The relationship between a married couple is based upon trust, and many financial decisions are made without regard for the full impact those decisions may have if the marriage should end in divorce. Joint bank accounts are commonly used for payment of monthly household expenses, for saving toward the couple’s retirement, etc. However, commingling of the assets of the parties can have steep financial ramifications upon one or the other in the event of a dissolution of the marriage.
A spouse whom may receive an inheritance during the course of the marriage must make a decision as to where to deposit the money inherited: Should he/she deposit the money into the parties’ joint bank account? Should the money be placed into an account in the sole name of the spouse inheriting the money? What if the inheritance was received prior to the marriage and placed into an account in the sole name of the inheriting spouse, but after the marriage the interest or proceeds of the inheritance were deposited into the parties’ joint bank account in order to pay joint obligations? Does this depositing of the proceeds of the inheritance during the marriage make the inheritance a marital asset, even though it was received prior to the marriage? Does the fact that marital expenses were paid with a mixture of marital money and the non-marital inheritance proceeds change the status of the entire inheritance? Does the length of the marriage have any impact on how the asset would be distributed in the event of a divorce?
The Court must begin with the presumption that the distribution of all marital assets, including gifts between the spouses and debts/liabilities incurred should be equal. If the presumption of a gift cannot be overcome and what were once nonmarital funds are classified as marital due to joint title, an argument could be made that there is justification for an unequal distribution of the assets. The court must consider such factors as the contributions to the marriage by each party, the financial circumstances of each party, the length of the marriage and any other relevant statutory factors which may be applicable to the couple. Prior to 2008, the presumption of a gift would have only been applicable in the event of real estate held by the parties as tenants by the entireties, regardless of when the property was acquired. This meant that if one spouse owned real estate prior to the marriage and that property was placed in the joint names of the parties at any time during the marriage, that transfer of title was presumed to be a gift from one spouse to the other.
In 2008, the law changed. The new statute provided that the presumption of a gift applies not only to real estate, but to any property titled as tenants by the entireties. In order to refute this, clear and convincing evidence must be provided by the disputing spouse showing credible, clear proof that the intent of the joint title was not to gift the property to the other spouse. However, even with the amendment to the statute, the only form of ownership addressed is tenants by the entireties. It does not address tenants in common, or joint tenants with rights of survivorship.
When property is held jointly between married persons, there is no difference between joint tenancy with rights of survivorship and tenancy by the entireties. The intent is the same: If one spouse pre-deceases the other, the property passes by operation of law to the remaining spouse. However, it is possible for a married couple to own real or personal property as tenants in common. If this occurs, does a gift presumption apply? Florida Statutes §61.075(6)(a)(4) provides that the “burden of proof to overcome the gift presumption shall be by clear and convincing evidence.” It is not clear whether the gift presumption applies in the limited situations of tenancy in common.
There are three distinct theories relating to commingling of funds and whether the commingling transforms the funds from nonmarital to marital. The first theory, the strict transmutation approach,
concludes that any commingling whatsoever results in the transformation of the entire asset into a marital asset. Under this theory, when marital and nonmarital funds are commingled, all nonmarital contributions automatically transform into a marital asset, without consideration of any other factors. The reasoning is that money is regarded as commercially interchangeable with other property of the same kind, and once commingled loses its separate character.
The second theory, the tracing approach, adopts the view that if the nonmarital funds are not so intertwined with marital funds that they can be traced to their nonmarital origins, they remain nonmarital property. Before 2008, Florida courts appeared to favor this approach when nonmarital funds were deposited into an account held jointly with both spouses. However, with the statutory amendments effected in 2008, the obstacles that must be overcome to prove commingling are two-fold. First, there is the heightened burden to overcome the gift presumption, and then whether the funds can be sufficiently traced. The Court may consider whether the nonowning spouse was the one who deposited the funds into joint names, or whether the funds were placed into an account of convenience.
The third theory examines the intent of the parties. Florida Courts have taken inconsistent and varied approaches to commingling issue and whether the deposit of marital funds into an otherwise nonmarital account transforms the entire asset into one fully subject to equitable distribution between the parties. The majority of the Courts in Florida, however, look to whether the funds are traceable to their nonmarital origin, or whether they have become so irretrievably commingled so as to dissolve the nonmarital character and transform them into a marital asset. Florida caselaw concerning nonmarital inheritances and whether they are marital or nonmarital in nature has customarily focused on the intent of the recipient spouse. In evaluating assets that come to one spouse by inheritance, the task for the court in a dissolution proceeding is to determine whether the recipient intended that the assets remain nonmarital or whether the recipient’s conduct during the marriage gives rise to the presumption of a gift to the other spouse. Evidence of an intent that the inheritance remain nonmarital arises when the nonmarital property is placed into a separate account, no other funds are deposited to the same account, and the parties other funds are never intermingled with the inheritance funds.
In determining equitable distribution, the court must first identify the assets of both parties. It must then classify them as marital or nonmarital in nature. Next, the assets must be valued, and then distributed between the parties. Any assets determined to be nonmarital are set aside to that party and are not subject to equitable distribution. Any commingling of nonmarital funds with marital funds can make the Court’s job of determining the nonmarital nature of an asset very complicated and arduous. The statutory changes which came about in 2008 come to bear on the outcome, and perhaps unintended consequences to the parties may result due to their actions before dissolution of their marriage was contemplated. Accordingly, in order to alleviate the burden of determining the nonmarital nature of an inheritance, premarital asset, or other nonmarital asset, it is best to be cognizant of how the account is titled, how the funds are used, and to ensure that no marital funds are intermingled therewith.
Excerpt from the Florida Bar Journal, July/August 2015
Susan W. Savard, Family Law section
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