It’s the Law: Separate property can become marital if co-mingled

Q: A friend of mine is getting divorced. He inherited some money last year and deposited it in a joint savings account with his wife. My friend claims the money is his, since he inherited it. His wife claims the entire account is a marital asset and she wants half of it. Who is right?

A: Florida’s Statutes mandate that the court make an equitable distribution of marital assets and liabilities as part of a divorce proceeding. The first part of that task is for the court to decide which assets and liabilities are marital and if there are any non-marital assets or liabilities.

Section 61.075 (5) (a), Florida Statutes, defines marital assets and liabilities to include:

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

2. The enhancement in value and depreciation of non-marital assets resulting either from the efforts from either party during the marriage or from the contribution to or the expenditure thereon of marital funds or other forms of marital assets, or both;

3. Inter-spousal gifts during the marriage;

4. All vested and non-vested rights accruing during the marriage in retirement, pension, profit sharing or similar program; and

5. All real property owned by the parties as tenants by the entireties, whenever acquired, is presumed to be a marital asset.

The Statute goes on to recite that non-marital 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 gift from someone other than the spouse, inheritance and assets acquired in exchange for those assets;

3. All income from non-marital assets 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 a valid written agreement of parties and assets acquired and liabilities incurred in exchange for those assets and liabilities; and

5. Any liability incurred by forgery or unauthorized signature of one spouse signing the name of the other spouse.

The Statute presents possibility for serious disagreement and, in some cases, surprise. For example, if a non-marital asset increases in value due to the effort of a spouse during marriage or use of marital funds, the increase in value is a marital asset. The courts have not required much involvement of a spouse in the management or maintenance of an asset to convert appreciation to marital.

Inter-spousal gifts are yet another source of litigation and, in many cases, disappointment. Your friend’s inheritance may fall into that category.

Merely because an asset is titled in one spouses name does not make it separate property for equitable distribution. It may be considered a marital asset if it was purchased with funds earned by the spouse during the marriage or can become marital if both marital and non-marital funds are co-mingle in an account. Two cases from Florida’s Second District Court of Appeal are illustrative.

In the case of Steiner vs. Steiner, the husband argued that rental income from property the husband owned prior to marriage was his separate property and non-marital. The court concluded that the rental income was marital, as it was the product of active participation, management and involvement of both parties. The court contrasted the rental income from mere passive appreciation in value.

The husband deposited the rental income into a SunTrust bank account maintained by the husband jointly with his mother (who died some time prior to the divorce). The court noted that the husband also deposited his wages into that account and paid the parties living expenses out of that account. The court concluded that the SunTrust account was also marital property, as once the funds were co-mingled and used for joint expenses they lost their separate character and became untraceable.

Many of these issues could be preempted by a well drafted prenuptial agreement. In other cases, conversion of non-marital into marital assets can be avoided by carefully maintaining a separation between those assets.

This area can be complex and contentious at time of divorce. Although there can be no substitute for good premarital planning, retaining a competent attorney at time of dissolution is critical.

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William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney. Questions for this column can be sent to: William G. Morris, email: wgmorrislaw@embarqmail.com or by fax, (239) 642-0722.

© 2008 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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