MEMO TO:
Alexsei Demo US
RESEARCH ID:
#4000840153af5b
JURISDICTION:
State
STATE/FORUM:
Florida, United States of America
ANSWERED ON:
September 7, 2022
CLASSIFICATION:
Family law

Issue:

Absent a prenuptial agreement, how are liabilities allocated between divorcing spouses in Florida?

Conclusion:

Fla. Stat. § 61.075(1) provides that, in a proceeding for dissolution of marriage, the court shall set apart to each spouse that spouse's nonmarital assets and liabilities. (Fla. Stat. § 61.075 (2022))

Per Fla. Stat. § 61.075(6)(b), "non-marital assets and liabilities” include: assets acquired and liabilities incurred by either party prior to the marriage; assets acquired and liabilities incurred in exchange for such assets and liabilities; and, numerous other categories listed in Fla. Stat. § 61.075(6)(b). (Fla. Stat. § 61.075 (2022))

When a marriage is dissolved, Florida courts use equitable distribution to divide the marital assets and liabilities between the parties. While the trial judge possesses the broad, discretionary authority to do equity between the parties, courts are to presume that an even division is equitable unless either party shows otherwise. (Hooker v. Hooker, 220 So.3d 397 (Fla. 2017))

Per Fla. Stat. § 61.075(6), marital assets and liabilities are assets and liabilities incurred during the marriage, individually by either spouse or jointly by them. All assets acquired and liabilities incurred by either spouse subsequent to the date of the marriage and not specifically established as nonmarital assets or liabilities are presumed to be marital assets and liabilities. (Hamilton v. Hamilton, 328 So.3d 1093 (Fla. App. 2021))

Where one spouse incurred a business debt, and the other spouse was not actively involved in the business, distribution of that debt to the managing spouse is within the trial court's discretion. (Dorsey v. Dorsey, 266 So. 3d 1282, 2019 Fla. App. LEXIS 5225, 44 Fla. L. Weekly D 875, 2019 WL 1466857 (Fla. Dist. Ct. App. 1st Dist. April 3, 2019))

As a general proposition, student loan debt incurred during the marriage is a marital liability. Thus, in the absence of specific findings supporting the unequal distribution of a student loan debt, such debt must be equitably distributed between the parties. The fact that one party will not receive any benefit from the other party's education because of the dissolution is not a factor to be considered when allocating a marital debt for student loans. (Rogers v. Rogers, 12 So.3d 288 (Fla. App. 2009))

Law:

Fla. Stat. § 61.075(1) provides that, in a proceeding for dissolution of marriage, the court shall set apart to each spouse that spouse's nonmarital assets and liabilities. In distributing the marital assets and liabilities between the parties, the court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors. The relevant factors are listed in Fla. Stat. § 61.075(1)(a)-(j):

§ 61.075. Equitable distribution of marital assets and liabilities

(1) In a proceeding for dissolution of marriage, in addition to all other remedies available to a court to do equity between the parties, or in a proceeding for disposition of assets following a dissolution of marriage by a court which lacked jurisdiction over the absent spouse or lacked jurisdiction to dispose of the assets, the court shall set apart to each spouse that spouse's nonmarital assets and liabilities, and in distributing the marital assets and liabilities between the parties, the court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors, including:

(a) The contribution to the marriage by each spouse, including contributions to the care and education of the children and services as homemaker.

(b) The economic circumstances of the parties.

(c) The duration of the marriage.

(d) Any interruption of personal careers or educational opportunities of either party.

(e) The contribution of one spouse to the personal career or educational opportunity of the other spouse.

(f) The desirability of retaining any asset, including an interest in a business, corporation, or professional practice, intact and free from any claim or interference by the other party.

(g) The contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both the marital assets and the nonmarital assets of the parties.

(h) The desirability of retaining the marital home as a residence for any dependent child of the marriage, or any other party, 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 maintain the residence until the child is emancipated or until exclusive possession is otherwise terminated by a court of competent jurisdiction. In making this determination, the court shall first determine if it would be in the best interest of the dependent child to remain in the marital home; and, if not, whether other equities would be served by giving any other party exclusive use and possession of the marital home.

(i) 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.

(j) Any other factors necessary to do equity and justice between the parties.

Fla. Stat. § 61.075(6) sets out what is included in "marital assets and liabilities" and "non-marital assets and liabilities":

(6) As used in this section:

(a)1. “Marital assets and liabilities” include:

a. Assets acquired and liabilities incurred during the marriage, individually by either spouse or jointly by them.

b. The enhancement in value and appreciation of nonmarital assets resulting 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.

c. The paydown of principal of a note and mortgage secured by nonmarital real property and a portion of any passive appreciation in the property, if the note and mortgage secured by the property are paid down from marital funds during the marriage. The portion of passive appreciation in the property characterized as marital and subject to equitable distribution is determined by multiplying a coverture fraction by the passive appreciation in the property during the marriage.

(I) The passive appreciation is determined by subtracting the value of the property on the date of the marriage or the date of acquisition of the property, whichever is later, from the value of the property on the valuation date in the dissolution action, less any active appreciation of the property during the marriage as described in sub-subparagraph b., and less any additional encumbrances secured by the property during the marriage in excess of the first note and mortgage on which principal is paid from marital funds.

(II) The coverture fraction must consist of a numerator, defined as the total payment of principal from marital funds of all notes and mortgages secured by the property during the marriage, and a denominator, defined as the value of the subject real property on the date of the marriage, the date of acquisition of the property, or the date the property was encumbered by the first note and mortgage on which principal was paid from marital funds, whichever is later.

(III) The passive appreciation must be multiplied by the coverture fraction to determine the marital portion of the passive appreciation of the property.

(IV) The total marital portion of the property consists of the marital portion of the passive appreciation, the mortgage principal paid during the marriage from marital funds, and any active appreciation of the property during the marriage as described in sub-subparagraph b., not to exceed the total net equity in the property at the date of valuation.

(V) The court shall apply the formula specified in this subparagraph unless a party shows circumstances sufficient to establish that application of the formula would be inequitable under the facts presented.

d. Interspousal gifts during the marriage.

e. All vested and nonvested benefits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs.

2. All real property held by the parties as tenants by the entireties, whether acquired prior to or during the marriage, shall be presumed to be a marital asset. If, in any case, a party makes a claim to the contrary, the burden of proof shall be on the party asserting the claim that the subject property, or some portion thereof, is nonmarital.

3. All personal property titled jointly by the parties as tenants by the entireties, whether acquired prior to or during the marriage, shall be presumed to be a marital asset. In the event a party makes a claim to the contrary, the burden of proof shall be on the party asserting the claim that the subject property, or some portion thereof, is nonmarital.

4. The burden of proof to overcome the gift presumption shall be by clear and convincing evidence.

(b) “Nonmarital assets and liabilities” include:

1. Assets acquired and liabilities incurred by either party prior to the marriage, and assets acquired and liabilities incurred in exchange for such assets and liabilities;

2. Assets acquired separately by either party by noninterspousal gift, bequest, devise, or descent, and assets acquired in exchange for such assets;

3. All income derived from nonmarital assets during the marriage unless the income was treated, used, or relied upon by the parties as a marital asset;

4. Assets and liabilities excluded from marital assets and liabilities by valid written agreement of the parties, and assets acquired and liabilities incurred in exchange for such assets and liabilities; and

5. Any liability incurred by forgery or unauthorized signature of one spouse signing the name of the other spouse. Any such liability shall be a nonmarital liability only of the party having committed the forgery or having affixed the unauthorized signature. In determining an award of attorney’s fees and costs pursuant to s. 61.16, the court may consider forgery or an unauthorized signature by a party and may make a separate award for attorney’s fees and costs occasioned by the forgery or unauthorized signature. This subparagraph does not apply to any forged or unauthorized signature that was subsequently ratified by the other spouse.

In Hooker v. Hooker, 220 So.3d 397 (Fla. 2017), the Florida Supreme Court noted that, when a marriage is dissolved, Florida courts use equitable distribution to divide the marital property between the parties. While the trial judge possesses the broad, discretionary authority to do equity between the parties, courts are to presume that an even division is equitable unless either party shows otherwise:

A. Equitable Distribution in Florida

When a marriage is dissolved, Florida courts use equitable distribution to divide the marital property between the parties. § 61.075, Fla. Stat. (2016). As this Court previously explained:

Under [Florida's equitable distribution] statute, the parties' assets are to be divided into two categories: (1) marital assets and liabilities and (2) nonmarital assets and liabilities. The statute defines assets and liabilities falling within each of these categories and establishes certain presumptions to assist in categorizing each asset and liability. The court then divides the marital assets and liabilities between the spouses.

Robertson v. Robertson, 593 So.2d 491, 493 (Fla. 1991). While "the trial judge possesses the broad, discretionary authority to do equity between the parties," courts are to presume that an even division is equitable unless either party shows otherwise. Acker v. Acker , 904 So.2d 384, 388 (Fla. 2005) (citing Canakaris v. Canakaris , 382 So.2d 1197, 1202 (Fla. 1980) ); accord § 61.075(1), Fla. Stat. (2016). As the Fifth District Court of Appeal explained in Gardner v. Gardner :

Equitable distribution is a court evolved concept in Florida. It is used to achieve a fair division of marital assets, which are those assets acquired by the parties during their marriage from their work efforts, services, and earnings. In determining whether certain property is

[220 So.3d 403]

a marital asset, the question is not which party holds title to the asset.

452 So.2d 981, 983 (Fla. 5th DCA 1984).

In Hamilton v. Hamilton, 328 So.3d 1093 (Fla. App. 2021), the Florida District Court of Appeal for the First District noted that a marital asset is defined by statute as assets and liabilities incurred during the marriage, individually by either spouse or jointly by them. All assets acquired and liabilities incurred by either spouse subsequent to the date of the marriage and not specifically established as nonmarital assets or liabilities are presumed to be marital assets and liabilities. In this case, debts existed on multiple personal credit cards held in the husband's name that were used to pay both household expenses and the expenses of running the husband's business. No attempt was made to separate the household debts from the business debts and there was no evidence specifically establishing these personal credit card debts as nonmarital liabilities, nor was a basis for excluding them from the equitable distribution scheme established. The Court, reversing the lower court's ruling, held that the entire debt was marital debt. The Court explained that to exclude the debts as nonmarital would flip the statutory presumption that all assets not specifically established as nonmarital assets or liabilities are presumed to be marital assets and liabilities (at 1094-1095):

Mr. Hamilton contends, first, that the trial court incorrectly classified more than $50,000 of credit card debt as non-marital debt, resulting in an unequal and unjust distribution of the parties' assets. A marital asset is defined by statute as "[a]ssets and liabilities incurred during the marriage, individually by either spouse or jointly by them." § 61.075(6)(a)1, Fla. Stat. "All assets acquired and liabilities incurred by either spouse subsequent to the date of the marriage and not specifically established

[328 So.3d 1095]

as nonmarital assets or liabilities are presumed to be marital assets and liabilities." § 61.075(8), Fla. Stat. Here, debts existed on multiple personal credit cards held in Mr. Hamilton's name that were used to pay both household expenses and the expenses of running Mr. Hamilton's solo accounting practice (which is itself a marital asset). At the hearing, no attempt was made to separate the household debts from the business debts. In turn, the court concluded that the debt was non-marital corporate debt in view of Mr. Hamilton's "fail[ure] to present any evidence to allocate any portion of this debt as marital." We reverse this determination to exclude the debts from the equitable distribution scheme because it flips the statutory presumption that "[a]ll assets ... not specifically established as nonmarital assets or liabilities are presumed to be marital assets and liabilities." § 61.075(8), Fla. Stat. From the record, we see no evidence specifically establishing these personal credit card debts as nonmarital liabilities, or a basis for excluding them from the equitable distribution scheme.

In Dorsey v. Dorsey, 266 So. 3d 1282, 2019 Fla. App. LEXIS 5225, 44 Fla. L. Weekly D 875, 2019 WL 1466857 (Fla. Dist. Ct. App. 1st Dist. April 3, 2019), the Florida Court of Appeal for the First District noted that where one spouse incurred a business debt, and the other spouse was not actively involved in the business, distribution of that debt to the managing spouse is within the trial court's discretion (at 1286):

Similarly, former Husband failed to establish an abuse of the trial court's discretion in the distribution of $87,500 as business debt "associated with" the second business distributed to Former Husband, Collins Mill Creek, LLC. Even if this distribution of debt rendered the equitable distribution scheme unequal — which Former Husband did not assert, and we do not find apparent from this record — such unequal distribution is authorized by section 61.075(1)(g), Florida Statutes. Where one spouse incurred a business debt, and the other spouse was not actively involved in the business, distribution of that debt to the managing spouse is within the trial court's discretion. See Cardella-Navarro v. Navarro, 992 So. 2d 856 (Fla. 3d DCA 2008).

In Rogers v. Rogers, 12 So.3d 288 (Fla. App. 2009) ("Rogers"), the Florida District Court of Appeal for the Second District held that, as a general proposition, student loan debt incurred during the marriage is a marital liability. Thus, in the absence of specific findings supporting the unequal distribution of a student loan debt, such debt must be equitably distributed between the parties. The fact that one party will not receive any benefit from the other party's education because of the dissolution is not a factor to be considered when allocating a marital debt for student loans (at 291):

As a general proposition, student loan debt incurred during the marriage is a marital liability. See, e.g., Smith, 934 So.2d at 641; Adams v. Cook, 969 So.2d 1185, 1187 (Fla. 5th DCA 2007); Banton v. Parker-Banton, 756 So.2d 155, 156 (Fla. 4th DCA 2000); see also § 61.075(5)(a)(1). Thus, in the absence of specific findings supporting the unequal distribution of a student loan debt, such debt must be equitably distributed between the parties. See Smith, 934 So.2d at 641; Adams, 969 So.2d at 1187. The fact that one party will not receive any benefit from the other party's education because of the dissolution is not a factor to be considered when allocating a marital debt for student loans. See Smith, 934 So.2d at 641; Adams, 969 So.2d at 1187. Thus, absent some other justification for an unequal distribution, controlling case law forbids a trial court from awarding student loan debt incurred during the marriage solely to one party or the other.

In Rogers, the lower court distributed approximately $45,000 in marital debt to the wife, including the entire student loan debt, and approximately $5,000 in marital debt to the husband. The husband argued that it would be inequitable for him to be responsible for half of the student loan debt when the wife would receive all of the benefit. The Florida District Court of Appeal for the Second District held that the fact that the wife would receive all of the benefit was not a valid justification for the unequal distribution (at 291):

Here, the final judgment distributes approximately $45,000 in marital debt to the Wife, including the entire student loan debt, and approximately $5000 in marital debt to the Husband. The trial court made no findings, either at the hearing or in the written final judgment, to support this unequal distribution of the marital debts. The only argument made at the dissolution hearing concerning the student loan debt was the Husband's argument that it would be inequitable for him to be responsible for half of the student loan debt when the Wife would receive all of the benefit. However, even assuming that this is the trial court's rationale for its distribution of the debts, as noted above this is not a valid justification for the unequal distribution. Accordingly, we reverse and remand for the trial court to reconsider the distribution of the marital debts. Because of the relatively limited marital assets, this may require the trial court to reconsider its entire equitable distribution scheme.

Authorities:
Fla. Stat. § 61.075 (2022)
Hooker v. Hooker, 220 So.3d 397 (Fla. 2017)
Hamilton v. Hamilton, 328 So.3d 1093 (Fla. App. 2021)
Dorsey v. Dorsey, 266 So. 3d 1282, 2019 Fla. App. LEXIS 5225, 44 Fla. L. Weekly D 875, 2019 WL 1466857 (Fla. Dist. Ct. App. 1st Dist. April 3, 2019)
Rogers v. Rogers, 12 So.3d 288 (Fla. App. 2009)