Inherent to a Florida action for dissolution of marriage is the equitable distribution of the parties’ marital assets and debts. However, what makes an asset or a debt “marital” is not always an easy determination. Section 61.075(6)(a)1 of the Florida Statutes defines marital assets and liabilities to be the following:
- Assets acquired and liabilities incurred during the marriage, individually by either spouse or jointly by them.
- The enhancement in value and appreciation of non-marital assets resulting either 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.
- Inter-spousal gifts during the marriage.
- All vested and non-vested benefits, rights, and funds accrued during the marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs.
Section 61.075(6)(a)(1), Florida Statutes (2016).
Additionally, when it comes to real property, pursuant to Section 61.075(6)(a)2 of the Florida Statutes, real property that is held by the parties as tenants by the entireties, whether acquired prior to or during the marriage, is presumed to be a marital asset. If a party wants to make a claim to the contrary, the burden of proof is then on that party to refute the gift presumption. Section 61.075(6)(a)2, Florida Statutes (2016). Since 2008, this gift presumption now also applies to personal property. The Statute provides that “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 [is once again] on the party asserting the claim that the subject property, or some portion thereof, is non-marital”. Section 61.075(6)(a)3, Florida Statutes (2016).
The burden of proof that is necessary to overcome the gift presumption for either real or personal property is by clear and convincing evidence that a gift to the other spouse was never intended. See Section 61.075(6)(a)4, Florida Statutes (2016). A “clear and convincing evidence” is an intermediate level of proof, requiring enough evidence to make a position significantly more likely to be true than not; it requires more proof than the “preponderance of the evidence” level, which merely requires that more than 50% of the evidence supports the position asserted. Therefore, if a spouse places his or her non-marital funds into a joint, marital account, those non-marital funds would become marital assets unless the spouse making a claim to the contrary can overcome the gift presumption by clear and convincing evidence, which, by far, is not an easy task.
When there are assets to be distributed between the parties, the Court must first identify the assets that are marital and subject to equitable distribution. When funds have been commingled by the parties, that identification becomes much more difficult.
There are three specific theories that exist when commingling of funds is at issue in a divorce – (1) the strict transmutation approach, (2) the tracing approach and (3) the intent of the parties approach.
Under the first theory, the strict transmutation approach, when non-marital funds are commingled with marital funds, the non-marital funds lose their separate character and become marital funds, and that occurs regardless of how the account is titled. Even if an account is titled just in the name of one spouse, an account may still become marital if both marital and non-marital funds are commingled in that account. After all, money is fungible and once commingled it loses its separate character. See Abdnour v. Abdnour, 19 So. 3d 357, 364 (Fla. 2d DCA 2009) (internal citations omitted). Likewise, when non-inter-spousal cash gifts such as cash gifts from a parent to their child, i.e., the husband or the wife, are commingled with marital assets, they lose their non-marital character and become marital assets subject to equitable distribution. Furthermore, the commingled funds may be treated as being entirely marital even when the parties never used the commingled funds to pay their marital expenses; the commingling of the funds is enough in and of itself for the entire account to be characterized as marital. Dravis v. Dravis, 2D13-5513 (Fla. 2d DCA 2015) (internal citations omitted). This means that proceeds from the sale of a non-marital asset become marital when deposited into an account containing marital funds. This also means that non-marital cash gifts become marital when they are not maintained separately – commingling these non-marital cash gifts with marital funds causes the non-marital gifts to lose their separate, non-marital character. Id. (internal citations omitted).
Under the second theory, the tracing approach, if non-marital funds that have been commingled with the marital funds can still be traced back to their non-marital origin, those non-marital funds will retain their non-marital character and hence be excluded from equitable distribution. In Steiner v. Steiner, the Second District Court of Appeal has found that properties purchased during the marriage from the parties’ joint account were non-marital assets since the purchase prices were paid with proceeds that were traceable to the party’s sale of the property owned prior to marriage. Steiner v. Steiner, 746 So. 2d 1149, 1151(Fla. 2d DCA 1999). Consequently, when funds in a joint account could be properly traced to their non-marital origin, those funds will remain non-marital.
Finally, under the third theory, the intent of the parties, the Courts evaluate the parties’ conduct during the marriage to determine whether the spouse with inherited funds, for example, intended to keep those funds separate, non-marital, or whether that party’s conduct has given rise to an inter-spousal gift presumption. In the Mondello v. Torres, the Court was tasked with determining whether the recipient of an inheritance, the Wife, intended for those inherited funds to remain non-marital during her marriage or whether the Wife’s conduct during the marriage gave rise to the presumption of a gift to the Husband. Mondello v. Torres, 47 So. 3d 389 (Fla. 4th DCA 2010). The Mondello v. Torres Court found that the Wife kept the inherited funds in an account just in her name. The Wife also testified that she intentionally kept the account separate as the funds were earmarked for her children that she had with her late husband. The Fourth District Court found that the Wife’s conduct reflected that no gift to the Husband was ever intended. The Court also stated that if some portion of the non-marital funds is used to pay the marital expenses during the marriage, such action alone does not convert the remaining non-marital funds into a marital asset. Id. (internal citations omitted).
Consequently, when a party seeks to maintain the non-marital nature of an asset during the marriage, it is crucial to keep the non-marital asset separate from the marital assets. Commingling of funds should be avoided at all costs. However, at the same time, how the non-marital asset is titled and used during the marriage is also dispositive on the final classification of that asset for purposes of equitable distribution during an action for dissolution of marriage.
As to what constitutes non-marital assets and liabilities, pursuant to Section 61.075(6)(b)1 of the Florida Statutes, non-marital assets and liabilities include the following:
- 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;
- Assets acquired separately by either party by noninterspousal gift, bequest, devise, or descent, and assets acquired in exchange for such assets;
- 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;
- 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
- 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.
Section 61.075(6)(b)(1), Florida Statutes (2016).
Again, commingling such non-marital assets with marital assets would often cause the non-marital assets to lose their non-marital character and become subject to equitable distribution. Therefore, it cannot be stressed enough that commingling should always be avoided.
It is also important to be aware how 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.” Section 61.075(7), Florida Statutes (2016). However, 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.” Id.