How marital assets will be divided during a divorce is often the biggest topic for both parties, aside from how custody of the children will be divided. Many divorcing couples are surprised about the factors which can and cannot affect the distribution of marital assets, as many have gained the information they have through television or from what happened to a friend of a friend during his or her divorce. Some states operate under the rule of equitable distribution during a divorce, while others are known as community property states. In a community property state, the marital assets are split right down the middle, regardless of any circumstances which would make that action less than fair for one party. Florida is an equitable distribution state, which mean while the assets may not be divided 50/50, they will be divided fairly, taking into consideration all the factors in a specific marriage.
Marital Assets vs. Non-Marital Assets
Before any property can be divided in the state of Florida, it must be determined which assets are marital assets, and which are separate assets. Separate, or non-marital property is not subject to division in a divorce. This means the property one spouse came into the marriage with, or property which was gifted or left as a part of an inheritance to one spouse during the marriage is considered non-marital property. That is, these assets are considered non-marital, assuming the spouse kept the property separate during the marriage.
When Separate Assets are Commingled during the Marriage
If, however, one spouse came into the marriage with $50,000 in a savings account and a vacation home in Aspen, then added his or her spouse’s name to the savings account and sold the Aspen property to buy a marital home in Florida those assets become marital assets. In other words, to remain non-marital assets, money, property or other items must not be commingled with marital assets. Even if a new spouse’s name is not added to a bank account, but marital funds are added to the account, it will likely be considered a marital asset.
Pre or Post-Marital Agreements Can Determine Separate and Marital Property
Any assets or debts defined by the couple as separate property in a valid premarital agreement are also considered premarital property. If there is no pre or post-marital agreement governing certain assets, then all property and debts acquired by either spouse during the marriage will be considered marital property. It makes no difference if the assets or debts are jointly titled or are in the name of one spouse only. Assets include bank accounts, property, retirement accounts, profit-sharing plans and deferred compensation. Whether an asset is vested or not, meaning whether the right to receive the benefit depends on a future condition, it remains a marital asset.
Factors a Judge Will Take into Consideration When Dividing Marital Assets
When dividing marital assets during a divorce, the judge will consider the length of the marriage, the overall economic circumstances of each spouse, the contributions made by each spouse to improving marital assets, the contributions as income-earners, parents or homemakers of each spouse, whether a career or education was interrupted by one spouse to contribute to the other’s career or education, the debts and liabilities of each spouse, and whether either spouse intentionally wasted or destroyed marital assets.
Dividing Investments during the Divorce
So, once you have determined which assets are marital and which are non-marital, you may be wondering how your investments will be dealt with during your divorce. You and your spouse likely invested your money with a goal of earning money. Any appreciation of your investments, as well as any income generated by those investments could become a marital asset if that growth or income occurred while you were married. As an example, if one spouse received stock options as a “perk” of their job, and these stock options vested during the marriage, they will likely be treated as marital property. If one spouse purchased a rental property for $100,000, and, during the course of the marriage, that property appreciated to a worth of $350,000, then at the time of the divorce, the other spouse would be entitled to half of $250,000—the amount the value of the property increased during the marriage.
Issues to Consider
Spouses will probably have a Qualified Domestic Relations Order (QDRO) during the divorce if either spouse has pensions or other employer retirement accounts. A QDRO orders the plan administrator to pay the non-employee spouse the amount set forth by the court order or settlement agreement. If a QDRO is not properly prepared, there can be significant tax consequences. Retirement assets which are not in an employer plan such as IRAs, will require change of ownership documents. When a couple has been married at least ten years, the spouse married to a spouse who paid into the system could qualify to receive spousal Social Security benefits. All financial investment accounts and insurance policies must be checked to ensure the beneficiary is updated following the divorce.
Valuing Your Marital Assets
You likely receive a statement which tells you how much your investments are worth, however, this may not be the same as the amount you would receive if you cashed in or transferred those investments. The value could be the transfer value or the surrender value, therefore you may have to ask the investment company for an up-to-date valuation, transfer or surrender value. Typically, those marital investment assets subject to distribution are valued as of the date of filing of the divorce petition. If there is a significant increase or decrease in the value of the asset between the filing of the divorce and the completion of the divorce, that gain or loss is realized by both parties at the time of the actual distribution or sale of the investment.
Getting the Legal Help You Need during Your Florida Divorce
It is important to remember that your investments don’t have to be left to the mercy of a Florida court during your divorce. You and your spouse may negotiate your own settlement agreement, dividing your marital assets in ways which work best for you. Don’t forget to address tax issues if you do negotiate your own agreement. If an exchange is in accordance with the terms of your marital settlement agreement, the IRS will allow you to transfer taxable investments to your spouse, tax-free. In the future, however, should the receiving spouse decide to liquidate or sell the asset, that spouse could be liable for capital gains tax. Going through a divorce can be stressful, to say the least, The attorneys at The Family Law Place will carefully evaluate your marital investments, helping to ensure you receive an equitable share and are treated fairly.