Home sweet home: Figuring a marital interest in nonmarital assets

In a Florida divorce, unless the divorcing parties enter into an agreement of their own, the judge will divide marital assets and debts according to the principle of equitable distribution. This means, according to the applicable state statute, that the division should be equal, unless unequal distribution can be justified considering all relevant factors. 

First, the court determines which assets and debts are nonmarital and not subject to division, meaning owned or owed by one spouse separately. For example, nonmarital assets are those owned before marriage by one spouse or that was gifted to or inherited by only one of them.

New assets and liabilities acquire nonmarital status if received in exchange for nonmarital assets and debts. Income from nonmarital property remains nonmarital unless it becomes marital such as by comingling the income in an account with marital funds like wages received during the marriage by either spouse. Finally, the parties can classify property as nonmarital in a pre- or postnuptial agreement. 

Then, the marital assets (and debts) -- defined in the statute as property acquired or liability incurred during marriage, either individually by either one or jointly -- are equitably distributed. 

Active appreciation of nonmarital asset 

Active appreciation of nonmarital property is also marital, meaning the increase or appreciation in value of nonmarital property because of either spouse's efforts during marriage or through the investment of marital money or assets into the nonmarital asset. For example, active appreciation in value of a nonmarital home would result from the use of marital funds to renovate or remodel. 

Passive appreciation and reduction of mortgage principal on nonmarital residential property or other real estate subject to mortgage paid down by marital funds 

In response to an earlier Florida Supreme Court decision, the Florida legislature added new provisions to the equitable distribution statute effective July 1, 2018. The amendments direct how the court determines what portion of passive appreciation in nonmarital real property should be characterized as marital when the parties paid down a mortgage and note on it using marital money during marriage. 

For example, one spouse may have owned a home before the marriage that the couple used as the family residence during marriage. If they paid a mortgage on it with marital funds during marriage and the value appreciated, the court applies the formula set out in the statute to determine how much of the appreciation would be marital. 

The law also provides that either spouse can ask the court not to use the statutory formula if he or she can show it would be inequitable under the circumstances. 

The statutory amendments dictate that the total part of the originally nonmarital home or other real estate that should be classified as marital for purposes of equitable distribution in this situation are the sum of these components: 

  • The marital part of the passive appreciation according to the formula
  • The amount of mortgage principal paid down during the marriage with marital money
  • Any active appreciation 

This post introduces a complicated area of Florida divorce law. A family lawyer can answer questions about how the law is likely to impact a particular divorce.

 

 

  

 

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  • The Law Office of Daniel E. Forrest represents individuals in Fort Lauderdale in high-asset divorce matters. Daniel Forrest is board-certified family lawyer and mediator serving the South Florida area.
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