Tag: Property Division Premarital

Property Division and the Family Castle

For many American families, their home is their castle. When divorce is on the horizon, your castle may fall under attack. Florida’s property division statute requires an equitable distribution of all marital property, but it is not a how-to guide. Money magazine has an article looking at some of your options.

Property Division Castle2

The Coronavirus Crash

Before the silent enemy Covid-19 hit us, the median value of a home in the U.S. was $247,084, and the average amount of mortgage debt a person topped $202,000.

With many experts predicting the coronavirus siege will lead to a surge in divorce, deciding how to deal with your marital home – and its accompanying debt – can be a dangerous financial burden in every case. Below are some strategies to defend your castle.

Selling the Castle

For many couples simply putting a shared home up for sale may seem like the simplest solution, but remember, that step won’t automatically erase all mortgage headaches or end the need to co-operate with your former spouse.

You will still need to agree on a realtor and asking price as well as determine how the continuing mortgage payments will be made. Will you be splitting the expense 50/50? Will the spouse who continues living there make the full payment?

If your home sells for more than the outstanding balance on the mortgage, how will the remaining proceeds be divided between you both after settling the joint debt? Worse, if you end up underwater on the mortgage, you’ll have to decide if you can even afford to sell it and how you’ll pay off the remaining debt if you do.

There are also the taxes. You can each exclude the first $250,000  in capital gains — the amount your home has appreciated in value since you bought it — from your taxable income, if the home was your primary residence and you owned it for more than two years.

If you opt to file a joint tax return, you can exclude up to $500,000. Earnings above that exclusion or on the sale of, say, a vacation property, could stick you with a tax bill.

Keeping the Home

Divorce upends life, and it makes sense that a majority of the time at least one spouse isn’t ready to leave the marital home and add the stress of moving to their to-do list.

The idea of remaining in a familiar, comfortable home can seem even more compelling when there are children who might have to change schools or leave behind friends.

But many financial advisors and divorce attorneys caution against keeping your old home after a divorce, calling it one of the biggest mistakes you can make during the process.

If you want to remain living in the home you once shared with your ex-spouse, you need to carefully review your budget and weigh whether you can individually afford it.

Refinancing the Mortgage

If you have $50,000 in equity in your current home and you’ve agreed to a 50-50 split of its value, you’ll need to come up with $25,000 to buy out your former spouse. In return, your ex-spouse should remove their name from the property title, typically using a quitclaim deed.

If you don’t have the cash, you might need to give up other assets in the divorce negotiations equal to the home’s equity, such as your investment account, 401(k) or IRA.

However, qualifying as a single person can be challenging as lenders will examine your individual earnings, credit history, and savings to see if they believe you’re capable of repaying the loan.

Staying Co-owners of the Manor

If you are unable to refinance or payoff the mortgage, you may be able to keep the status quo. This is not recommended, as it requires a high degree of trust in your former spouse.

Since both your names will remain on the home and on the mortgage, you’ll both be liable for making payments. Should your ex-spouse stop contributing their share, you could face more debt, foreclosure, bankruptcy or poor credit.

Florida Property Division

I’ve written about houses and property divisions before. In Florida, every divorce proceeding the court has to set apart nonmarital property, and distribute the marital property.

Florida judges always begin with the premise that the property distribution should be equal, unless there is a reason for an unequal distribution based on several factors.

One of the factors the court has to consider is the desirability of keeping the home for the kids or a spouse, if it’s equitable to do so, if it’s in the best interest of the child, and financially feasible.

However, whether keeping the home for yourself or the kids is financially feasible requires you to have an honest look at what you can and can’t afford. Some strategies to keep the home include:

Raiding Savings

While not the best solution, pulling from savings can help you keep hold of the home. By obtaining a court ordered qualified domestic relations order or QDRO, you can gain access to a portion of your ex-spouse’s employee retirement plan assets.

Such funds may not be subject to the 10% early withdrawal penalty for people under age 59.5, meaning you’ll save more on taxes by using this money to secure your home than you would by tapping other accounts you may have.

Alternatively, if you have Roth IRA savings, you could pull an amount equal to what you’ve contributed tax and penalty free, again making it a smarter way to meet your mortgage payment needs.

Raising Rents

If you’re really determined to keep the home, but cannot pull from savings or refinance, it might be worth brainstorming ways you can earn income from it to help cover the mortgage and upkeep costs.

Renting out the whole home while you’re on vacation – or even just a bedroom or two when in town – could make you hundreds a night. Airbnb hosts, for instance, can make over $900 a month according to research.

If you can’t refinance the mortgage in your own name, keeping the home isn’t a wise decision. It is better to restructure your life in a way that makes sense in the long run, rather than pillage your other financial accounts.

The Money article is here.


Divorce and Business Property Division

When one of Zach Hendrix’s three business partners said he was getting divorced, sympathy turned into shock as everyone realized that a soon-to-be ex-wife could become a co-owner. Understanding the law around business and property division in a divorce is the first step to protecting yourself.

business property divisions

Open for Business

When a small business owner divorces, the company can become part of a property fight; the battle can end with owners losing all or part of their businesses. Or, they or the company may be forced to take on debt to prevent an ex from sharing ownership.

Even when ownership isn’t at stake, the rancor and uncertainty around a divorce can take a toll on a company — owners may be distracted and unable to focus on what the business needs.

Hendrix and two of his co-owners had to borrow a combined $250,000 to buy out their partner in 2017 after he announced his divorce plans. A startup, and not in a position to get that much credit, the three had to personally guarantee the loans. They were able to repay the debt in a year and a half out of their profits.

The divorce was a learning experience for the partners. When they started, they hadn’t written what’s known as a buy-sell agreement that creates a process and sets a price for buying out a partner.

Florida Business Property Division

I have written about property division recently. Florida is an equitable distribution state when it comes to dividing businesses 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.

There are several factors to know whether a business interest is marital. First, you will need to look at the date of marriage and the date the business interest was acquired.

Additionally, you should look to the source of funds used to start the business, and also if there were money and labor contributions to the business given by either spouse during the marriage. In distributing 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.

Whenever an agreement cannot be made between the spouses, the court’s distribution of marital assets or marital liabilities must be supported by factual findings and be based on competent evidence.

Once you have determined whether an interest in a business is marital, how do you actually determine what that interest is worth?

There are three approaches to value a business interest: (1) the asset approach; (2) the income approach; and (3) the market approach.  Each approach has inherent strengths and weaknesses.

Any valuation expert should consider all three approaches; however, it is often the case that all three approaches cannot be applied.

Back in business

The emotional fallout from a divorce can affect co-owners and employees. In his settlement with his wife, Jeffrey Deckman agreed to pay her $100,000 over four years; that amount was half what his telecommunications business was valued at.

Deckman borrowed money to make the payments, but having that debt hanging over him created stress that spilled over to his company.

“I started getting edgy, short-tempered, pushing hard for (sales) numbers that I never pushed so hard for before.”

He began fighting with his two business partners, and the discord affected everyone who worked there. It took six months for Deckman to realize what he was doing. “It showed me on a certain level that I hadn’t accepted responsibility for the deal I made,” he says.

But by the time Deckman understood that “I was making people pay,” he had damaged his relationship with his partners and staffers. In 2005, two years after the divorce, he realized that he needed to withdraw from working in the company, and in 2008 he sold his stake. Deckman, who now does consulting for small and mid-sized companies, believes despite losing his share of the business that he did the right thing in his divorce settlement.

He says of his ex-wife: “Today, years later, we are great friends and our children benefit greatly because of it.”

The Detroit News story is here.


Jump Street

So much for The Vow. Channing Tatum and his wife came out Fighting, announcing their divorce. The appreciation of their properties and investment makes their property division quite The Dilemma – even if they don’t become Public Enemies.

This is the End

The former couple, Channing Tatum and Jenna Dewan, both 37, announced their separation on Monday after almost nine years of marriage and after welcoming their daughter in 2013.

We have lovingly chosen to separate…love is a beautiful adventure that is taking us on different paths for now [who writes these? ed.].

According to People, it’s estimated that Tatum made $60 million in 2013 for movies like The Vow, 21 Jump Street, Magic Mike and G.I. Joe: Retaliation. He also launched his own vodka line during the marriage.

Property Division

I’ve written extensively about property divisions. Equitable distribution, as property division is called in Florida, requires courts to set aside each spouse’s non-marital assets and debts, and then distribute the marital assets and debts.

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

Marital property then, could include Tatum’s vodka business and other valuable assets purchased during the marriage.

Step Up

Complicating matters is that Tatum was not as well-known when he married. After their marriage both of their careers grew, the stock market rebounded, and home values rocketed.

The Tatum divorce shows how stakes can rise during a marriage, and how improvements to marital – and even non-marital or premarital assets – can come into play.

Florida recently amended a law dealing with whether there is a marital portion of a nonmarital house with a mortgage paid down by marital money, and if so, how to divide the marital portion.

The issue of the appreciation of non-marital property paid 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 new law amends our statute, and establishes a new statutory formula.


The best way to avoid the process of an expensive property division case is to have a prenuptial agreement and a post-nuptial agreement to discuss these issues before the divorce.

Alternatively, the issues can be taken care of in a private mediation. As a last resort, they will have to fight the case in court, and have a judge decide the issues.

As a general rule, divorce litigation is something that should be avoided because things go haywire. Court battles are long, painful and expensive.

One of the other Side Effects, is that divorce also bleeds into every aspect of a person’s professional and personal life.

The People article is here.


The Engagement Ring

If the luck of the Irish holds, your engagement diamond may be yours forever. Diamonds, given to you after someone asks the question: “will you marry me?” with a “yes” to follow, are a contract. This is why so many of them end up in court property division cases.

The Engagement Ring Tradition

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.

I’ve written about engagement rings before. 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?

Engagement Rings in Court

After an engagement ring is given, and if the couple doesn’t marry, in New York the law deems a broken engagement as no one’s fault. Accordingly, the ring should be given back to the giver, with few exceptions. Most states have adopted that approach.

This is true in Florida. Lawsuits to recover an engagement ring by disappointed donors usually are resolved by courts looking to see if the engagement was terminated by the donee or by mutual consent of the parties.

The rationale is that rings are given on the implied condition that a marriage ensue.

Once a marriage proposal is extended and accepted — once the promise is made — no matter what day of the year, that ring is no longer considered a gift. It’s a contract to enter into marriage.

Most states embraced the no-fault rule after the 1997 case of Heiman v. Parrish. There, the Kansas Supreme Court decided that no matter who broke the engagement, the ring should be given back to the giver if the parties don’t marry.

“Ordinarily, the ring should be returned to the donor, regardless of fault,” the court found.

But Montana hasn’t followed the rule. Montana classifies the ring as an unconditional gift. The recipient keeps it. California and Texas take a middle-of-the road approach: the recipient of the ring is expected to return it, unless the giver called off the engagement.

The general rule in Florida 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.

If the engagement ring is viewed by the court as a non-marital asset, it is not subject to equitable distribution in divorce proceedings, and the spouse keeps it as their own.

The New York Times article is here.


Houses and Spouses

Once you’ve decided to divorce, new decisions need to be made: who is going to move out of the house, and are you going to sell the house – or not. Florida’s property division statute requires distributing the marital property, but is not exactly a how-to guide. This post looks at some options.

Deciding Whether to Sell

To make the decision more difficulty, there’s really no right or wrong answer to whether you should sell or keep a house. Your decision will depend on various factors.

Some of the factors influencing the decision to sell are things like your personality, is the house titled in both of your names, are there children, if so, where are the best schools, and how far away are the two parents’ homes.

Equitable Distribution

I’ve written about houses and property divisions before. In Florida, every divorce proceeding the court has to set apart nonmarital property, and distribute the marital property.

Florida judges always begin with the premise that the property distribution should be equal, unless there is a reason for an unequal distribution based on several factors.

One of the factors the court has to consider is the desirability of keeping the home for the kids or a spouse, if it’s equitable to do so, if it’s in the best interest of the child, and financially feasible.

Delaying the Sale

Some spouses decide to sell, but schedule the sale months or years into the future. This happens when a couple has kids, and both parents agree that the house shouldn’t be sold to preserve the school district or allow for easier timesharing.

There are other problems in a keeping a house in which your name is still on title. In the even that your ex-spouse does not pay the mortgage timely, your own credit will suffer the late notices.

And, if someone invited to your old home is hurt, that person will sue the record title owners for their damages. If your name is on title as an owner, that’s you! Making sure you have decent insurance on the house may be in order.

Selling Now

If you can’t wait for years, and need to sell immediately, there’s a silver lining.

A fresh start and new beginning after a complete division of all of the assets tying you together with your Ex is the best way to go forward for some people.

However, there’s a cost of sale. When you sell your house, you pay a commission, and other expenses, like taxes, title expenses, repairs which can average about 10 percent of the sale price.


This is one of those modern ideas that sound so crazy, it just might work. With nesting, the kids live in the house, and the parents take turns living there. The parent not in the home often has an apartment that the divorced couple rent and share the cost of.

The U.S. News and World Report article is here.


Unequal Property Division

A Husband recently demanded an unequal property division in his divorce. He wanted more than half of a $225 million fortune, and for his Ex to get about $6 million. He claimed he was entitled to more than half because of his “genius”. Are you entitled to more than half in a divorce?

Valuing Genius

Randy Work, 49, a former executive at Texas-based private equity firm Lone Star, had first claimed that his wife of 20 years, Mandy Gray, was entitled to only $6m because she had an affair with the couple’s personal physiotherapist.

The pair, who are both American and have two teenage children, met in 1992 and married in 1995. They split up in 2013 when Gray began an affair with the couple’s physiotherapist, 44, who she now lives with in a rented flat in Kensington.

A British high court judge rejected the Husband’s claim that he made an “exceptional contribution” to the marriage and was therefore entitled to more than a 50-50 split of the couple’s assets, which include a mansion in West London, complete with swimming pool and fitness center and a ski lodge in Aspen.

Ruling on their divorce in 2015 Justice Holman told the businessman that his wealth contribution – which Work said totaled more than $300m in 10 years – was not “wholly exceptional” and rejected his claim to be a financial “genius”.

“I personally find that a difficult, and perhaps unhelpful, word in this context,” Holman said. “To my mind, the word ‘genius’ tends to be overused and is properly reserved for Leonardo da Vinci, Mozart, Einstein and others like them.”

Work, who has spent at least $3m fighting to keep his wife from collecting half of the family fortune, took the case to the court of appeal which on Tuesday unanimously rejected his appeal against the trial judge’s ruling.

Florida Property Division

I’ve written about property division in Florida many times 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 nonmarital assets and debts, and then distribute the marital assets and debts between the parties. In dividing the marital assets and debts though, the court must begin with the premise that the distribution should be equal.

However, if there is a justification for an unequal distribution, as in the Work divorce, the court must base the unequal distribution on certain factors, including: the contribution to the marriage by each spouse; the economic circumstances of the parties, the duration of the marriage, or any interrupting of personal careers or education.

Additionally, courts can consider the contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both the marital assets and the nonmarital assets of the parties.

However, courts generally can’t base unequal distribution on one spouse’s disproportionate financial contributions to the marriage unless there is a showing of some “extraordinary services over and above the normal marital duties.”

The English Divorce

During the divorce hearing Holman had said the case “should be so easy” to settle as there was “plenty of money to go round” and criticized the couple for descending into “unedifying and destructive pugilism”.

“In our view the husband has failed to demonstrate that Holman J’s decision was wrong,” three court of appeal judges said.

London has become known as the divorce capital of the world because British judges tend not to discriminate between breadwinner and homemaker and order equal splits of combined fortunes.

However, Work had hoped to convince the court of appeal judges to allow him to join those few men who had been granted more than half of the combined assets in a divorce in recognition of the “wholly exceptional nature” of their success.

Holman had ruled that although Work was an “astute businessman”, Gray was a “highly intelligent” woman who had given up her career to follow her husband to Tokyo, where he made hundreds of millions of pounds exploiting the Japanese financial crisis.

“A successful claim to a special contribution requires some exceptional and individual quality in the spouse concerned. Being in the right place at the right time or benefiting from a period of boom is not enough,” Holman said.

“It may one day fall for consideration whether a very highly paid footballer, who is very good at his job but may be no more skillful than past greats, such as Stanley Matthews or Bobby Charlton, makes a special contribution or is merely the lucky beneficiary of the colossal payments now made possible by the sale of television rights.”

Holman said Work and Gray, 47, had been “two strong and equal partners” and he would not have been able to amass his vast fortune without her contribution.

The Guardian article is available here.


Dissipation: Wasting Money in Divorce

Mary J. Blige, has filed for divorce from her estranged husband, Martin “Kendu” Isaacs. In court filings, there are allegations that he spent hundreds of thousands of dollars on his girlfriends. How does this impact the property division?

Mary has won nine Grammy Awards, four American Music Awards, and has recorded eight multi-platinum albums. She is the only artist with Grammy Award wins in R&B, Rap, Gospel, and Pop. However, she is now concerned about dirty tricks in divorce.

Dirty Tricks

Some couples divorce in a business-like, and even a friendly way. They recognize that coming to a fair end as quickly as possible allows them to get on with their lives.

However, there is no shortage of dirty tricks in divorce. One of the most common is to “dissipate,” or intentionally squander money so a spouse can’t get a fair share of it in the divorce.

Mary and her husband Martin married back in 2003. The divorce cited irreconcilable differences as the reason for the split. The couple has no children together. Mary is purportedly asking the judge to deny Martin’s ability to get spousal support.

According to TMZ, in recent filings, Martin is accused of having dissipated $420,000 of the parties’ marital funds. Martin was Mary’s manager. So, it could be that much of the money allegedly spent on himself or a girlfriend can be chalked it up as “travel charges.” However, Mary alleges the $420,000 in expenses were not business-related.

Property Division

In Florida divorces, courts distribute the marital assets and liabilities between the parties with the premise that the distribution should be equal, unless there is a justification for an unequal distribution. I’ve written about various aspects of property division before.

Some of the factors to justify an unequal distribution of the property include things like the financial situation the parties. The length of the marriage, whether someone has interrupted their career or an educational opportunity, or how much one spouse contributed to the other’s career or education.

Dissipation and Waste

One of the relevant factors courts look to is whether one of the parties intentionally dissipated, wasted, depleted, or destroyed any of the marital assets after the filing of the petition or within 2 years prior to the filing of the petition.

Spouses could dissipate assets by spending money on girlfriends, as Mary alleges. Other instances of waste have included gambling losses, and drug usage. Some people would rather lose the money outright than split it with their spouses.

Where this kind of marital misconduct results in a depletion or dissipation of marital assets, it can serve as a basis for unequal division of marital property. Alternatively, the misconduct can also be assigned to the spending spouse as part of that spouse’s equitable distribution.

Martin is purportedly asking for more than $110,000 per month in spousal support, which Mary objects to. Mary is quoted as saying: “I am not responsible for supporting [Martin’s] parents and his children from another relationship which he lists as ongoing monthly expenses.”

The TMZ article is here.


Can Your Pre-Marital Property Be Divided?

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.