When a marriage is dissolved, there are many distinct matters that need to be handled by both parties. One such issue involves nonmarital assets. Nonmarital assets, by definition, are assets brought into a marriage that were not purchased with marital funds; these assets are usually not included in the equitable distribution taking place during a divorce. One of the most common nonmarital assets is a house. Did you know, however, that even if a house is considered a nonmarital asset, it can still be subject to equitable distribution?
Over time, houses can appreciate far beyond its original market value. If you are looking to make your money back on a home, this would certainly be ideal. In divorce proceedings, however, the appreciation value of a home can be considered a marital asset if marital funds contributed to its increase in value. This can include paying for renovations or even just making payments on the mortgage. If marital funds are not used to contribute to the home’s value (whether it’s because one spouse fully owned the home or funds from inheritance were used instead), the appreciation value would not be split during a divorce.
If the court finds that the appreciation value of the home is subject to equitable distribution, the next step is to determine exactly how much should be under consideration. There are very few circumstances where the entire appreciation value will be split; what typically occurs is that the court will take a portion of the appreciation value and then split that between the two parties. The formula used by the court is derived from the court case Stevens v. Stevens, which dealt with this particular issue for the first time. The formula is below:
Here is an example of this formula at work. Suppose one spouse purchased a home prior to the marriage. He or she took out a mortgage of $200,000. When he or she got married, the real estate value of the home was $300,000. Six years later, the couple filed for divorce and the home is now worth $600,000. Thus, the appreciation value is $300,000.
If marital funds were used to contribute to home appreciation, then the court would use the Stevens formula. This is what the formula would look like with the numbers from the example:
As the formula shows, approximately two-thirds of the appreciation value would be split between the couple, which comes out to $200,000. When distributing assets, Florida law states that distribution should be equal, unless there’s a reason to make it unequal. Thus, in this example, it is probable that out of the $200,000 available, each party to the divorce would receive $100,000 each.
While this formula appears simple, its application can differ on a case-by-case basis. Every divorce requires individual attention in order to make sure all parties are being treated fairly. If you believe you are entitled to equitable distribution of a nonmarital asset, you will need an experienced family law attorney who can help you crunch the numbers and advocate for you in court. Call Hendry & Parker, P.A., in downtown Dunedin, at (727) 205-5555 today for a free consultation serving Pinellas, Pasco & Hillsborough Counties.