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How to divide assets and liabilities in a Florida divorce

House dividedIt is easy to get lost in the various financial and asset disclosure requirements that are imposed by Florida law.  A great deal of financial information and documentation can be needed in order to complete the divorce, depending on the extent of the marital estate and the complexity of the parties’ finances.

Florida utilizes the “Equitable Distribution” standard when dividing assets and liabilities.  This article will outline the general rules and requirements for “equitable distribution” of a marital estate in the State of Florida.

Generally, property includes assets and funds.  Assets include real estate, personal items, bank accounts, retirement accounts, accrued sick and vacation pay, intellectual property (patents, trademarks, and copyrights), stock options, businesses and business interests, and tangible personal property (e.g., cars, jewelry, guns, art, and pets). Liabilities, which are also subject to equitable distribution in a Florida divorce, include any kind of debt such as a mortgage, student loan, credit card debt, tax liens, car loans, etc.

Contact our attorneys today to discuss your rights!

Step One: Distinguish Marital and NonMarital Property

If a given piece of property was obtained during the marriage, with marital funds or labor, it will typically be treated as marital property.  As such, the court will presume that an equal division of the property is fair and equitable. Examples of marital assets include:

  • Real property held as tenants by the entirety;
  • Personal property held as tenants by the entirety;
  • Gifts from one spouse to another;
  • Insurance benefits acquired during the marriage;
  • Any appreciation or enhancement in the value of non-marital assets;
  • Pension benefits, workers’ compensation benefits, social security income, interests in pending lawsuits, and stock options acquired during the marriage.

Nonmarital property includes any assets or liabilities before or after the marriage, or from sources that are independent of the marriage, such as an inheritance. In some limited instances property acquired during the marriage is also considered a spouse’s nonmarital property.  Unless steps are taken to change the title or the value of the property in the marriage, the following types of property are generally considered nonmarital assets:

  • Assets or liabilities that a party possessed prior to the marriage;
  • Assets or liabilities acquired during the marriage, but through an exchange for a nonmarital asset;
  • Income derived from nonmarital assets during the marriage (unless the income was used as a marital asset);
  • Any assets and liabilities that are excluded from being considered as marital property under a valid written agreement, such as a prenuptial agreement; and
  • Any liabilities incurred by the fraud of one of the spouses (that spouse is responsible for the liability);
  • Assets that were inherited;
  • Assets or liabilities that were obtained after the filing of a petition for dissolution of marriage.

Converting Nonmarital Property to Marital Property

Nonmarital property can be converted into marital property. This can happen if nonmarital property is retitled from one spouse’s name into both spouses names, or when nonmarital property is comingled with marital property, and the value of the marital and nonmarital assets becomes indistinguishable. This commonly occurs when spouses open a joint bank account and add nonmarital funds to the account. In both retitling and commingling situations the entire value of the property is converted into marital property.  Also, where nonmarital property is enhanced due to the labor or financial contribution of either spouse during the marriage, the property can be converted into marital property.

However, it’s important to note that any professional practice associated with the degree is considered marital property, and can be factored into both division of property and in deciding alimony.

Step Two: The court will then value the marital property.  The value of marital property can be determined by various methods, including an assessment of the purchase price, the value of the property if sold during the divorce, recognized authorities for the value of assets, such as a Blue Book value in reference to a car, or an expert analysis of the value of the asset.

The court classifies the property as either marital or nonmarital property. Nonmarital property is set aside and marital property is lumped together. The court uses the date of marriage and the date the parties enter into a valid separation agreement or the date of filing a petition for dissolution of marriage to determine the dates used for classifying the property as marital or nonmarital.

Step Three: The court then distributes the marital property.  Generally, the presumption is that the property will be divided equally, but the court may allow the marital property to be divided unequally as long as the result is equitable. Determining what is equitable involves a totality-of-the-circumstances, fact intensive, including:

  • The contribution to the marriage by each spouse (including contributions to the care and education of the children and services as homemaker);
  • The economic circumstances of the parties;
  • The duration of the marriage;
  • Any interruption of personal careers or educational opportunities of either party;
  • The contribution of one spouse to the personal career or educational opportunity of the other spouse;
  • The desirability of retaining any asset, including an interest in a business or professional practice, intact and free from any claim or interference by the other party;
  • 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 martial assets and the nonmarital assets of the parties;
  • The desirability of retaining the marital home as a residence for any dependent child of the marriage;
  • The intentional dissipation, waste, depletion, or destruction of marital assets during the marriage; and
  • Any other factors necessary to do equity and justice between the parties.

Marital Misconduct and Unequal Distributions

Courts allow for unequal distribution of marital assets where marital misconduct caused a waste of marital assets. These situations can arise in instances where marital funds have been spent on an extramarital affair, were gambled away, or used to support a drug addiction.

It is important to note that marital misconduct alone is not enough for a court to award an unequal distribution. It can be difficult to prove these allegations without extensive discovery and investigation.

Equitable Distribution is Final

Once the division of marital assets and liabilities has been formally decided, it is final. This is a clearly distinguishable legal standard when compared to legal standards governing child custody, alimony, and child support. Judgments in those areas can be subsequently modified due to a material and continuing change in circumstances.

Conclusion

Dividing property is almost always a complicated aspect of any divorce.  Obtain the advice of an experienced family law attorney who can help guide you through the process and protect your rights and interests in a divorce.  If you need assistance with your divorce in Walton, Okaloosa, Bay or surrounding counties, Contact Us to discuss your divorce rights.

It’s National Adoption Month!

It’s National Adoption Month and there are many wonderful opportunities available to adopt a child. National Adoption Month has been recognized in November for 19 years and is designed to celebrate adoptions, raise public awareness of the need for adoptive families and the issues surrounding adoptions in the United States.  Thousands of children are waiting, both domestically and abroad, to find a family and a home. Some are available through private adoption agencies, and others are waiting in state foster care homes. Other children are adopted from within the family (grandparent adoption, stepparent adoption, etc.). But is adoption right for you and your family?

Here are some of the more common reasons a person should adopt a child.

First and foremost, the desire to provide a child with a family. As an adoptive family, you should want to provide a child with a loving home and family. That should include everything that makes a home a loving place to be, and a family that accepts the child into their home. Family traditions will be shared, routines altered and memories created. It also means accepting the child for who they are – even their faults. It’s important to remember that, the child may have experienced unfortunate circumstances and may need help to begin anew and start a new life. Indeed, those circumstances may be the reason the child needs help from your family!

The desire to help a child move on in life. Adoptive parents should have an interest in helping a child heal from past circumstances that brought about the need for the adoption, whether this comes from abuse, neglect, being abandoned, or orphaned. Various services may be needed to facilitate the transition, but there is an abundance of services to help you and the child through the process. Again, by working together as an adoptive family, this journey can be rewarding and successful.

The ability to provide for a child. Adoptive parents want to share their home with a child, and they have the physical space for another child. They commit the time, effort and emotional space in their heart for a new family member. Adoptive families are also financially secure enough to adopt comfortably.

Every family and every adoption presents with unique opportunities and challenges. That’s a journey that every family can understand, and adopting a child can enhance that journey for both the child and you as an adoptive family. If you would like to explore your options to adopt a child, contact an adoption agency, state social services department or local adoption attorney to find out how you can get started.

Florida Marital Settlement Agreements

Marital Settlement Agreements: An Alternative to the Florida Contested Divorce

Very few words invoke feelings of misery or dread like the word “divorce.” It’s a word that, for most people, is synonymous with intense anxiety and the destruction of ones family. In a Florida contested divorce, these feelings are unavoidable consequences of an adversarial proceeding. However, for those who can agree on the terms of their divorce, a Marital Settlement Agreement offers an opportunity to turn a hostile situation into a managed and predictable process. The agreement provides certainty, with both parties compromising on various points to reach resolution of the divorce, and thereby resolving all issues relative to custody, visitation, property division, child support and spousal support.

Advantages of Settlement

Less Fees and Costs: Because marital settlement agreements can be reached quickly and do not involve protracted litigation in court, attorneys spend a fraction of the time that would otherwise be needed to complete the divorce.  The cost is thereby minimized.
Speed: Divorcing spouses have full control over the speed of the settlement negotiations, and are not delayed by litigation and court backlogs.
Flexibility: A settlement agreement is a product of the parties’ chosen solutions to resolve their particular problems and and concerns.

Marital Settlement Agreements are Complete Resolutions of the Divorce

Parties can include all of the issues presented by their divorce inside the settlement agreement. As long as none of the provisions violate existing law and the agreement is not obtained by fraud or duress, it will be considered a valid agreement that can be incorporated into a Final Judgment of Divorce.  The settlement agreement can resolve all disputes relative to:

  • Assets (marital residence, investments, automobiles, etc.)
  • Liabilities (mortgages, car loans, credit card debt, etc.)
  • Alimony
  • Child Support
  • Parenting Plans
  • Time-sharing Arrangements

Experienced Family Law and Divorce Attorneys

Although marital settlement agreements are typically less complicated than divorce litigation, they are complex documents with numerous issues to address, such as tax repercussions and estate planning issues, that require advice of an experienced domestic relations attorney. Consult a experienced Florida family law attorney to determine whether a settlement agreement is the right option for you in your dissolution of marriage case.

Can you get a divorce for free?

In all honesty, a divorce can be expensive.  Clients often ask me for for guidance as they plan for the financial cost of their divorce. I read a report that estimated the average cost of a contested divorce to be $15,000, per party.  Based upon 13 years of experience, I would say that is an accurate figure for a contested divorce in Florida.  Uncontested divorces can be a fraction of that cost (like a 1/10 fraction).  Money is tight enough with the parties taking on all of the household bills that were previously shared, so uncontested divorces are always preferred. However, for various reasons, the parties are often unable to reach an agreement and file the divorce as an uncontested case.

How will these parties, who are already strapped for cash as they go about setting up separate households, pay the fee for legal services? And how will they pay for litigation costs, such as filing fees and depositions and the normal costs of a diligent representation? How much time will you need to take off from work in order to litigate the case, and what will that cost? There is no consistent answer to these questions.  Some of my clients clients simply pay with stored away cash.  Others borrow money from relatives, put the fees and costs on credit cards or have relatives front the costs.  However, if none of these options are available, can you force your spouse to pay for a contested divorce?

In Florida, attorney’s fees cannot be awarded unless authorized by statute or agreement of the parties. Section 61.16, Florida Statutes, governs the apportionment of attorneys fees and costs in divorce cases.  It states, in part:

(1) The court may from time to time, after considering the financial resources of both parties, order a party to pay a reasonable amount for attorney’s fees, suit money, and the cost to the other party of maintaining or defending any proceeding under this chapter, including enforcement and modification proceedings and appeals….

This provision is designed to ensure that both parties have a similar ability to obtain fair representation for their divorce. This requires a two-step analysis.  First, Florida judges must consider the financial resources of the party requesting attorney’s fees as they determine whether there is a need to award attorney’s fees.  If a need exists, the court will proceed to the next step.  Secondly, the court will consider whether the other party has an actual ability to pay an attorney fee award.  If the requesting party meets both of these tests, he or she may be able to obtain attorney’s fees and costs from your spouse and force them to pay for a contested divorce.

Attorney’s fees and costs can be awarded at any point in the case.  The court can award suit monies to finance ongoing litigation at any point during the case, or the court can award attorney’s fees and costs at the end of the case.  In either event, you will likely have to pay for the cost of the divorce until such time as a judge forces the other party to pay your attorney’s fees and costs.

Ashley Madison in Florida Divorce Cases

By now you have certainly seen at least one headline stating that private data from Ashley Madison, a web-based service that assists married people to cheat on their spouse, was released to the public. Reports suggest that the information includes names, email addresses, credit card information, and sexual preferences for tens of millions of personal profiles across the country.

If you are a Florida resident, and you or your spouse are found among the lists of people who were utilizing Ashley Madison’s services, what does that mean if you or your spouse file for divorce?

No doubt, infidelity is a very common reason people file for divorce.  However, Florida remains a “no-fault” state.  Therefore, Florida courts do not generally care whether one of you cheated on the other.  But that does not mean cheating is irrelevant to your divorce.  For various reasons, infidelity can affect the outcome of the divorce.

First, if the cheating spouse wastes money on an affair, the expenditure may be deemed “intentional dissipation” or “waste” of marital assets. If so, during the equitable distribution of property, the innocent spouse may be entitled to a larger share of the remaining marital assets. Second, the amount of alimony, if awarded, may be affected by infidelity.  Third, obviously, cheating can affect the credibility of a spouse in a court proceeding.  Finally, cheating, and any other illegal behavior, may call into question the moral character of the disloyal spouse. Under Florida Law, a court’s assessment of moral character can affect how the Court assigns parental responsibility and time-sharing.

Evidence that you or your spouse utilized Ashley Madison’s service may not be admissible.  Proper foundations for the admission of evidence must be laid and, so far, the source of this information is weak at best (hackers).  On the other hand, other evidence, including credit card statements that are discoverable under Florida’s mandatory financial disclosure laws may provide evidence to prove adultery or waste of marital assets. You should consult with an attorney in your state regarding what evidence may be applicable in your case or if you have any questions about the information found in this blog post.

How to Qualify for Medicaid (and keep your property): Part II

The asset and income restrictions on Medicaid benefits are what bring a great many people to an elder law attorney.  The applicant meets the age, citizenship and other basic requirements for Medicaid benefits, but they nevertheless can’t be immediately qualified because of the limitations on what an applicant can own or earn while receiving Medicaid benefits.  So, what are these limitations?

Asset Limits

Generally, Medicaid applicants are limited to $2,000 in countable assets. Moreover, if the applicant is married, the applicant’s spouse (who may not be going to live in a long-term care facility) is limited to $119,220 in countable assets for the year 2015. If both spouses need Medicaid, their asset limit is $3,000 total or $1,500 each.

And there’s another problem.  With certain exceptions, if the applicant has transferred property or funds in the past five years, that property or those funds are counted in the Medicaid application. The idea of the look-back period is to prevent people from hiding assets or income in order to qualify for Medicaid (in other words, to ensure that Medicaid is only paying for people to have nursing home care if they truly need it).  However, for those who did not foresee a need for long-term care, this provision can be a major hurdle when seeking long-term care.

An applicant must disclose transfers of assets or income made during the look-back period if the transfer was for less than fair market value or was a gift.  Any transfer for less than fair market value or an uncompensated transfer is presumed to be for the purpose of becoming eligible for Medicaid, and can be counted against the applicant as a penalty.  Transfers that occurred more than five years before the application is completed will not be counted against the applicant.

Penalties for transfers are calculated as a function of the average cost of a nursing home in the State of Florida.  For example, assume the applicant gifted $15,990 in funds or property to a grandchild within five years before the application was submitted.  The average cost of a nursing home in the State of Florida is $7,995 per month.  Therefore, $15,990 divided by $7,995 equals 2.  In this example, the applicant will be penalized two months, and will not qualify for Medicaid benefits until the penalty period is complete.

Exempt Assets

An average person or couple has a home, cars and various other property that they accumulate in everyday life.  The average value of such assets will easily exceed $2,000 in value, and typically will range between $300,000 and $700,000 for middle income couples and retirees.  Do the Medicaid limits mean that mom or dad will lose everything to get the care they need in a nursing home or assisted living facility? Fortunately, various asset exemptions exist to allow applicants to keep some or all of their assets.

  • Homestead:  The homestead, with contiguous acreage, is exempt up to $552,00 in value (for 2015) as long as the applicant intends to return home or the applicant’s spouse continues to reside in the home.  Verification of intent to return home may or may not be required.
  • Personal Property:  Applicants may keep one wedding band and an engagement ring.  Generally, all personal property is exempt as long as it does not include valuable assets such as art, jewelry, or collectibles.
  • Motor Vehicles:  One car of any age, and any motor vehicle that is seven years old or older is exempt.  Cars modified for use by a handicapped individual are exempt as well.
  • Life Insurance:  All life insurance policies with a combined face value of $2,500 or less MAY be exempt if a separate burial fund has not been established.  Life insurance policies are also exempt if they are term policies or they have no face value.  If a policy exceeds the asset limit, the applicant may cash it in or borrow against it.
  • Burial Fund:  The applicant (and spouse if there is one) may have a burial fund in the amount of $2,500 if a life insurance policy has not been designated as the burial fund.
  • Burial Plan:  Burial plans are exempt in any amount.
  • Income Producing Property:  Income producing property is exempt as an asset if it meets certain criteria.  This exemption is significant in a state like Florida, with a great many vacation condos and beach homes.  However, income received from the property counts as income (discussed below).
  • Unavailable Real Property:  Real property can be unavailable for many reasons.  For example, if it is jointly owned with a third party and the third party refuses to sell the property, it is considered unavailable.
  • Annuities:  Although income received from the annuity would count as an asset, the principal or annuitized amount is exempt.
  • IRAs and 401ks:  May be exempt if the applicant is receiving their required minimum distributions.  The principal of the accounts is exempt as an asset but the minimum distributions will count toward the applicant’s income.

If a person has property or funds that do not fall within these exemptions, various tactics may be utilized to preserve the property or funds.  A personal services contract may be created to ensure care by a relative and thereby isolate funds, an irrevocable non-assignable annuity can be purchased, or funds may be used to improve the homestead and thereby funds can be merged with the homestead exemption discussed above.  Each case is different but you and your attorney can decide the best course given your individual circumstances.  The key is to plan early to avoid disqualification under the five year look-back period.

Income Eligibility

To Qualify for Medicaid benefits an applicant’s gross income must be less than the income cap. The income cap is three times the Federal Benefit Rate, which for 2015 is $733.  Therefore, the total income cap for 2015 is $2,199.  However, even if the applicant earns more than the cap, an elder law attorney can establish a Qualified Income Trust (QIT)  to defeat this limitation.  A QIT is a trust that holds the applicant’s income.  At the applicant’s death, the State of Florida will be paid the balance of the funds remaining in the QIT up to the amount of the Medicaid lien (the amount owed for long-term care services).  Any remaining amount can then be disbursed to the beneficiaries of the QIT. QITs must be approved by an attorney from the Department of Children and Families (DCF), which oversees the Medicaid program.

Estate Recovery Rules

Under Florida law, the State of Florida may recover from the estate of the deceased applicant the amount the State paid for medical services on behalf of the applicant. A Statement of Claim is filed in the applicant’s probate estate and the State becomes an interested party in the probate proceedings.  The debt is discharged after two years if no claim is filed.

If you are considering your options in filing for Medicaid benefits, or are concerned about financing long-term care for a loved one, consult with an elder law attorney about your options. Even if you are not actively seeking Medicaid qualification, early planning for that contingency is crucial.

Next, we will discuss Medicaid planning through trusts to secure and protect assets.

How to Qualify for Medicaid (and keep your property): Part I

Given the limitations on what a person may own to successfully apply for Medicaid, families often conclude that mom and dad will have to forfeit everything they own in order to qualify (to get mom or dad in a nursing home, or otherwise get the care mom or dad will need).  When I first heard about the “spend down” tactic as a way to qualify for Medicaid, I was horrified to realize that we as attorneys, in certain circumstances, are actually having to advise people to spend or transfer what they have in order to get into a nursing home.  Regardless, with proper planning, this result can be avoided.

This will be the first of several installments to provide general guidance on how to protect your property and funds while qualifying for Medicaid.

Before discussing the asset restrictions, some basics about Medicaid need to be discussed, such as: What is Medicaid? The Health Insurance Association of America describes Medicaid as a “government insurance program for persons of all ages whose income and resources are insufficient to pay for health care.” (America’s Health Insurance Plans (HIAA), pg. 232). Medicaid is the largest source of funding for medical and health-related services for people with low income in the United States.  When I first read that definition, I was a bit put off because it sounds like a program for people who are really poor.  But, as with many issues in life, it’s all relative – you have to have a standard to measure the need for Medicaid benefits.  That standard can be understood with one number: $8,000.00 per month.  That is the average cost of nursing home care in the State of Florida.  Obviously, many people will have income and resources that are “insufficient” to pay for health care by that standard.  Without long-term care insurance or independent wealth, Medicaid will be needed to pay for long-term care, such as nursing home or assisted living arrangements.

Before you can even get to the property or financial requirements imposed by the Florida Institutional Care Program (ICP) Medicaid, certain preliminary requirements must be met, including:

  • Age: Must be 65 or older, or otherwise blind or disabled;
  • Citizenship: Must be a U.S. citizen or a qualified noncitizen;
  • Resident: Must be a resident of Florida;
  • Medical Eligibility: The applicant must have medical needs that require a type and level of care that is provided by a nursing home (a person who only needs assisted living will not qualify for a nursing home).

In the next installment, we’ll begin a discussion of resource eligibility, including asset limits that must be met in order to qualify for Medicaid.