Marital vs. Non-Marital Assets & Debts
Assets and debts accumulated by either spouse during the marriage are, with certain exceptions, considered to be “marital”. For a party going through a divorce, the most important characteristic of a marital asset is that the court has the authority to divide the asset or debt between the parties, or assign the entirety of the asset or debt to one party. Before you can determine if equitable distribution of assets and debts is possible in your situation, first you must find out which assets and debts are considered "marital."
Marital vs. Non-Marital Assets & Debts in Florida
Another, easier way to understand marital assets and debts is by discussing the concept of the marital estate. In any Sarasota divorce, one of the first jobs of any divorce attorney is to determine the contents of the “marital estate”, or to say it yet another way, the property of the marriage.
In Florida divorce cases, the marriage is treated like a shared business. Imagine that two people co-own a business, and over the life of the business have purchased assets in the business’ name, and have borrowed money against the business.
It’s easy to understand that if the business is split up, the business owners are each entitled to their share of the value of the assets of the business, after making sure that all of the debts are accounted for. If one of the business partners owned some of the equipment before the formation of the business, that would logically remain his, separate from the distribution of the other business assets.
The assets of the business are just like the “marital estate”. What that means is, if you bring something into the marriage, whether it’s a piece of jewelry or a retirement account, that is generally considered to be non-marital, or not part of the marital estate. The exception is when you spend “marital labor” or any labor of yours, or your spouse’s during the marriage improving the value of that property.
Figuring Out Marital & Non-Marital Assets
As an example, consider a wife who owns a home prior to the marriage. During the marriage, the Wife spends some significant effort “fixing up” the house, which increases the value of the home. While the home was all hers prior to the marriage, the introduction of that labor, assuming that it resulted in an increase in the market value of the house, has now made at least a portion of that house’s value marital.
Another example is a husband who came into the marriage with a brokerage account. During the marriage he makes no contributions to the account whatsoever, but lets it grow passively along with the market. Because there was no marital contribution to this account, any increase in value belongs exclusively to the husband. Had he contributed any money to this account during the marriage, the court would have the task of determining what amount of this account is marital in nature, and subject to division.
There is a significant “gray area” when it comes to determining marital and non-marital assets in a Sarasota, Florida Divorce. When the marriage of the parties has come to an end, but neither party has formally filed for divorce, it is common to see a “race to the bottom” where both parties are liquidating assets, accruing debt, or concealing income in the hopes that the other party will have to bear half the burden of the marital expenses while not getting their full share of the marital estate.
Florida’s Statute: Marital Assets & Debts
Florida Statute 61.075 discusses the identification of marital assets, and provides us with “cut off” dates for determining when an asset is marital and when it is non-marital. The statute, in relevant part reads as follows:
“(7)The cut-off date for determining assets and liabilities to be identified or classified as marital assets and liabilities is the earliest of the date the parties enter into a valid separation agreement, such other date as may be expressly established by such agreement, or the date of the filing of a petition for dissolution of marriage...
This language is not always helpful, in that it states that the IDENTIFICATION of the assets as marital or non-marital is either when the parties enter into a separation agreement or when one of them files for divorce. While that seems helpful for identification of the assets, (or liabilities) there is a secondary consideration with respect to these assets and liabilities, which is their VALUE.
61.075 has this to say about what date to use for valuation of any piece of marital property or debt:
The date for determining value of assets and the amount of liabilities identified or classified as marital is the date or dates as the judge determines is just and equitable under the circumstances. Different assets may be valued as of different dates, as, in the judge’s discretion, the circumstances require.
Now this is where it gets interesting. Let’s again use the example of the wife’s house. The house is, admittedly, partially marital, as she used marital labor to spruce up the house, thusly increasing its fair market value. Now, let’s throw in a very real variable, that of the real estate market and its fluctuations. As we know, especially on the Gulf Coast of Florida, the value of real property can increase, or decrease dramatically over the course of just a few months. Getting a valuation date that benefits your client can be a huge factor in a Florida divorce.
In a Florida divorce involving significant real property, it seems that the value of the property increases (or decreases) dramatically right around the time of the dissolution. This means that the wife’s house, which was otherwise not valued by the husband, is now suddenly of a high value, thusly providing the husband with a healthy amount of equity in the residence, in part due to market appreciation.
Valuing Your Marital & Non-Marital Assets
The legislature has given the court significant leeway when it comes to valuing these assets. As cited above, the valuation date is almost any date that the court sees fit. This is a huge factor in a litigated Sarasota divorce, as the parties can each have their own experts providing not only the value of a business or piece of real property, but also the values across a specific date range.
Arguments for choosing one particular valuation date over another include marital contributions, one party’s dissipation or failure to maintain the asset, and just about any reasonable argument a Sarasota divorce lawyer can think of. The most important lesson in determining which assets and debts are marital vs. non-marital in a Florida divorce is ensuring that the appropriate values are assigned to these assets and debts.