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The Use of an Incorrect Ratio Led to an Incorrect Calculation and that Led to a Reversal of a Florida Trial Court’s Equitable Distribution Decision

When people think of equitable distribution in a divorce, they may associate it with a fairly simple and straightforward process in which each spouse gets 50% of the marital assets. Of course, achieving this outcome can involve some technical matters, such as determining values of assets and deciding what is or is not a marital asset. Then there are other potential complexities such as dividing a property where the value was (or is) less than the balance of the outstanding mortgages. Achieving an equitable distribution that fairly protects your interests, then, involves a detailed understanding of the law in Florida, which is why it pays to have representation from a knowledgeable Miami family law attorney.

The divorce of A.M. and K.M. was a case with an equitable distribution dispute. The couple married in the fall of 2011. Prior to the marriage, the wife had purchased a home that was worth $126,000 on the couple’s wedding day. The home had two mortgages on it. The first mortgage alone had a balance of $166,000. During the marriage, the couple lived in that home. They used marital assets to make payments on the first mortgage, but they paid nothing on the second mortgage. The husband also made renovations to the home during the marriage.

Three and a one-half years after the couple married, the wife filed for divorce. During that litigation process, the home was assigned a market value of $170,000. The first mortgage had a balance of $143,000 and the second mortgage had a balance of $57,000.

In the divorce case, one of the key disputes related to the marital portion of the passive appreciation of the home. The trial judge used the balance of the first mortgage at the start of the marriage and the value of the home at the start of the marriage to reach a debt-to-value ratio of $166,000 divided by $126,000, or 1.323. Based on that, the marital portion of the passive appreciation was $81,000. That resulted in the judge ordering the wife to make a $53,000 equalizing payment as part of the equitable distribution.

The wife appealed that ruling. Her argument was that, in situations where more was owed on a property than it was worth, it is not proper to use the property value and the debt balance to calculate a ratio that is greater than 1.000. The appeals court stated that she was correct. The amount of debt outstanding against the home was greater than the value of the home. When that is the case, that means that the property has no equity. When a property has no equity at the time that two spouses marry, then “100% of the value of the passive appreciation” is a marital asset.

The correct calculation, then, of the marital portion of the passive appreciation of the home was the increase in the value of the home ($170,000-$126,000,) or $44,000, multiplied by 1, meaning $44,000, not $81,000.

Whether your divorce issue is alimony, equitable distribution or a different subject, Miami family law attorney Sara Saba is ready to help. Attorney Saba has provided helpful representation for her clients for more than 13 years. Our team is dedicated solely to meeting your family law needs. Contact us online or by calling (305) 450-8009 to schedule your consultation. Hablamos Español.

More blog posts:

Equitable Doesn’t Always Mean Equal: The Rules of Marital Property Division in Florida, Miami Divorce Lawyer Blog, Sept. 17, 2018

Calculating the Marital Portion of Passive Appreciation of Non-Marital Property in a Florida Divorce, Miami Divorce Lawyer Blog, April 16, 2018