The Miami Herald is reporting that the Supreme Court of Florida has issued its opinion in Kaaa v. Kaaa that addresses whether and under what circumstances passive appreciation of a marital home that is a nonmarital asset is subject to equitable distribution.
For 27 years, the parties resided in a home that was purchased by the husband for $36,500 six months before the marriage. During the marriage, marital funds were utilized to pay the mortgage and improve the home. Although the home was refinanced during the marriage, the wife was never placed on the title or deed. At trial, the parties stipulated that the value of the home was $225,000 and the outstanding balance of the mortgage was $12,871.46. The trial court found that the home was nonmarital, that the mortgage balance had been reduced by $22,279 and the renovation to the carport increased the value of the home by $14,400. Accordingly, the trial court ruled that the the enhancement value of the home, $36,679, was subject to equitable distribution and ordered the husband to pay the wife $18,339.50. In affirming the decision of the trial court, the Second District Court of Appeal held that the former wife was not entitled to equitable distribution of the passive appreciation of the real property.
The Supreme Court of Florida quashed the decision of the Second District Court of Appeal and concluded that passive appreciation of a non-marital asset is considered a marital asset when marital funds or the efforts of either party contributed to the appreciation. A nonmarital asset which appreciates during the marriage, only due to inflation or market conditions, becomes in part a marital asset, if it has indebtedness which is reduced by marital funds. Improvements or expenditure of marital monies which results in the enhancenment of the value of a nonmarital asset is an asset subject to equitable distribution. Additionally, the nonowner spouse is also required to have made contributions to the property during the marriage by investing marital funds or the efforts of either party.
In determining whether a nonowner spouse is entitled to a portion of the passive appreciation, the court is required to perform a five part test. First, the court is to ascertain the fair market value of the property. Next, the court is required to determine whether there has been passive appreciation in the home’s value. Third of all, the court must find that the passive appreciation is a marital asset under Florida Statute 61.075(2) by virtue of whether marital funds were used to pay the mortgage, whether their were contributions to the property by the nonowner spouse and the extent that these contributions affected the appreciation of the nonmarital asset. Fourth, the court is to then determine the value of the passive appreciation that accrued during the marriage. Finally, the court is to compute how the passive appreciation should be allocated by dividing the indebtedness at the time of the marriage by the value of the asset at the time of the marriage.
If you have property that is non-marital or believe that you may have an interest in your spouse’s nonmarital property, you should consult with a divorce lawyer in Broward to discuss your rights.