Active and Passive Effort in the Transformation of Non-Marital Property into Marital Property
When two people get married, they not only join themselves to each other, but every aspect of their life fuses. This includes marital property, unless the couple otherwise designates that certain assets are individual and should remain separate. If you and your partner are getting married, it is important to speak with an experienced family law attorney about the effectiveness of prenuptial agreements.
Equitable Distribution in Florida
Florida is an equitable distribution state, which means that when a couple decides to divorce, the court will review all assets and determine first and foremost, which assets are marital property and which assets are individual property. Then the court will review how the marital assets should be divided between the couple with the emphasis on ensuring that both sides receive their fair share of the property. This does not necessarily mean a 50-50 split, which is the standard in other states, like California.
The Importance of Prenuptial Agreements in Determining Marital and Non-Marital Assets
If the couple has a prenuptial agreement in place, determining marital and non-marital property can be pretty easy because the designation is made at the start of the legal relationship between the spouses. A prenuptial agreement is a fantastic tool to limit any divorce settlement strife and acrimony as the property will generally be delineated. Without a prenuptial agreement, even what appears to be non-marital property could still be considered marital depending on the extent to which each spouse actively supports the property.
Florida’s Burden of Proof for Determining an Asset as Non-Marital
In Florida, courts put the burden of proof on the spouse that wants to declare that certain property is non-marital. This is because generally when the spouses marry, it is presumed that they would like to make all their property marital, except what they have otherwise designated as individual and therefore nonmarital. The spouse that wants to determine property as non-marital will need to bring evidence supporting his or her argument. One way to do this is by showing that the property was held separately or differently than other marital property. For example, a bank account may be found to be non-marital if the couple had a joint account that they both relied on for marital and shared purchases and expenses. A separate bank account that belongs to only spouse that the other spouse does not have access to may be shown as intentionally and deliberately held separate and therefore non-marital.
Active Effort of Non-Marital Property Can be Found to be Marital Property
There are situations in which what is considered non-marital property may actually be found to be marital. This can specifically happen to non-marital property like tangible property and stocks, where the value can appreciate or depreciate over time. Florida courts have found that where there is non-marital property owned by one spouse is tended to or actively managed by the other spouse, the property may then be proven to be marital, rather than non-marital.
For example, if Spouse A is the titled owner of a house, and Spouse B actively manages the property through renovation or otherwise enhances the value of the property, the property may be considered marital. Sometimes courts may find that the property itself is not marital, but any income or appreciation in value since Spouse B’s active management may be considered marital. This would be the case where the home’s original value is $200,000, and Spouse B’s involvement with the home leads to the home’s value appreciation to $300,000, the $100,000 appreciation in value could be considered a shared asset between Spouse A and B. Additionally, any active effort on Spouse A’s part could also be found to be marital.
Effort Must be Active as Defined by Florida Courts
The courts are strict on the determination of what active effort means. For example, Spouse B’s work on the $200,000 home may actually depreciate the value of the home to $100,000; this would mean that though Spouse B put in effort, it was not active in the sense that it did not create income or growth in the asset itself.
Passive Income is Not Marital Property
Courts have also designated the difference between active and passive income. Where Spouse B provides active effort, the asset itself appreciates in value and that income is shared. However, sometimes an asset may be appreciate in value or create income just by its own with little to no effort to maintain it. This can be seen when a person owns stock and may put little to no effort into maintaining it but still receives dividends from it.
Please contact West Palm Beach family law attorney William Wallshein for a confidential consultation.