Marital VS Non-Marital (Separate) Assets in a Florida Divorce

When married couples go through a divorce, it is important to understand how the division of assets in a settlement works. As the state of Florida is not a community property state, a divorce attorney will have to distinguish between marital and non-marital assets, ensuring there is fair distribution among the spouses. Florida operates under equitable distribution laws. This means marital property is distributed fairly, though not necessarily divided equally, between the spouses.

Properties, possessions, and financial holdings acquired during marriage constitute marital property, along with real and personal property held as tenants by the entireties. During a divorce, these are subject to equitable distribution.

On the other hand, non-marital property or separate property are those acquired by either spouse before marriage. Some examples would be inheritances and non inter-spousal gifts.

What Are Marital Assets?

Marital property refers to the properties, possessions, and financial resources acquired by a couple during their marriage. These include financial accounts, businesses, real and personal property, and more.

These assets are considered joint property owned by both spouses, regardless of which spouse originally earned or acquired them.

Likewise, if a non-marital asset appreciates due to one or both spouses spending marital funds to improve it, the value of the enhancement, which is the difference between the present value and the value before marriage, can be considered marital property.

Also, when one spouse gives another spouse a gift, that gift would be considered marital property.

Real and personal property held as tenants by entireties is also considered a marital asset. “Tenants by the entireties” is a specific form of ownership that applies only to married couples.

To be categorized as marital property, the property will fall under the following criteria.

• • The property must be controlled and owned jointly

• • Both spouses must have an identical interest in the property

• • They must be married during the acquisition

• • The spouses’ interest must have been granted by the same instrument

• • The spouses’ interest must have begun at the same time

It is important to determine what is considered a marital asset to ensure every spouse receives equitable distribution and financial fairness. It’s also in compliance with legal requirements governing divorce cases.

Failing to properly categorize assets can lead to disputes and delays. In many instances, properly categorizing marital property becomes the basis for negotiation or court decisions, leading to a smoother and more amicable divorce process.

What Types of Assets Qualify as Marital Assets?

Generally speaking, Florida statutes clarify that the types of assets considered marital property are those acquired during the marriage.

These include the following types of property.

• • Real estate, including the primary home and investments

• • Financial accounts, including bank, retirement, and investment accounts

• • Ownership of business interests and income earned from businesses

• • Vehicles, household items, and debts

Real Estate

Marital real estate includes both primary and investment properties. For real estate to qualify as part of marital property, it must be acquired during the marriage.

Primary Home

The primary home where the couple resides is generally considered marital property. However, it is considered marital property only when the home was acquired during the marriage.

Other factors, such as mortgages and equity in the home, will also be considered under the equitable distribution laws.

Investment Real Estate

Other properties purchased during the marriage but not used as residence are also considered marital assets.

Under the equitable distribution laws, mortgages and equity on the property will also be considered for property division.

Bank Accounts

Marital funds in bank accounts, including checking and savings are generally considered marital property.

Banking accounts with joint control or those established during the marriage are subject to equitable distribution laws.

Retirement Accounts

Dividing retirement accounts during a divorce doesn’t have to be complicated as long as the distinction as to when contributions are made is clear. A retirement account, such as a 401(k) and IRA, is considered marital property if contributions on the retirement accounts were made during the marriage.

For example, let’s say a husband works for a company that provides a 401k. Before the marriage, the husband had accumulated $20,000. After marrying, he accumulated an additional $50,000 in his retirement fund during the marriage, before his divorce.

Because retirement plans form part of property division in divorce cases, the husband’s $20,000 will be considered non-marital property, while the $50,000 will be considered marital property.

Florida statutes also qualify vested and nonvested benefits, rights, and funds accumulated during the marriage in any retirement fund, pension, profit-sharing, annuity, deferred compensation, and insurance plans as marital funds.

NOTE: Social Security is not considered a marital asset. It is considered income. Income from Social Security can be used to fund alimony after the divorce is finalized.

Investment Accounts

Mutual funds, investment accounts, brokerage accounts, and holdings like precious metals, including income derived from the following, are considered marital property if these were acquired or funded during the marriage.

Business Interests

Business interests and income derived thereof, whether in a company or a professional practice, can be considered marital property.

Parameters include the acquisition or growth of the business during the marriage. As to how a business is valued during a divorce, this is subject to court discussion.

Vehicles

Vehicles acquired during the marriage, regardless of individual ownership, constitute marital property subject to fair distribution.

For example, a vehicle acquired during the marriage with joint funds is considered marital property.

Household Items

Household items, ranging from furniture to jewelry, antiques, and collectibles, constitute marital property if acquired during the marriage.

Debts

Both assets and liabilities incurred must be divided fairly.

Debts incurred during the marriage, such as credit card debt and mortgages, are also considered marital liabilities and are subject to equitable distribution.

How Are Marital Assets Divided in a Florida Divorce?

Florida is not a community property state. Florida is an equitable distribution state, which means marital property is not automatically divided equally. Below are the steps in marital property division in Florida.

1. 1. Before going to court, spouses have the option to negotiate and draft a Marital Settlement Agreement (MSA) outlining the terms of the division of assets. If the MSA is deemed fair and meets legal requirements, the court may approve it, avoiding the need for a trial.

1. 1. If the spouses cannot agree on the division of property, the judge has the authority to make decisions on the allocation of marital property based on information presented during the divorce proceedings, ensuring these are divided fairly.

1. 1. Mediation is also a common approach in Florida divorces, where a mediator helps facilitate communication and compromise between the spouses to settle.

1. 1. In some cases, spouses may choose arbitration as an alternative to court litigation. An arbitrator, similar to a judge, is appointed to make decisions on the division of marital property. Arbitration is a private process that is still binding. This is a more flexible and expedited approach.

What Are Non-Marital Assets?

During a divorce settlement, non-marital property, sometimes called separate property, is the property excluded from the division of assets. Whichever party owns the non-marital asset will keep that asset after the divorce.

Assets acquired by either of the spouses prior to the marriage are considered separate property. Likewise, non-marital property includes real and personal property acquired by non-interspousal gift or inheritance.

The income received from non-marital property is considered a non-marital asset so long as the other spouse does not share in the proceeds or the income is not kept in a joint account. This is a common case for spouses who own rental property before marriage.

If there is certain property that would otherwise be considered marital property that married couples wish to exclude when they divide assets during a divorce settlement, these can be explicitly stated through a valid prenuptial or postnuptial agreement.

Properly identifying what is considered non-marital assets is crucial for financial planning post-divorce.

It allows each spouse to have a clear understanding of their financial standing and can contribute to a more stable and secure financial future.

Furthermore, distinctions as to whether an asset constitutes marital property or separate property promote fairness and clarity, expediting the divorce and property division process.

What Types of Assets Qualify as Nonmarital Assets?

The certain assets considered non-marital property include the following.

• • Inheritances

• • Gifts

• • Assets acquired through settlement or specified as non-marital property in a prenuptial agreement

• • Debts

• • Social security accounts and income derived from said accounts

Inheritances

How is an inheritance handled in a divorce? Generally speaking, inheritances, whether monetary or property, are considered separate property.

An inheritance, whether obtained during or prior to the marriage for the benefit of one spouse, is considered non-marital property unless the inheritance is placed into an account with joint control.

In this case, there is no way to tell which funds are marital or separate. This commingling constitutes marital property.

Gifts

Gifts received by one spouse, including primary and investment real estate, from a third party are often considered non-marital property.

Unless the gift is intended to be a joint marital asset as stated in a valid written agreement, it remains separate property.

Assets Acquired Through Settlement

Other assets obtained through legal settlements, such as personal injury settlements or insurance payouts, may be treated as non-marital property.

It is considered separate property when the settlement is received for the benefit of one spouse, independent of marital contributions.

Assets Specified as Nonmarital in a Prenuptial Agreement

Assets explicitly designated as non-marital property in a prenuptial agreement are typically treated as separate property during divorce proceedings.

Qualification parameters involve ensuring the prenuptial agreement is valid, enforceable, and clearly outlines the assets exempted from equitable distribution.

Prenuptial agreements, also called premarital agreements, can define certain assets and liabilities as separate property so it does not become marital property at any point during a marriage or divorce.

Debts

Debts incurred by one spouse before the marriage or specified as separate in a prenuptial agreement are often treated as non-marital debts.

It is also considered separate if it was not incurred for the benefit of the marriage.

Social Security

According to Federal statute, Social Security benefits are not divisible in divorce proceedings. Social security benefits after a divorce are the sole property of the individual, even when they are earned during the marriage.

How Are Nonmarital Assets Divided in a Florida Divorce?

Unlike community property states that split all property acquired during a marriage equally, a Florida divorce follows a distinct process that considers fairness, a prenuptial or postnuptial agreement, and the appreciation of separate property. Here are the essential steps:

1. 1. Before any division occurs, it is crucial to accurately identify and classify assets as either marital or non-marital property. Properties, inheritances, gifts, and assets acquired through settlements or specific designations in postnuptial agreements are considered separate property.

1. 1. If the couple has a valid and enforceable prenup in place, the terms outlined in the agreement regarding the division of non-marital property will generally be honored. Such agreements often specify which assets are to be considered separate property and exempt from distribution.

1. 1. The courts will ensure the agreement meets legal requirements. If valid, it will serve as a guiding document for the division of marital property.

1. 1. If a spouse had non-marital assets acquired before marriage, such as rental property, any increase in value or income derived from the non-marital property may be subject to fair distribution, taking into account the economic contributions and efforts of each spouse.

1. 1. When non-marital and marital funds are mixed or jointly used during the marriage, this is called commingling and can complicate the division process. The court will consider the contributions of the spouses, the length of the marriage, and other factors to determine the extent of the commingling.

1. 1. The spouse claiming separate property will bear the burden of proof by providing convincing evidence such as a prenup and financial records.

1. 1. If the spouses cannot reach an agreement on the division of non-marital property through negotiation or mediation, the court will intervene.

What is the Appreciation of Non-Marital Assets?

When a non-marital asset appreciates during the marriage, this appreciation is considered when determining how the increased value should be treated during the settlement of assets.

An example scenario is one spouse entering the marriage already owning a property. During the marriage, the real estate market experiences significant growth, leading to an increase in the value of one spouse’s separate property.

In the event of divorce, the appreciated value of this separate property may be subject to fair distribution.

The portions of the division of the appreciated non-marital property will be based on factors like financial contributions and efforts.

What is Active Appreciation of Nonmarital Assets

Active appreciation of non-marital property refers to the increase in value of assets owned by one spouse before the marriage or acquired through specific means, where the increase is directly attributable to the active efforts, contributions, or involvement of both spouses during the marriage.

In divorce proceedings, active appreciation becomes significant when determining the fair distribution of assets, as it recognizes the joint efforts that led to the appreciation.

The active appreciation of non-marital property is a result of efforts such as financial contributions, time, managerial skills, marketing skills, and the like.

How is the Active Appreciation of Nonmarital Assets Calculated?

The calculation of active appreciation of non-marital property during a divorce involves assessing the increase in value that directly results from the active efforts, contributions, or involvement of both spouses during the marriage. Here are the general steps:

1. 1. Determine the baseline value of the non-marital property at the time of the marriage.

1. 1. Assess the current market value of the non-marital property.

1. 1. Identify the factors contributing to its active appreciation, including specific efforts and contributions like managerial skills, time, effort, or financial investments of both parties during the marriage.

1. 1. Quantify the active appreciation by comparing its baseline and current value.

1. 1. Have the court evaluate and determine equitable distribution of the active appreciation considered as marital property.

Passive Appreciation

Passive appreciation refers to the increase in the value of a non-marital property without direct efforts, contributions, or active involvement by either spouse during the marriage. It often occurs due to external factors such as market trends, economic conditions, or changes in the value of an asset class over time.

The treatment of such appreciation on separate property is different from active appreciation. The value of the appreciation, in this case, is not considered a marital asset. That is because the increase in value is out of the control of both spouses.

To reiterate, since it is not directly tied to the efforts or contributions of either spouse during the marriage, the increased value is often considered the individual appreciation of the owning spouse’s separate property.

It is important to note that the owning spouse bears the burden of proof to claim such appreciation. This may include financial records, appraisals, or expert opinions that demonstrate the external factors influencing the increase in value.