendment happened this year. Florida Statute §193.155 now provides that a husband and wife who abandon jointly titled homestead property may designate the percentage attributed to each spouse of the differential between market value and assessed value that is portable to a new homestead property.

The parties must be husband and wife at the time that the jointly owned property is abandoned. They must file a form with the property appraiser prior to either person applying for the portable differential, and the designation, once made, is irrevocable. However, once that form is filed, couples will have the freedom to designate the SOHA benefit how they like.

Your Home’s Value and Divorce

On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Tuesday, July 31, 2012.

Your house is usually one of the largest assets to divide in a divorce. That being said, there is good news and bad news about the value of one of your biggest assets.

First, USA Today reports some good news:

Data through May 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed that average home prices increased by 2.2% in May over April for both the 10- and 20-City Composites.

This increase was better than the consensus forecast, and hopefully prices will turn positive year-over-year in June. Tampa and Miami are each up about 3% in the last year.

The bad news is that housing prices have dropped about 35% from their peak, and forecasts say housing prices will be close to flat this year and next, with mid-single-digit nationwide gains emerging by mid-decade.

In 2008, the Florida Constitution was amended to allow homeowners to keep a portion of their tax assessment differential after their home is sold. Because many homes in Florida are in negative equity, clients often overlook the hidden tax advantages their homestead can provide during and after a divorce.

I wrote an article in the Florida Bar Journal examining the equitable distribution of the tax assessment differential in divorce, and how the Constitutional Amendment impacts non-married couples selling their homestead after a breakup. I have lectured, and continue to receive calls about the impact of this constitutional change from clients and attorneys alike. Hopefully the article will give something to think about.

Are Breast Implants Marital Property?

On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Wednesday, July 25, 2012.

Division of property, the dividing up of marital assets and debts, can be big problems in a divorce. Often, attorneys bring complicated business valuations and other complex assets to a court for decision . . . but not always.

What about the value of breast augmentation surgery – paid for with marital funds – can they be considered a marital asset subject to division?

The Florida Supreme Court has never really tackled this giant issue, but other states have. So, are a wife’s breast implants really marital assets subject to be equitably divided in by a court? Well wait no longer, the North Dakota Supreme Court has 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 for Mrs. Isaacson, she was saved from a very painful distribution. Was Isaacson v. Isaacson the most important decision in matrimonial law ever? Hardly, but equitable distribution does raise a number of interesting questions. Statutory factors, such as when the assets were acquired, or when the debts were incurred, and the reasonable necessity of acquiring and incurring them can all come into play.

Separations and Divorce

On behalf of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Sunday, July 15, 2012.

Equitable distribution, the dividing up of marital property, should be done equally. But there are reasons for a court to treat assets differently. One reason is a lengthy separation. A new study shows that about 79% of married couples who separate, end up getting divorced.

“Separation is very common and is more common than immediate divorce,” said researcher Dmitry Tumin of Ohio State University at a presentation at the annual meeting of the Population Association of America, which ended Sunday. “Most separations last one year or less, but a few drag on a decade or more before ending in divorce. Other separations stay unresolved.”

Lengthy separations can have a significant impact on equitable distribution, and for good reasons. In separations which last several years, your house or business may have appreciated in value significantly (or depreciated) or you may have accumulated stock and other assets. While the general rule is that marital property should be distributed equally, trial courts can consider various factors to distribute properties differently.

Dividing marital property seems simple enough, just divide by two! However, the more knowledgeable you become, the better prepared you will be to resolve your case fairly and amicably. For this, and other reasons, it is always recommended to consult with an experienced, board certified attorney in these matters.