MARRIED IN FLORIDA: HOW DO YOU LIKE YOUR PRE-NUP?

What’s that you say, you don’t have a Pre-nuptial Agreement. Sure you do you just didn’t negotiate it, write it or sign it. You didn’t do these things because the State of Florida wrote it for you and as far as your assets and liabilities; home, bank accounts, vehicles, businesses, retirement accounts, credit card debt, loans, taxes etc… ; are concerned the agreement goes something like this:

At the time the parties seek to end their marriage, regardless of the reason, they must first determine what assets and liabilities are marital and non-marital and then they shall set apart to each spouse that spouse's non-marital assets and liabilities.

But what are the marital and non-marital assets you ask. Not to worry, the State has taken care of that for you too: Paraphrasing from Florida Statue 61.075 with examples and comments italicized, marital assets and liabilities include:

1. Assets acquired and liabilities incurred during the marriage, by one spouse alone or by both of them together. That’s right, even if your spouse has a credit card in his or her name only and you didn’t know about it, your responsible for some portion of it.

2. The enhancement in value and appreciation of non-marital assets resulting either from the efforts of either party during the marriage or from the contribution to or expenditure thereon of marital funds or other forms of marital assets, or both. Ok, so lets assume you owned a business before you got married and you’ve continued to work and expand that business for the past ten years since you got married, well your spouse also equitably owns a portion of that business.

3. Spouse to spouse gifts during the marriage. Yep, that beautiful gold watch your spouse bought you for your last birthday, he of she is entitled to some portion of its value.

4. All vested and non-vested benefits obtained during the marriage in retirement and insurance plans. Yes, this would include your company 401K retirement plan and similar types of accounts.

5. All real-estate tilted in both parties’ names, whether acquired prior to or during the marriage, shall be presumed to be a marital asset. If you owned a home before the marriage and then changed the deed to reflect both you and your spouse are owners of the home it is presumed that you made a gift of one half of your interest in the home to your spouse. In addition, if you purchased a home during the marriage and paid for it with only funds obtained from your employment, obtained a mortgage in only your name and titled only in your name, your spouse is still entitled to a equitable share of the home’s value at the time of divorce.

6. All personal property titled in both parties names, whether acquired prior to or during the marriage, shall be presumed to be a marital asset. Received an inheritance and placed it into a joint bank account you hold together with your spouse you just turned that non-marital asset into a marital asset that your spouse can receive a share of.

OK, so now we know what your State of Florida provided Pre-nuptial Agreement defines as a marital asset and liability what are the non-marital assets that you may, not necessarily will, get to keep after your divorce and what liabilities may you avoid. Again paraphrasing from Florida Statue 61.075(a) with examples and comments italicized, non-marital assets and liabilities include:

1. Assets acquired and liabilities incurred by either party prior to the marriage. But see number six above, if you change the title of those assets to reflect joint ownership or commingle non-marital liabilities with marital liabilities they may not remain non-marital assets and liabilities. Take for example Bob and Sue, at the time they got married Bob had $10,000 of non-marital debt (more appropriately referred to as pre-marital debt) on credit card A. During the course of the parties marriage Bob obtains credit card B and due to the great new lower interest rates Bob transfers the remainder of his balance from credit card A to credit card B and Bob and Sue continue to utilize credit card B for other purchases and make monthly payments toward the entire balance during the course of their marriage. At the time of Bob and Sue’s divorce credit card B has a balance of $8,000 but Sue remembers Bob’s $10,000 transfer of his pre-marital debt to that card and feels she should not be responsible for the same. Sue of course is correct, however, Bob’s pre-marital debt has now become so commingled with the marital debt that a court is more likely than not to rule that all debt associated with credit card B is marital debt.

2. Assets acquired separately by either party through inheritance. Again see the example under number six above. Understand now why I said you “may” get to keep these assets.

3. All income derived from non-marital assets during the marriage unless that income is used on a regular basis to pay for martial liabilities. Again were back to the “may” get to keep issue.

4. Any liability incurred by forgery or unauthorized signature of one spouse signing the name of the other spouse. Any such liability shall be a non-marital liability only of the party having committed the forgery or having affixed the unauthorized signature.

5. Assets and liabilities excluded from marital assets and liabilities by valid written agreement made by the parties. What? “valid written agreement”. You guessed it, the State allows you to avoid the pre-nuptial agreement it has made for you if you’d like to make your own pre-nuptial or post nuptial agreement with terms you and spouse agree to, as long as it is validly written and executed.

Continuing on with our State of Florida provided pre-nuptial agreement, once the parties determine what assets are martial and non-marital the marital assets and liabilities should be equitably distributed to each party with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors, including:

1. The contribution to the marriage by each spouse, including contributions as a parent and homemaker.

2. The current economic circumstances of each party.

3. The length of the marriage.

4. Any interruption of personal careers or educational opportunities of either party.

5. The contribution of one spouse to the personal career or educational opportunity of the other spouse.

6. The desirability of retaining any asset, such as a business, intact and free from any claim or interference by the other party.

7. The contribution of each spouse to the parties’ financial betterment or demise. As an interesting note to this factor, during a recent divorce involving a professional race car driver it was put forth by the Husband/driver that he should be entitled to retain a larger portion of the martial assets due to the inherent dangerousness of his occupation and the income realized by the parties due to his personally risky employment. The case was settled without the court ruling on the Husband’s novel pleading.

8. The desirability of keeping the marital home as a residence for any dependent child, when it would be equitable to do so, it is in the best interest of the child or that party, and it is financially feasible for the parties to do so until the child is emancipated or some other time.

9. The intentional dissipation, waste, depletion, or destruction of marital assets after the filing of the petition or within 2 years prior to the filing of the petition. We’ve all heard the urban legends of one spouse selling the other spouse’s expensive collector car for pennies on the dollar. This covers that situation assuming there are other marital assets available to balance the scornful sale.

10. And finally the all encompassing: any other factors necessary to do equity and justice between the parties.

Now you might be reading this and saying to yourself that most of this sounds fair, or not, but wait there’s more.  Not only did the State of Florida write this pre-nuptial agreement for you but it also from time to time will modify the agreement without any direct notification to you. Case in point, lets assume you owned a home before you got married and on the day you got married the home was worth $250,000 with an outstanding mortgage of $100,000. Let’s further assume that you continued to pay down your mortgage after the day you got married from income you received from your employment.

Some 15 years later you find yourself in the middle of a divorce and now that same home is worth $300,000 and the mortgage has been paid down to $50.000. If you had gotten divorced a few years ago your spouse’s share of that home would be $25,000. An amount equal to 50% of the amount the home’s mortgage was reduced by during the marriage and nothing was given to your spouse just because the homes market value increased $50,000 over the 15 year period.

However, if you were getting divorced today your spouse’s share would have increased by another $25,000 to account for one half of the increased market value of the home realized over the 15 year period of the marriage for a total marital share of $50,000.  So now your spouse receives both ½ the value the mortgage was reduced by, as well as ½ of the increase in the market value of the home that was realized during the marriage.

So even assuming you were aware at the time of your marriage what Florida was doing with regard to valuing marital shares of pre-marital homes and you were fine with that calculation. I think we can safely say that you wouldn’t be fine with the change in that calculation that was put into place without your consent or consultation.

Think a pre-nuptial or post-nuptial agreement might be in order for you and your prospective or current spouse? No wait, don’t answer that yet. Wait for our next newsletter to see what the State has to say about the alimony component of your State of Florida provide pre-nuptial agreement.