Business Magazine | BABM | Legal | Business and Divorce

In a Florida divorce, when it comes to the equitable distribution of assets and liabilities, the first step is to determine which assets are marital, which ones are non-marital and which are a combination of both. After determining what assets the marital estate consists of and their values are ascertained, the Court equitably distributes the assets and liabilities between the Husband and Wife. There is a strong presumption that everything should be split equally, unless there is justification for an unequal distribution. Ultimately the purpose here is to ensure that one spouse does not automatically go from wealth to misfortune and vice versa.

Marital or Not? In simple form, marital assets are the assets that were incurred during the marriage. There are some exceptions which include, but are not limited to, inheritance and assets obtained from non-marital sources. Non-marital assets are the assets owned prior to marriage or acquired after separation or filing for divorce. As always, there are exceptions to the rule. A fact intensive analysis is needed for each substantial asset.

Business. If you obtain a business during the marriage the analysis is easy. The business was created during the marriage and thus, is a marital asset subject to equitable distribution. A business acquired prior to marriage is non-marital, but it does not completely insulate the business. A spouse may still have a claim against the non-marital business if the value of the business has increased during the course of the marriage. This is possible because Florida law defines a “marital asset” to include the “enhanced value and appreciation of non-marital assets” when the increased value resulted from the efforts of the Husband or Wife during the marriage or if marital funds were used to contribute to the increased value of the business. Thus, although a business (or any other asset) will retain its non-marital status, the appreciation or enhanced value is a marital asset subject to equitable distribution when that increase is due to the efforts of either spouse.

Determining the value of a business and the enhanced value is very complex. There are several different methods that may be used and the opinion of an expert is required. Consideration needs to be given to the marketability of the business, the speculative nature of a business, any value for the goodwill of any professional association, etc. Once the values (base and enhanced) of the business is established, then the Court can determine what portion is subject to equitable distribution. For example, if a non-marital start-up business is worth $10,000.00 at the time of marriage and throughout the course of the marriage the company’s equity increases to $250,000.00, the Court would find that the initial $10,000 is non-marital, but the increase in value is subject to a 50/50 split to the extent that the enhanced value or appreciation was caused by the efforts of either spouse during the marriage.

Retirement. All retirement benefits, pensions, 401(k) plans, IRA accounts, deferred compensation plans, etc., that were incurred during the marriage are marital assets subject to equitable distribution. It does not matter whether the benefits are vested or non-vested. Any portion of the benefits that accrued before the marriage are set aside and not subject to equitable distribution. Any contributions to the benefit during the marriage is a “marital” asset. Several formulas exist to determine the marital portion of a retirement plan and it quickly becomes complicated. With that said, in order to obtain a quick estimate of the marital portion of a current retirement plan, you can divide the number of years of marriage by the number of years the retirement plan has existed. This will provide you with the percentage of the retirement plan that is marital and thus, subject to equitable distribution. For example, the Wife has a pension offered through her employer in which she has worked for 15 years. Of those 15 years, she has been married for 10. 10 (number of years) / 15 (years of employment) is 0.66. In this scenario, 66% of the pension is marital and subject to equitable distribution. If the pension became vested at the time of the divorce, the Husband would receive his half of the 66$ (marital portion).

Unequal Distribution. Although there is a strong presumption for a 50/50 split, there are factors the Court considers to determine when 50/50 is not equitable. The factors include the contributions to the marriage by each spouse, the economic circumstances of each party, the length of the marriage, whether either party has lost educational opportunities or had an interruption of their career, the contribution of one spouse to the career of the other spouse, contribution of one spouse to marital assets or incurring of debts, desirability of retaining a business, or desirability of retaining a home for a child of the marriage, intentional dissipation of assets (spending money on a paramour, gambling/drug addiction, etc.), and any other factors that the Court deems necessary to do equity and justice between the parties.

The law views a marriage as a partnership. Any asset that the partnership acquires is subject to the equitable distribution analysis. Many times how the asset is owned or whose name it is under is not relevant. Even if you entered into a prenuptial agreement which states that all non-marital property (i.e., business) remains with each respective spouse, you may still have exposure if your prenuptial agreement fails to specifically address the enhanced value or appreciation of the asset. If you find yourself going through a divorce you must have a firm understanding of what is subject to equitable distribution. Otherwise you are may be negotiating blindly.

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