Most people get married truly believing that it will be forever. Divorce statistics, however, indicate that “forever” is not always the case. Family law practitioners usually recommend that couples protect themselves by entering into a contract which spells out exactly what each party is entitled to in the event of divorce – pre-nuptial or post-nuptial agreements. Although this is the smartest option, it is often distasteful to the loving couple. For those couples who opt out of contractually protecting themselves, knowledge of Florida law is imperative to avoid unintentionally gifting the other spouse with typically one-half of the assets they owned prior to the marriage.
In a divorce, the court must divide the assets and liabilities acquired by the couple during the marriage. In Florida, this is done on an equitable basis. Florida Statute 61.075 sets forth the basic guidelines for how the court should divide the parties’ assets and liabilities. Section 61.075(a) defines marital property. Generally, the court determines the assets and liabilities the parties had on the date of the marriage and on the date the petition for dissolution of marriage was filed. The court deems all of the assets and liabilities acquired between these two dates as marital assets which must be divided between the parties during the divorce. Non-marital property is defined in section 61.075(b). Normally, assets that a party had prior to the marriage are considered non-marital assets, and are not subject to division by the court as part of the divorce. The same would apply to assets inherited during the marriage, or obtained by gift and other situations defined by 61.075(b); these assets would be considered non-marital and not subject to division during the divorce.
The concept seems simplistic and can be if: (1) the parties keep their non-marital assets completely segregated from the marital assets during the marriage; and (2) no marital labor or marital money is used to enhance the value of the nonmarital assets. This usually is not the case, as during the course of a marriage the parties are generally running their lives based upon all available finances. Thus, in the midst of the divorce the parties wind up litigating whether certain assets have become marital in nature and subject to division. The law in this area is extremely complex and requires extensive knowledge of the relevant statutes and case law. However, as set forth below, there are certain general concepts that can be followed to lessen the possibility of making an unintended gift of nonmarital assets to a party’s spouse, including finances and trusts.
Real estate is one of the areas where parties often make an unintended gift of their non-marital asset to the marital estate. If one party owns real estate prior to the marriage, and then during the marriage transfers the real estate from his or her name into both names as “tenants by the entireties,” the court will presume that the party transferring the real estate intended to make a gift of the property to the other party. This often comes into play when one party wants to refinance a previously owned home. Even if the transfer is made into joint names as “tenants in common,” arguments are made during a divorce that the asset is now marital.
Another method of unintentionally gifting a portion of your pre-marital real estate occurs when marital money is used to pay down the mortgage on the property or is used to make improvements. This situation involves complex legal concepts, which are beyond the scope of this article. There are certain arguments that can be made to overcome the gift presumption, or to attempt to preserve at least a portion of the non-marital character of the asset, but it almost always results in heavy litigation and large expenditures in attorney’s fees. See Kaaa v. Kaaa, 9 So.3d 756 (Fla. 2d DCA 2009). Thus, the bottom line with real estate is that under no circumstances should real estate be transferred into joint names during a marriage unless a gift is intended, nor should marital money be used to pay down the mortgage, or improve the property (nor should marital labor be used to improve the property), unless there is a contract indicating that no gift is intended and the property shall remain the original owner’s non-marital property.
Historically, the presumption of gift concept only applied to real property and did not come into play when a bank account, which was owned by one party prior to the marriage, was transferred into joint names. However, in 2008, the Florida statutes were amended to provide that the presumption of gift also applied to personal property titled as tenants by the entireties. Again, even if the property is not transferred into joint names as tenants by the entireties, the fact that the account is now in joint names raises substantial issues as to the marital or non-marital character of the asset. Thus, if a party owns a bank account prior to marriage (or any other assets for that matter, including brokerage accounts and the like), the account must stay in that party’s sole name to avoid potentially making an unintended gift of the account to the party’s spouse.
However, keeping the account or asset in your sole name is not enough. Even if the bank account remains in a party’s sole name, it still may become a marital asset, either in whole or in part if the party commingles marital and non-marital funds into the account. For example, if one spouse has a bank account with $100 prior to the marriage, and then during the marriage deposits a paycheck of $10 into that account, the account is now commingled because it contains non-marital funds ($100) and marital funds ($10 earned by marital labor, which does not necessarily require that it be earned at a job – marital labor would also include managing a brokerage account resulting in an increase in value of the account).
There are several theories and arguments that can be made, including a request for inequitable distribution of the marital estate, to try to overcome the commingling issue. However, as with real estate, these types of issues result in substantial litigation and attorney’s fees. Thus, the safest method of assuring that you do not unintentionally make a gift of your non-marital assets to your spouse is to: (1) enter into a pre-nuptial or postnuptial agreement, which indicates that an asset will not lose its non-marital character even if certain actions are taken during the marriage; or (2) keep your non-marital assets segregated and pristine and only transfer them into joint names or use them for a marital purpose if you intend to make a gift. Doreen Yaffa