What is Equitable Distribution?
“Equitable distribution” refers to the way that spouses in Florida divide their property and debts in a divorce.
Generally “equitable” means a fair division of assets and liabilities.
Dividing the family's property during divorce can be challenging, especially if the marriage has accumulate a lot of big ticket items, such as: houses, rental property, retirement and pension plans, stock options, restricted stock, deferred compensation, brokerage accounts, closely-held businesses, professional practices and licenses, etc. When dividing assets, the Court considers the value of the asset, amount of debt incurred by each party, and is the property marital or separate property.
Division of Property by Agreement
Couples can make their own agreements about dividing property either on their own or with the help of a mediator. Courts generally uphold such agreements as long as they are in writing and each spouse has had an opportunity to consult with an independent attorney.
Division of Property by a Judge
A judge can make an unequal division after considering all of the relevant circumstances, including the following:
- the length of the marriage
- each spouse’s overall economic circumstances
- the desirability of allowing the couple's minor children, or either spouse, to continue living in the marital home
- each spouse’s contributions, including improvement of marital or non-marital assets, and contributions to the marriage either as an income-earner or as a parent or homemaker
- whether either spouse interrupted a career or education during the marriage or contributed to the other spouse’s career or education
- each spouse’s debts and liabilities, and
- whether either spouse intentionally wasted or destroyed marital assets either after the divorce petition or within the two years preceding it.
Another factor Courts consider is the difficulty of dividing certain assets. For example, in most cases a judge would try to award a business started by one spouse during the marriage entirely to that spouse and award other property or money to the other spouse to make up for the marital interest in the business. A court won’t divide up a home and award each spouse part of it, but might order the couple to sell it and divide the proceeds. If a marital home is the couple’s only major asset, a judge might also order the couple to wait until some future date to sell the home and divide the proceeds, and award one spouse a temporary right to live in the home. This is a particularly common result when the couple has minor children still living in the home.
Value of Asset
Assets should not necessarily be divided simply based on their current dollar value. You need to understand which assets will be best for your short- and long-term financial security. This is not always easy to discern without a thorough understanding of the asset itself -- its liquidity, cost basis and any tax implications associated with its sale.
Separate and Marital Property
Before dividing property, the Court must determine whether either spouse owns any of the property separately. Separate, or “non-marital,” property is not subject to division in divorce. Property is separate if one spouse owned it before marriage or acquired it during marriage as a gift (not including gifts from the other spouse) or by inheritance. Separate property also includes:
· Any property that was owned by either spouse prior to the marriage;
· An inheritance received by the husband or wife (either before or after the marriage);
· Assets and debts a couple defines as separate property in a valid written agreement (a premarital agreement, for example)
· Income from separate property, unless the spouses have treated the income as marital property, by “commingling” it, for example (see below), and
· Items exchanged for or purchased with separate property.
Please Note: Many couples come into a marriage with separate property then during the course of the Marriage begin to commingle assets. For example, if you re-title your separately owned condo by adding your husband as a co-owner or if you deposit the inheritance from your parents into a joint bank account with him, then that property will most likely now be considered marital property.
Marital property consists of all income and assets acquired by either spouse during the marriage including, but not limited to: Pension Plans; 401Ks, IRAs and other Retirement Plans; Deferred Compensation; Stock Options; Restricted Stocks and other equity; Bonuses; Commissions; Country Club memberships; Annuities; Life Insurance (especially those with cash values); Brokerage accounts -- mutual funds, stocks, bonds, etc; Bank Accounts -- Checking, Savings, Christmas Club, CDs, etc; Closely-held businesses; Professional Practices and licenses; Real Estate; Limited Partnerships; Cars, boats, etc; Art, antiques; Tax refunds.
Please Note: All other property that is acquired during the marriage is usually considered marital property regardless of which spouse owns the property or how the property is titled. For example a home that is purchased during a marriage that is only titled in husband’s name, is equally divided between the spouses.
Hopefully this basic description of how assets get divided in divorce will help you as you are going through your divorce. But as you can see, this can be an extremely complicated process filled with unseen potholes. Please contact The Marin Law Firm, P.A., at 407-207-1902 to schedule a free consultation.