Equitable Distribution Flashcards
1
Q
What kind of proceedings would trigger disposition of assets and liabilities under 61.075?
A
-dissolution of marriage; or
-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
2
Q
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 the factors as specified in Fla. Stat. § 61.075(1)(a)-(j).What must court do first in distribution of assets and debts?
A
-set apart to each spouse that spouse’s non-marital assets and liabilities
3
Q
What premise must court begin with when distributing marital asset and debts?
A
-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 the factors as specified in Fla. Stat. § 61.075(1)(a)-(j).
4
Q
What must court do with every asset and liability?
A
Every asset and liability must be identified, classified, and valued. This includes marital and non-marital assets and liabilities. Then, each marital asset and liability must be distributed between the parties.
5
Q
How are marital assets and liabilities defined per 61.075
A
- 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;
- The paydown of principal on a note and mortgage secured by a nonmarital real property and a portion of the passive appreciation in the property if the note and mortgage are paid with marital funds.
- Interspousal 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
- All real property held as tenants by the entireties
- All personal property titled jointly by the parties as tenants by the entireties (even if acquired prior to the marriage).
6
Q
What is the presumption of assets acquired, and liabilities incurred by either spouse subsequent to the date of the marriage and not specifically established as non-marital assets or liabilities
A
presumed to be marital assets and liabilities.
7
Q
Who has the burden of establishing an asset or liability incurred during marriage is nonmarital?
A
Where assets/liabilities acquired/incurred during the marriage, the burden shifts to the party trying to establish it as non-marital. Once an asset/liability is established as pre-marital, the burden shifts to the opposing party to establish the asset as marital.
8
Q
When a party claims appreciation of a nonmarital asset is marital, who has the burden?
A
Party making the assertion has the initial burden of proof to show marital efforts or funds used for improvement and the burden then shifts to the owner spouse to show some enhancement is exempt.
9
Q
Husband claimed that the source of the deposit to acquire the marital residence which was purchased during the marriage, was from a non-marital source but other than his vague testimony, no evidence was produced. The residence was titled in joint names. Is it proper to carve out nonmarital portion?
A
It is error to provide him with a credit for the claimed non-marital contribution. bc it ignoresthe gift presumption which was not overcome based solely on the husband’s testimony. The source of the initial contribution was irrelevant.
10
Q
What is the standard of review for classification of an asset?
A
de novo
11
Q
What is the standard of review of valuation purposes?
A
abuse of discretion
12
Q
Is future salary a marital asset?
A
No, but accrued benefits may be.
13
Q
The husband, a county employee, accrued 1060 hours of sick leave and 928.7 hours of unused vacation time at the time of divorce, which upon termination of employment, the husband would be entitled to compensation for his unused hours. Are his unused vacation days and sick leave marital?
A
The husband’s employment contract provided for the method of valuing his unused hours, the value of the unused sick and vacation days was subject to equitable distribution. However, if the unused sick and vacation day valuation was speculative in nature, the court would not have required equitable distribution
14
Q
Can sale of a future book that was written during marriage be subject to ED ?
A
Maybe
15
Q
If a marital property has negative equity, can the negative equity be subject to equitable distribution?
A
Yes
16
Q
Can court consider adult child’s student loan incurred during marriage as marital debt?
A
Yes - reversible error not to.
17
Q
Can court include the cost to transfer property when determining equitable distribution?
A
Yes, if evidence is presented on same.
18
Q
How are gifts from 3rd parties during marriage classified?
A
Nonmarital - it’s a non interspousal gift.
19
Q
Trial court classified wife’s coke shares as marital but wife’s son testified he bought them for her as a gift and wife testified she neither purchased additional shares nor reinvested the shares. Was this error?
A
Yes, bc it was a noninterspousal gift and therefore nonmarital.
20
Q
How is debt incurred during marriage for nonmarital expense classified?
A
Should not be part of ED
21
Q
When identifying classifying and valuing assets, what must court do?
A
FJ must be supported by factual findings based upon competent substantial evidence.
* Distribution of all marital assets and liabilities, whether equal or unequal, shall be supported by factual findings in the judgment based on competent substantial evidence with reference to the factors enumerated in 61.075(1) AND
* The distribution of all marital assets and liabilities, whether equal or unequal, shall include specific written findings as to
(a) clear identification of nonmarital assets and ownership interests;
(b) identification of marital assets, including the individual valuation of significant assets, and designation of which spouse shall be entitled to each asset;
(c) identification of the marital liabilities and designation of which spouse shall be responsible for each liability;
(d) any other findings necessary to advise the parties or the reviewing court of the trial court’s rationale for the distribution of marital assets and allocation of liabilities. §61.075(3)
22
Q
Is date of identification discretionary?
A
NO statute defines date of marriage - DOF
23
Q
Is the date of valuation discretionary?
A
Yes - case by case basis
24
Q
How does court have jur to deal with ED?
A
Must have personal jurisdiction over parties
25
What gives court subject matter jur in DOM?
61.021 one of the parties to the marriage must reside 6 months in the state before the filing of the petition
26
What is the standard of review on jurisdictional matters?
De novo - reviewing court is not required to defer to lower tribunals on issues of law. Appellate review of a decision that is based on a legal conclusion involves no more than a determination whether the applicable issue of law was correctly decided in the lower tribunal
27
What does de novo mean?
the appellate court is free to decide the question of law, without deference to the trial judge, as if the appellate court had been deciding the question in the first instance
28
Can court distribute a marital asset as lump sum alimony?
Yes - general request for ED will suffice
29
Does claim that asset is nonmarital have to be plead?
the intent to claim certain assets as non-marital must be alleged in the pleadings or the court will be unable to hear argument regarding those assets at trial (unless tried by consent).
30
What is the date for Determining Assets and Liabilities as Marital
Fla. Stat. 61.075(7):
The cut-off date for determining assets and liabilities to be identified or classified as marital assets and liabilities, or nonmarital 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.
31
What is the presumption of an asset acquired before the marriage
Assets acquired before marriage are NON-MARITAL assets and remain the property of the owner spouse in the absence of evidence of a gift or conveyance of the assets
32
If the asset was acquired before the marriage and is later jointly titled as Tenants by the Entirety… the presumption shall be the asset is a Marital Asset based upon the presumption of a gift. To rebut the presumption that a gift was intended (in an effort for this asset to be classified as non-marital) who carries the burden of proof ?
the party arguing there was no gift intended must prove this with CCE to overcome the gift presumption (more than a PPE but less than BRD). §61.075(6)(a)2-4.
33
Dad gives his daughter and the son-in-law a house titled in joint names. Dad testified that he always intended it to be a gift to just the daughter. What should court do?
Court can find that presumption of tenants by entirety is overcome and gift if clear and convincing evidence
34
How are nonmarital assets and liabilities defined?
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. 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 Section 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.
35
If use of nonmarital income for marital purposes during marriage converts it to marital income, how will savings from that same source be classified post filing?
Nonmarital
36
Can court distributed a contingent liability
yes but the contingent liability cannot be too speculative to identify or distribute
37
How is an engagement ring classified
nonmarital
38
What happens when engagement ring or wedding ring are converted to another piece of jewelry?
the additional jewelry cost will be marital, and the initial engagement ring and wedding band will be nonmarital
39
When does commingling occur
* Commingling occurs if nonmarital property becomes so intermingled with marital property that the nonmarital property is no longer traceable, and is incapable of being specifically identified as nonmarital property.
40
Husband owns 1/2 of real property with sister before marriage and then buys his sisters 1/2 of property during marriage with marital assets, how is the underlying real property classified?
The whole thing isn't marital - his original one half remains nonmarital
41
What analysis court engage in when a spouse receives an asset during marriage by inheritance
determine whether the recipient intended that the assets remain non-marital or whether the recipient's conduct during the marriage gives rise to the presumption of a gift to the other spouse
42
how can a party show intent to keep inheritance nonmarital
A party may show intent to keep an asset nonmarital if “the non-marital property is placed into a separate account, no other funds are deposited into it, and the account is never intermingled with the parties' other funds. However, “[w]hen one spouse deposits funds into a joint account where they are commingled with other funds so as to become untraceable, a presumption is created that the spouse made a gift to the other spouse of an undivided one-half interest in the funds
43
Is a party's student debt incurred during marriage considered marital even though other spouse will not get benefit of the education?
Yes - fact that other party receives no benefit from the debt is not a factor.
44
What type of goodwill is marital?
Enterprise goodwill -value of a business which exceeds the tangible assets (i.e. book value) and represents the tendency of clients/patients to return and recommend the practice irrespective of the reputation of the individual practitioner.
45
what type of goodwill is nonmarital?
Personal/Professional Goodwill (NONMARITAL) = Goodwill attributable to skill, reputation and continued participation of an individual.
46
What is the significance of a covenant not to compete?
This demonstrates personal goodwill which should not be included in determining value assigned to business
47
What is the exclusive method of measuring the goodwill of a professional association in marital dissolution proceedings
determine the fair market value of the practice, or what a willing seller would accept from a willing buyer, with neither acting under duress for a sale of the business. The excess over assets represents goodwill.
48
What is the walk away doctrine
In determining the fair market value of a business, FL uses the amount that a buyer would pay to the seller without a non-compete doctrine (meaning the seller could walk across the street, open a business, and compete). The Walk Away Doctrine reduces fair market value of the business.
49
Who has the burden of proof in claiming enhancement of appreciation of non marital asset?
The non-owner spouse claiming enhancement to portion of a marital asset carries the initial burden of proving enhancement to the marital asset (i.e. contribution of marital labor or marital funds enhanced the nonmarital asset
50
Is a premarital home converted to a marital asset by using marital money to pay down mortgage and expenses?
No - only the appreciation thereon is marital.
Higgins v. Higgins, 232 So. 3d 378 (Fla. 4th DCA 2017)
51
Husband has three accounts which were funded with $400,000 inherited from his mother. The Wife had no access or control over accounts. Wife asserted because Husband personally managed accounts, any enhancement in value was due to Husband’s marital efforts or labor, and therefore the enhancement in value was marital. Is the appreciation marital? What analysis should court engage in?
In order to determine that the appreciation is marital the court must find
1. Husband actively managed the accounts;
2. As a result of Husband’s marital efforts his accounts enhanced in value; and
3. The actual value of the enhancement.
Gromet v. Jensen, 201 So. 3d 132 (3d DCA 2015) trial court had competent substantial evidence that H actively managed the account but the accounts actually went down in value so there was no enhancement
52
How is passive appreciation for nonmarital asset calculated when there is some marital contribution for pay down of principal
STEP 1: Figure out Marital paydown of principal on mortgage plus assessments plus improvements and divide that by FMV DOM or the date the asset was acquired, whichever is later (marital multiplier)
STEP 2: Figure out FMV less FMV on DOM or the date the asset was acquired, whichever is later.
STEP 3: Take % from Step one and multiply it by value determined in step 2
STEP 4: add number from step 3 to mortgage pay down to get the NET MARITAL APPRECIATION
53
What does the coverture fraction for KAA analysis
(paydown during marriage)
____________________________________________
(value of the real property on date of purchase or DOM or date
encumbered by mortgage ), whichever is later.
54
HYPO
Principal pay down in marriage from marital funds is $20,000
Value on DOM is $200,0000
What is the marital multiplier to determine marital portion of appreciation?
(Passive Appreciation) 20,0000 (principal pay down/ 200,000 Value of Property on date acquired/DOM/date it first became encumbered whichever is later**) = 10%
55
H purchased building before the marriage. The Husband bought the building for $900k and sold the building right before the parties separated for $780k. The building did not appreciate in value. The mortgage was reduced by $25k during the marriage. Wife argues she is entitled to an equitable distribution of the reduction in the mortgage. The Husband alleged the building decreased in value and therefore the Wife was not entitled to anything. What should court do?
The pay down of the mortgage enhanced the Husband’s equity in the nonmarital asset. But for the reduction in the mortgage of nonmarital asset, H would have received less in net proceeds. In Somasca, trial court didn't consider since building depreciated but 2nd DCA reversed and ordered court to distribute 1/2 of the principal pay down tot he Wife. (If the building broke even or sold at a loss, this may not have necessarily been the outcome)
Somasca v. Somasca, 171 So. 3d 780 (2nd DCA 2015)
56
Husband had a home prior to the marriage, in his name alone. After the marriage, Husband refinanced the property and added Wife’s name to the refinancing documents. At the time of the parties’ marriage the house was worth $300k, but fell to $197k. H claimed value of the property was worth $160k. Parties pooled their income and paid down the mortgage on the home during the marriage. Should wife receive 1/2 credit for the paydown of mortgage?
Weaver v. Weaver, 174 So. 3d 482 (4th DCA 2015)
4th held that b/c the value of the house was not enhanced during the marriage, it was error for the court to award the Wife any portion of the asset.
57
What proposition does Hahamovitch stand for?
BROAD & GENERAL WAIVER DURING IN PRENUP IS SUFFICIENT
Parties entered into prenuptial agreement. The provision critical for this issue was that the spouses “waived and released all rights and claims that the spouse may be entitled to as a result of their marriage to the rights in the other’s property.”
Supreme Court held that a language in the agreement was broad enough to waive the rights of the Wife to any asset titled in Husband’s name that was acquired during the marriage or which value enhanced/appreciated due to the marital income or efforts.
58
What is the general proposition concerning the enhanced value of pre-marital stock from a company in which the owning spouse works?
Pagano and Pagano (Fla. 4th DCA 1996)
It's considered a marital asset subject to equitable distribution
59
In Robbie v. Robbie (4th DCA 1995), what did the court note concerning nonmarital business interest?
This is the polestar case addressing nonmarital business interests, which are subject to active appreciation. In Robbie, the Court noted that asset appreciation constitutes a marital asset subject to equitable distribution where marital labor contributes to its value, notwithstanding that the increased value is primarily created passively by inflation, market conditions, or the conduct of others
60
Give an example of when a nonmarital business interest appreciation is not marital
Oxley v. Oxley (4th DCA 1997):
Husband owned 50% of the business, and served as its president, his activities were ministerial and ceremonial, leaving the management and investment decisions to others. The Fourth District ruled that the record supported the conclusion that the business did not increase in value as a result of any business decisions or labor of the husband, notwithstanding his being the president of the company and performing various non-essential functions for it.
61
HYPO: Husband worked for a company in which he owned premarital stock. At best, husband was middle management and he had been demoted several times and ultimately fired. This was a large, closely held company with thousands of employed. The husband purchased the stock in the company before the marriage. He took out a loan to pay for the shares and interest only on the loan repaid during the marriage. When he was terminated, the husband cashed out his stock which had appreciated significantly in value. How should H's premarital stock be classified?
Witt-Bahls v. Bahls, (Fla. 4th DCA 2016)
The court held the appreciation in stock to be non-marital. The wife failed to establish husband occupied a significant management role (his efforts causing appreciation in the stock), the appreciation of the stock was not due to the marital effort of the owner spouse and therefore the enhancement is not a marital asset. This established that the burden of proof is on the non-owning spouse to evidence that the owning spouse contributed marital efforts to the appreciation in the premarital stock. The rule proposed by the wife—that all appreciation of the stock of a company for which a spouse works is a marital asset—would in essence force the trial courts to determine exactly how much of the increase in value of a multi-national corporation each and every hourly employee was responsible for. “Such a significant expansion ... is better left to the legislature to consider.”
62
In a case where company stock was a family owned company and owning spouse has a significant management position what is the preumpstion?
Holding a significant management position is evidence that marital efforts contributed to enhancement in the asset and the burden shifts to owner spouse to show that the enhancement was passive and due to market forces
63
what is the presumption concerning company stock when owner spouse has an insignificant role?
Then that is not going to be dispositive evidence that the marital efforts contributed to the enhancement of the marital asset and the non-owner spouse will have not met his or her burden of proving the marital efforts enhanced the value of the nonmarital asset.
64
Husband had a premarital business. While he worked at the business during the marriage, the business did not appreciate in value and went down in value. How should this asset be classifed?
NONMARITAL - no enhancement.
Ramos v. Ramos (Fla. 4th DCA 2017)
65
What is DROP
Deferred Retirement Option Program (“DROP”) is an option under the Florida Retirement System which allows the participant to accrue retirement benefits while continuing to work. The retirement benefits are paid into a separate account and accrue statutory interest during the five-year DROP term. A cost-of-living adjustment is also applied to the plan. At the end of the five-year DROP term, the participant retires and receives the total accumulations contained in the DROP account as a lump-sum distribution along with the accrued monthly benefit amount
66
HYPO: The former husband received a lump sum DROP payment of $269,000.00. The parties had entered into a marital settlement agreement providing the wife with an accrued equal portion of the husband’s pension benefits. The final judgment was entered in January, 1998. In July 1998, the DROP program was created; and, the former husband entered into the DROP program. Is the former wife was entitled to a QDRO that provides that she is entitled to a portion of the former husband’s DROP benefits?
The appellate court holding that the former wife was entitled to her share of the lump-sum accumulation resulting from the former husband’s participation in DROP. Once the final judgment was entered, the former wife’s portion of former husband’s retirement benefits became her property.
67
How is a disability pension generally classified?
A disability pension, unlike a retirement pension, generally is not a marital asset for purposes of equitable distribution.
68
Why are disability pensions not considered marital assets?
The nature of the disability pension is designed to compensate the employee for lost earnings and injuries (including pain and suffering) sustained on the job, and therefore, it is personal to the employee and should not be considered a marital asset. Likewise, the Fourth District has stated that benefits paid to a spouse for non-economic damages such as pain and suffering, loss of future wages, and future medical expenses are the separate property of that spouse. However, any compensation paid during the marriage for lost wages or lost earning capacity is considered marital property.
69
HYPO: wife testified that, during the marriage, she and the husband maintained the disability insurance policy with marital funds. After they separated, the husband allowed the policy to lapse by failing to make timely payments. When the wife discovered this information, she contacted her attorney and arranged to have the policy reinstated and she began making the payments again. The trial judge relied on this information when determining that the disability benefits were a marital asset that should be divided equally between the husband and the wife. Will this sustain appeal?
Kay v. Kay, (Fla. 5th DCA 2008) - Fifth DCA reversed trial court’s finding the disability benefits were a marital asset, as the nature of the asset is to compensate for lost earnings.
70
Can pensions be subject to ED even if they are not vested at time of divorce?
There is a distributable marital component to a pension benefit even though it is neither vested nor matured at the time of divorce
71
What are the two principal methods to distribute and divide pensions
1. the “immediate offset” method (i.e. cash payout or offset in ED schedule) and
2. the “deferred distribution” method
72
Using the Immediate Offset Method, what must trial court do?
1. Complicated calculations and will generally require expert testimony
2. Using the opinion of an actuary, determine the value of the husband's interest in the fund as of the date of the final hearing.
3. Calculate how much of the present value was earned during the marriage by
-Creating a coverture fraction where the numerator is the amount of time the employee was married while participating in the plan, and the denominator is the total time the employee has in the plan. This “coverture fraction” is the amount of the pension fund accumulated during the marriage; and
-Multiplying the present value of the plan by the coverture fraction to produce a dollar figure. This is the part of the total present value of the fund which accrued during the marriage.
4. Equitably distribute that part of the total present value of the pension fund.
73
What does an immediate offset approach assume
that adequate assets are available to satisfy the award
74
What are the advantages and disadvantages of immediate offset approach
The advantage of this approach is that it arrives at an immediate final resolution of the matter. The disadvantage is that it places the full risk of forfeiture or early retirement on the employee. This method also requires the court to make many assumptions and choose among variables which can dramatically alter the amount of the present money value
75
what is the deferred distribution method?
Much simpler to calculate. Under this approach, the court determines what the employee's benefit would be if he retired on the date of the final hearing without any early retirement penalty. The court then multiplies this dollar amount by the percentage to which the other spouse is entitled. This method yields a fixed dollar amount which the awarded spouse receives from each of the employee's pension payments after retirement.
76
What are the advantages and disadvantages of deferred distribution method
Although it prolongs contact between the parties and raises the possibility of enforcement problems, this approach equally distributes the risk of forfeiture between the parties.
77
HYPO:
The parties were married in 2003 and a petition for dissolution of marriage was filed in 2016. At the time the petition was filed, the husband had been working for as a fireman for the City of Delray Beach for sixteen years. As a fireman, the husband received a pension that accrued from the beginning of his employment at a rate of 2.5% per year worked. The husband intended to work for twenty-five years as a fireman for the city. When the husband reached twenty years of service, the annual rate for the computation of retirement benefits would increase to 3% per year, and this higher multiplier would apply from the beginning of service. Nevertheless, at the time of filing, the husband had accrued only the multiplier of 2.5% per year. The only expert who testified at trial was the husband's expert, Timothy Voit. Using the 2.5% multiplier, Voit calculated that the gross monthly benefit accumulated in the pension plan during the marriage was $2,254.80, of which the wife was entitled to one-half or $1,127.40. Was this error?
Lovelace v. Hutchinson, 250 So. 3d 701 (Fla. 4th DCA 2018)
Voit used the 2.5% multiplier because his calculation was based on the amount of benefit that accrued as of the date of filing of the petition and did not take the husband's post-marital efforts into consideration. Court agreed. We find that the application of a 2.5% multiplier instead of the 3% multiplier the husband could achieve after four years additional service is not a “penalty.” Rather, the 3% is a bonus for the additional service the husband must perform in order to qualify for the enhanced retirement multiplier. This is consistent with the basic premise of that the “valuation of a vested retirement plan is not to include any contributions made after the original judgment of dissolution.” Clearly, in order to get the benefit of the enhanced multiplier, the husband needs to continue working during a period of time after the dissolution. Thus, we find the enhanced multiplier to be akin to a bonus for longevity in the husband's employment and unlike the penalty in Boyett.
78
Can parties agree to implement an income withholding order to divide a pension to achieve equitable distribution?
No
79
Can parties agree to a QDRO to force direct payment to a nonparticipating spouse a portion of the spouse's municipal or governmental pension to achieve ED?
NO
80
What is a QDRO
A qualified domestic relations order to effectuate non-participant' spouse receiving benefits under participating spouses' Employee Retirement Income Security Act - it allows a non participant to receive benefits payable under the plan
81
What is the benefit to a participant to do a QDRO
The alternate payee incurs the tax liability in the tax year received
82
What is the three step process to calculate marital and nonmarital portions of employment-related stock options?
1. Determine whether stock options are employee compensation options or market options
2. Is the primary purposes for past services or future services
3.Coverture formula for determining the marital and nonmarital portion of option in question is to take the time from the grant date to the date of filing and divide it by the entire time from the date of options in question were granted until the vesting date
83
What is the critical test to determine if a stock option is marital v. nonmarital
The date in which the options are GRANTED not the vesting date.
84
Whether options are marital or nonmarital hinges on what analysis?
Whether it is for past, present or future services.
85
Is deferred compensation marital?
Yes
86
When is compensation considered for future services as opposed to deferred compensation?
When the award is an incentive for employee to render continued and future services to a company and as an incentive for future productivity
87
The husband was granted 46,667 SARs during the marriage with a base equity value of $10.00 per share. The SARs were then replaced with new SARs having a lower base equity value of $6.81 per share. At the time of trial, company had not determined value of SARs and had no obligation to do so until several years after trial date. Husband contended any appreciation would be due to his future performance and nonmarital. What should trial court do
SARs were fully vested before the petition was filed and should have been designated a marital asset. To the extent any appreciation of the SARs was for performance before the date of filing, that amount should be valued as a marital asset. Also, court may impose a constructive trust on one-half of the SARs, as in Jensen (recognizing that a constructive trust is deferred distribution method and that “the deferred distribution approach for a stock option that cannot be valued as of yet is the only prudent and plausible approach to adopt.
Hollister v. Hollister, 965 So. 2d 341 (Fla. 2d DCA 2007)
88
What should a trial court do if the value of a marital stock option cannot be determined as of final hearing?
Impose a constructive trust, which is a deferred distribution method
89
Can a court consider a stock option for purposes of ED and then use that same stock option as income for purposes of support?
No - it's error but it can consider some options income and some for ED.
90
Can the court equitably distribute a term life insurance policy
No - it has no value until the contingency of death of the insured occurs.
91
The husband and his brother operated several companies and the brothers purchased “key man” insurance from their insurance agent. Each brother secured two $500,000 term life insurance policies. The applications of insurance admitted into evidence at trial clearly show that the brother was the owner of the policy insuring the brother's life with the husband as his beneficiary, and the husband owned the policy insuring the husband's life with the brother as the beneficiary. The business paid the premiums for all of the life insurance policies. The broker died after petition was filed and the husband was paid $1,066,000 on the policies. Should the court consider the pay out in the ED?
No - bc it's a term life policy with no value and benefit paid for event occurring AFTER DOF.
Ross v. Ross, 20 So. 3d 396 (Fla. 4th DCA 2009
92
What special info has to be included for an order dividing a military pension under 61.076
All vested and nonvested benefits, rights, and funds accrued during the marriage in retirement, PENSIONS, profit-sharing, annuity, deferred compensation, and insurance plans and programs are marital assets subject to equitable distribution.
If the parties were married for at least 10 years, during which at least one of the parties who was a member of the federal uniformed services performed at least 10 years of creditable service, and if the division of marital property includes a division of uniformed services retired or retainer pay, the final judgment shall include the following:
(a) Sufficient information to identify the member of the uniformed services;
(b) Certification that the Servicemembers Civil Relief Act was observed if the decree was issued while the member was on active duty and was not represented in court;
(c) A specification of the amount of retired or retainer pay to be distributed pursuant to the order, expressed in dollars or as a percentage of the disposable retired or retainer pay.
An order which provides for distribution of retired or retainer pay from the federal uniformed services shall not provide for payment from this source more frequently than monthly and shall not require the payor to vary normal pay and disbursement cycles for retired or retainer pay in order to comply with the order.
93
What is the bright line rule on military pensions?
All retirement points earned on military after pension after nonmarital
94
What is the controlling law on military pensions
FEDERAL LAW - Fed law dictates total amount of disposable retired pay of a member payable under all court orders may not exceed 50% of disposable retired pay
95
Wife served in military and had a pension. Trial court determined wife was entitled to alimony from husband and was concerned about the enforceability of the alimony award based upon the husband’s conduct, including liquidating his 401k upon filing and cleaning out the parties account, and filing income tax return taking all of the deductions. Trial court ordered that the wife retain the husband's 45% interest in her military pension as permanent lump sum alimony to do. Is this reversible?
* Rawson v. Rawson, 264 SO. 3d 325 (Fla. 1st DCA 2019)
1st DCA said NO, not reversible. The husband's dissipation of the parties' assets and his withholding of the rental income from the wife—as well as his threat that he would rather kill the wife than support her—underscored the court's “significant concerns about the enforceability of its alimony award.” Those findings were sufficient to show both a “special necessity” and “unusual circumstances” to support awarding the wife the husband's marital share of her military pension as lump sum alimony
96
Are veteran's disability benefits subject to ED?
No - similar to all other disability benefits paid.
97
How should courts view workers compensation and personal injury claims in classifying such assets?
Take an analytical approach as opposed to mechanic (if received during marriage = marital).
Workers comp - does it represent past lost wages, loss of earning capacity medical expenses? if so, marital. If award is for future loss ages, future medical expenses - should be separate nonmarital.
98
In situations where the attorney-spouse is retained before the filing of the petition, but performs work both before and after the filing of the petition, is the settlement marital?
the decision as to whether the fees received upon settlement constitute marital property is one that lies within the sound discretion of the trial judge.
99
What is the date for valuation of assets and liabilities?
Fla. Stat. 61.075(7): The date for determining the 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.
100
What standard should experts follow when performing business valuations?
Uniform Standards of Professional Appraisal Practice (USPAP)
101
What are the three approaches to valuation under the Uniform Standards of Professional Appraisal Practice?
(1) Market approach
(2) Income approach
(3) Asset approach
102
What is the market approach under the USPAP?
Valuation based comparison of the company to other comparable companies that have been sold on the open market
103
Under the market approach, what should practitioners consider?
(1) make sure valuator searched for comparable sales
(2) make sure comparisons are actually comparable
(3) check balance sheet to make sure nothing would skew purchase price - otherwise adjustments should be made
104
What is the income approach under the USPAP
Discounted value of projected income stream to the company.
105
What is the most common valuation method?
Income structure bc all info needed is easily available ie financial statements and 3rd party publications
106
Why does a business receive a marketability discount in an income approach valuation?
The theory is since company not sold in open market, it will not render as high of value. The marketability discount is almost entirely subjective based on the valuator.
107
What are control discounts?
If a valuator values less than 51% of a company, it can apply a control discount and decrease company. Conversely, if interest is 51% of more, it can apply a control premium and increase the value. The theory is, a controlling interest is worth more since it has more decisions and control over compensation and control over business. Control discount and how much to discount are almost entirely subjective based on the valuator judgment.
108
What is the asset approach under the USPAP
Essentially a liquidation value of the company
109
Is the fair market value approach considered by valuators?
This is what would a willing buyer pay and what would seller accept when neither acting under duress of sale of business - this is not regarded by valuators because it presumes values.
110
What is goodwill
The intangible asset arising as a result of name, reputation, customer loyalty, location, products, copyrights, trademarks, brand recognition, contracts and similar factors
111
What is the exclusive method of valuing a professional association?
FMV approach
112
How is goodwill enterprise determined
Enterprise goodwill is the set of characteristics associated with the business entity itself and which is transferable to a new owner upon sale. Meaning, enterprise goodwill exists regardless of who owns or operates the business.
FMV approach - the excess over assets represents the goodwill.
113
Can goodwill be a marital asset?
there must be a value separate and apart from the reputation or continued presence of the marital litigant
114
In determining personal goodwill, what approach does FL use?
Personal goodwill is associated with a specific owner’s reputation, experience, industry knowledge and skills.
walk away doctrine - what would a buyer pay a seller without a non-compete - meaning, seller could go down the street an open up a business. The walk away doctrine reduces the FMV
115
Can trial court leave parties joint owners of a marital business?
No
116
We know premise in distribution is equal distribution, what factors must court considered in awarding an unequal distribution?
1. contribution to marriage by each spouse including contribution to care education of children and services as a homemaker
2. economic circumstances of the parties
3. duration of the marriage
4. interruption of personal careers or educational opportunities of either party
5. contribution of one spouse to the personal career or educational opportunity of the other
6. Desirability of retaining any asset intact and free from any claim or interference by the other spouse
7. Contribution by each spouse to the acquisition, enhancement, and production of income or improvement of or incurring liabilities both marital asset and nonmartial assets of the parties
8. Desirability of retaining home as residence for any child of marriage or any other party when it would be equitable to do so or it is in best interest of child and it is financially feasible for party to retain or award exclusive use and possession until children emancipate
9. Intentional dissipation of marital assets after filing of petition within 2 years prior to filing action
10. any other factor necessary to do equity of justice between parties
117
Are disparate earnings sufficient to award an unequal distribution
That fact alone is insufficient to support award of unequal distribution
118
What are considerations that must be taken by court when one party wants to retain a marital home?
1. Are they asking bc they have a kid or other dependent
2. Would be it equitable to do so
3. Is it in the best interest of the child or that party
4. Is it financially feasible to retain
119
Can a court include assets in ED when they have been diminished or dissipated?
It is reversible error UNLESS there is a finding of intentional misconduct related to the reduced balance.
120
Can a court order parties to equally pay for credit card debt?
Yes, but it must make specific finding as to which spouse is paying what debt
121
Can a court order the buyout of a marital residence?
Yes, but the buy out must be over a reasonable period of time.
122
When may a court ordered lump sum equitably distribution payment?
61.075(10)(a) - when necessary to do equity between parties, court may in lieu of or to supplement facilitate or effectuate the equitable division of martial asset and debts order a monetary payment in lump sum or in installments
123
What must court do if it orders lump sum equitable distribution in installments?
-court may require security and reasonable rate of interest or recognize the time value of time money to be paid in the order
-must include payment schedule for enforcement purposes
124
What must court consider in awarding lump sum equalizer?
Must be based on payor's ability to pay without substantially endangering his/or her economic status
125
Can court order interim partial distribution of assets?
61.075(5)
If court finds good cause it may enter interim order and shall identify and value the marital and nonmarital asset and liabilities and provide for a partial distribution
126
When can a court order interim partial distribution
anytime after the DOF and party is served and before final distribution
127
What is litigant required to do in order to seek interim partial distribution
allege good cause upon sworn motion establishing specific factual basis for the motion
128
For purposes of interim partial distribution, what is good cause
extraordinary circumstances
129
What factors shall court consider in determination of entitlement to setoffs or credits upon sale of marital home
61.077
(1) Whether exclusive use and possession of the marital home is being awarded, and the basis for the award;
(2) Whether alimony is being awarded to the party in possession and whether the alimony is being awarded to cover, in part or otherwise, the mortgage and taxes and other expenses of and in connection with the marital home;
(3) Whether child support is being awarded to the party in possession and whether the child support is being awarded to cover, in part or otherwise, the mortgage and taxes and other expenses of and in connection with the marital home;
(4) The value to the party in possession of the use and occupancy of the marital home;
(5) The value of the loss of use and occupancy of the marital home to the party out of possession;
(6) Which party will be entitled to claim the mortgage interest payments, real property tax payments, and related payments in connection with the marital home as tax deductions for federal income tax purposes;
(7) Whether one or both parties will experience a capital gains taxable event as a result of the sale of the marital home; and
(8) Any other factor necessary to bring about equity and justice between the parties.
130
Can spouse not living in a home seek rental value of property being occupied by other spout during dom?
Not if the occupancy is for the benefit of a minor child pursuant to a court order
131
When is joinder of a corporation to an action necessary
If transfer for corporate assets is requested
132
With respect to a marital business, what can a court do with or without joining the corporation as a party
1. distribute corporate stock that is marital
2. prevent party from disposing of corporate assets in party's control
3. order transfer for corporate stock to the other
133
When is partition appropriate
When the property cannot be divided
134
Who can bring partition
Any one or more legal owners or others interested in the land to be divided
135
How is subject matter jurisdiction determined in partition
In any county where the land or any part thereof lies
136
What must be plead for partition
1. description of land
2. names & address of owners
3. quantity held by each
4. Any other matter to enable court to adjudicate the rights and interest of the party
137
If court orders partition, what must the FJ include?
Reasonable deadlines for sale to take place - list date, etc
138
Are domestic support obligations dischargeable by bankruptcy
No - however, under the Bankruptcy Abuse Preventing and Consumer Protection Act, OTHER TYPES OF OBLIGATIOSN AND DEBTS ARISING OUT OF A SEPARATION OR DIVORCE INCLUDING PROPERTY SETTLMENTS ARE STILL DISCHARGEABLE UNDER CHAPTER 14
139
What are the seminole cases in FL on goodwill?
1. Held v. Held
2. Williams v. Williams
3. Thompson v. Thompson
140
What does Thompson v Thompson Fla Supreme Court case stand for?
This is a 1991 Florida Supreme Court case that stands for the proposition that GOODWILL is:
Fair market value approach should be the exclusive method of measuring business goodwill in FL
141
What did Williams v Williams stand for?
In 1996, in Williams, the Court concluded that business goodwill of a professional practice is a marital asset subject to division if it exists and was developed during the marriage. However, if a noncompete agreement would be required pursuant to a sale, there is no reason to believe
that the goodwill adheres to the enterprise.
142
What was the proposition set forth in Held v. Held?
In 2005, Court concluded in Held that the adjusted
book value was used in determining the fair market
value of the business. The court rejected the inclusion of a non-solicitation agreement in enterprise goodwill.
143
What happened in Erp v. Erp?
2007 seminole case on discounts:
“A trial court should be accorded the discretion to determine whether a marketability discount should apply to the valuation of a closely held corporation in a dissolution of marriage case where the court is traditionally charged with achieving equity through the use of various remedies.”
The appeals court found “no abuse of discretion in the trial court’s decision to apply a ten-percent marketability discount in this case.”
144
What was held in Garcia v Garcia?
2010 seminole case on buy-sell agreements:
“The sale price set by restrictive provisions on transfer of closely held stock is not conclusive as to the value. However, restrictive transfer covenants affect value through impaired marketability and must be considered when a trial court determines the value of stock for purposes of equitable distribution. When stock is subject to a restrictive transfer agreement the price fixed by such provisions will not control its value, but the restriction on transfer is a factor which affects the value of the stock for purposes of equitable distribution.”
145
How is valuation of a business calculated in Florida?
“The valuation of a business is calculated by
determining the fair market value of the business which is the amount a willing buyer and willing seller would exchange assets absent duress.
