Florida Family Lawyer Blog

As discussed in previous blog entries, Florida is an equitable distribution state. More specifically, the Court will divide the marital assets between the divorcing parties based upon all the facts of the case. The court begins its division analysis with a presumption that the marital assets and liabilities incurred by the parties during the marriage should be split equally, however surrounding facts and circumstances in a given divorce may alter the percentage each party receives. Assuming the marital assets are divided equally, another important issue to address is whether the definition of marital assets encompasses one spouse’s retirement accounts, IRAs, and 401k plans. The short answer is—it depends! How much of these accounts remains susceptible to equitable distribution in divorce depends largely on when they were created.

It is easy to see why division of martial property is one of the more challenging processes when going through divorce. In Florida, marital property includes any asset acquired during marriage by either spouse’s efforts. Additionally, Florida Statutes requires that a married couple’s vested and nonvested benefits, rights, and funds accrued during marriage in retirement, pension, profit-sharing, annuity, deferred compensation, and insurance plans and programs are all “marital assets” subject to equitable distribution. Therefore, all of a spouse’s retirement accounts, IRAs, and 401k plans are susceptible to equitable distribution even if they do not vest until after the parties separate. However, one important caveat stated within the Statutes itself, is that division of those assets will only result from a spouse’s employment time after the marriage but before the commencement of a dissolution proceeding (i.e., the duration of the marriage) because that is when the benefits accrue. For example, a pension plan balance prior to marriage and an increased value in the same plan subsequent to a dissolution proceeding cannot be subject to the equitable distribution of marital assets in the state of Florida. In this example, the pension owner would have the burden of establishing whether some portion of the pension benefits accrued prior to marriage.

How will the court determine the value of these accounts and what is the method of distribution? One Florida District Court of Appeal has explained that this determination generally requires complicated calculations in addition to expert testimony based on competent and substantial evidence. The preferable approach to such calculations includes reducing the fund’s present value by factoring in the contingencies of vesting, maturity, and the pension holder’s mortality. Once a final value is reached, it will then be equitably divided. In dividing a marital asset pension, however, courts have the following two options: (1) reduce the pension benefits to their present value (as previously discussed) and then order a lump sum distribution of the amount to the recipient spouse; or (2) direct that a portion of each pension payment be paid to the recipient spouse at the time of each payment. Because some pension plans may require an early withdrawal penalty, the second options appears to be more reasonable. However, some courts have chosen instead to apply the first option and simply reduce the pension holder’s interest in another piece of marital property and distribute that interest to the recipient spouse. Therefore, no early withdrawal penalties are implicated with either option.

If you are going through a divorce and have obtained many of these funds during the course of your employment, consult an attorney to consider your options.