Source: https://www.jacksonvilledivorceattorneyblog.com/page/2/
Timestamp: 2019-04-19 04:26:16+00:00

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Equitable distribution of assets in Florida divorces can be a complex and divisive issue. Regarding trusts and divorces, you can walk a fine line between a marital asset and a non-marital asset. Enhancement in value and appreciation can be a marital asset in certain situations.
Oxley v. Oxley, 695 So.2d 364 (Fla. 4th DCA 1997) is a case that is especially relevant regarding a person placing their property in a revocable trust with themselves as trustee, hiring a financial manager to make the daily investment decisions, and thereby protecting themselves from the Florida Statute § 61.075(6)(a)(1). This section provides marital assets and liabilities to include 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. Meaning, technically, a non-marital trust’s appreciation of value could be considered marital property unless specific requirements are followed. Oxley spells out how to avoid appreciation being considered in the dissolution of marriage.
In Oxley, the parties’ marital income was primarily from trust distributions to the husband which he supplemented with a salary taken as president of a family holding company. The trust is revocable and was established prior to the marriage by the husband that provides that all income is payable to husband. The investment decisions for the trust was made for the husband’s exclusive benefit by the trustee based on the advice of the husband’s father and brother. It had multiple, active investments such as several working oil wells. On one occasion the husband invested $400,000 of trust funds through a separate money manager. At the time of the marriage, the trust was valued at $2 million and then increased to $7 million at the time of dissolution; and the increase was attributable to undistributed income that has accumulated during the marriage and upon which he paid personal income tax. The trust also owned and paid the expenses on the marital home. The husband also owned 50% of a corporation found to be a gift (technically purchased for a nominal amount) from his father. As company president, the husband’s activities were largely ministerial and ceremonial, and he left the management and investment decisions to others. The trial court in Oxley ruled that the trust, including the undistributed income, were non-marital assets, which significantly limited the wife’s equitable distribution.
Equitable distribution in Florida during a divorce can be a frightening prospect. What are the rules regarding distribution of assets of a trust in a divorce? Does the divorce court have the authority to distribute trust assets?
The appellate courts in Florida have addressed this issue. The appellate court held that without consent from all beneficiaries to the trust, the trial court did not have the authority to distribute any asset of the trust. See Sylvester v. Sylvester, 557 So.2d 599, 600 (Fla. 4th DCA 1990). In Sylvester, the court held that the trial court’s finding that the irrevocable trust, which was the only source from which the husband could comply with the judgment, could be terminated by husband at any time, was erroneous due to the court’s failure to have all indispensable parties before it. The trust would have to be before the court joined with the trustee and beneficiaries.
Similarly, in Minsky v. Minsky, 779 So.2d 375 (Fla. 2nd DCA 2000), the appellate court reversed the determination that trust funds are a marital asset and the resulting equitable distribution in a dissolution action. The trial court incorrectly determined that because the parties had used the trust accounts as marital funds, the funds had “taken on the nature of a marital asset” and awarded the trust funds to the wife. The appellate court indicated that, in effect, the trial court dissolved the trust created for the children’s benefit and the husband as trustee and declared it a marital asset. The court held that the trial court does not have jurisdiction to adjudicate property rights of nonparties.
In a Florida divorce case, sometimes, a marital asset can become non-marital property of one spouse by contract. Or one spouse can become the beneficial owner of marital property by transferring it to an irrevocable trust.
In Nelson v. Nelson, 206 So.3d 818 (Fla. 2nd DCA 2016), a husband and wife transferred an out-of-state home to an irrevocable trust that had the wife as sole trustee. The appellate court ruled that because the husband waived all right to alter, amend, modify, revoke, or terminate the trust, and the trust instrument did not contain a provision dissolving the trust upon divorce, the trust was irrevocable. The court ruled that the out-of-state home was not marital property subject to equitable distribution in a divorce. Neither the wife nor the beneficiary daughter had applied for modification or revocation of the trust, so the court could not dissolve the trust.
This case illustrates an example of how property can be classified in a divorce. When the husband bought the out-of-state property and jointly titled it with his wife, the home became marital property. When the husband transferred the home to the trust, it ceased being marital property and became non-marital. In addition, the Nelson court cites to Hansen v. Bothe, 10 So.3d 213 (Fla. 2nd DCA 2009) regarding the Former Husband’s Trust instrument not containing a provision dissolving the Trust upon divorce. In Hansen, the court held that divorce of husband and wife who were co-settlors and co-trustees of a revocable trust, did not terminate the trust even though wife relinquished any rights she had under the trust as part of the divorce. The trust in Hansen contained no provision terminating it upon divorce of co-settlors, and the trust explicitly provided for replacement trustees in the event the original trustees ceased to serve.
Non-marital assets and liabilities are defined in Florida Family Law as 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 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. See Fla. Stat. § 61.075(6)(b)(1-4).
The Tax Cuts and Jobs Act “TCJA” has a definite effect on alimony payments. Prior to the new law, alimony payments could be deducted by the payer for federal income tax purposes and recipients had to report the payments as taxable income. Any divorces finalized before December 31, 2018 will continue under the old tax law. Any divorces finalized after December 32, 2018 apply under the TCJA eliminates the deduction for alimony payments and recipients no longer have to include them as taxable income. In addition, any modification of alimony payments after December 31, 2018 shall be affected by the TCJA if the modification specifically states that the TCJA applies; meaning if the TCJA is ordered applicable by the Court.
Pre-2019 divorce orders for alimony still qualify under the old federal income tax law for a deduction benefit without having to itemize if all requirements are met. Requirements include: 1) a written document is required the alimony payment; 2) payment must be to or on behalf of a spouse or ex-spouse; 3) the divorce decree or separation document cannot state the payment is not alimony; 4) ex-spouses cannot live in the same household or file jointly; 5) a payment must be made in cash or by cash equivalent; 6) cannot be deemed to be child support; 7) the taxpayer’s social security number must be included on the tax return; 8) the obligation to make payments ceases upon the recipient’s death. See IRS Tax Topic No. 452.
Depending on your situation, you need to speak with an experienced Jacksonville family law attorney now. If you will be making alimony payments, it is in your best interest to get a divorce wrapped up before December 31, 2018 so payments will be deductible. If you will be receiving payments, it is in your best interest to put off finalizing your divorce until next year, so the payments will be tax free to you. Contact the Law Office of David M. Goldman, PLLC for a consultation.
Property During A Divorce in Florida – How Do You Handle It?
The Court cannot order partition of your property without it being alleged in your dissolution of marriage petition. Florida courts have long held that a judge may partition the jointly-owned property of the parties in a divorce action only if the due process requirements of Chapter 64, Florida Statutes, relating to partition are met. See Sanders v. Sanders, 351 So.2d 1156 (Fla. 2nd DCA 1977). The complaint for partition can be incorporated into a divorce petition and no separate filing is needed. F.S. § 64.041 specifies that the complaint must allege a description of the property, the names and places of residence of the owners, and the share held by each owner. The partition complaint must be filed in the county where the property is located.
Typically, the parties will agree on a real estate broker to list the property for sale at current fair market price and the parties will split the proceeds according to the parties’ interest in the property (taking into account the costs and expenses put into the property) unless an agreement is made for one party to refinance the home and pay the opposing party their share. After a divorce, property automatically converts into a tenancy in common and each owner has the right to sell, lease, or mortgage their interest in property. See F.S. § 689.15.
You may be tired of receiving child support or alimony payments late or not at all, and you would like to be paid directly from the employer of your ex-spouse or child’s father/mother. Florida Statutes 61.1301 provides that an income deduction order can be entered once there is an order of alimony or child support by the court. The income deduction order must be issued by separate order.
There is a federally approved and required Income Withholding Order “IWO” that will allow you to garnish income for child support and alimony. See 42 U.S.C. 666, Social Security Act. Arrearage of child support can be withheld also and the employer/income withholder is given instructions on how much to withhold until full payment is made.
There are very clear rules about the IWO, and an IWO may be rejected and delay payment if not completed properly. The employer must reject the IWO and return to the sender if the IWO instructs the employer/income withholder to send a payment to an entity other than a state disbursement unit, which is a centralized facility for collections and disbursement of child support payments. Another reason the IWO must be rejected is if the form does not contain all the necessary information to comply with the withholding. The IWO must include a dollar amount as the amount to withhold and must include a copy of the underlying order. In addition, the correct Office of Management and Budget “OMB” approved form must be used or it will be rejected.

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