Florida

WHY IT IS A GOOD IDEA TO ENTER INTO A SEPARATION AGREEMENT, EVEN IF YOU PLAN ON FILING FOR DIVORCE IN THE FUTURE:

Pursuant to § 61.075 of the Florida Statutes, the signing of a separation agreement is the cut-off date for determining which assets can be classified as “marital” and thus distributed by the Court. Accordingly, entering into a separation agreement helps the parties clearly identify: (a) the assets that are subject to equitable distribution; (b) the value of their assets; and (c) the manner in which they choose to divide their marital assets. Without a separation agreement, parties face the prospect of a long, difficult battle over equitable distribution. By entering into a separation, divorcing couples achieve clarity and avoid the high costs and inconvenience of litigation.

The precise language of the statute is as follows:

(7) The cut-off date for determining assets and liabilities to be identified or classified as marital assets and liabilities is the earliest of the date the parties enter into a valid separation agreement, such other date as may be expressly established by such agreement, or the date of the filing of a petition for dissolution of marriage. The date for determining value of assets and the amount of liabilities identified or classified as marital is the date or dates as the judge determines is just and equitable under the circumstances. Different assets may be valued as of different dates, as, in the judge’s discretion, the circumstances require.

Because Florida statute provides a very broad definition of marital property, many couples find themselves drawn into protracted and uncertain litigation regarding which assets are marital, and how they should be valued and distributed by the court. By entering into an agreement, you can avoid that costly process.

• Retirement Benefits are Marital Assets:Arnold v. Arnold, 967 So.2d 392 (2007):
  
  "For purposes of equitable distribution, each spouse has an interest in all retirement, annuity and deferred compensation benefits, including DROP accounts - or portions thereof - to which either spouse earns the right during the marriage. Such benefits are marital assets under section 61.075(5)(a), Florida Statutes (2006)."
  
  
• Valuation of Vested Retirement Plans:
  
  Pursuant to the Florida Supreme Court's ruling in Boyett v. Boyett, 703 So.2d 541 (Fla. 1997), post-dissolution contributions are excluded in the valuation of retirement plans that have already vested. The decision states as follows:valuation of a vested retirement plan is not to include any contributions made after the original judgment of dissolution. We believe that this gives effect to the statutory definition of marital assets in section 61.075(5)(a), Florida Statutes (1993),[fn3] and to section 61.076(1), Florida Statutes (1993).[fn4] Likewise, we approve Bain v. Bain, 553 So.2d 1389, 1391 (Fla. 5th DCA 1990), and Howerton v. Howerton, 491 So.2d 614, 615 (Fla. 5th DCA 1986).
  
  
• Deferred Retirement Option Program Accounts (DROP Accounts)
  
  A DROP plan is an arrangement under which an employee who would otherwise be entitled to retire and receive benefits under an employer’s defined benefit retirement plan instead continues working. However, instead of having the continued compensation and additional years of service taken into account for purposes of the defined benefit plan formula, the employee has a sum of money credited during each year of the continued employment to a separate account under the employer’s retirement plan. The account earns interest (either at a rate stated in the plan, or based on the earnings of the trust underlying the retirement plan). The account is paid to the employee, in addition to whatever benefit the employee has acquired under the defined benefit plan based on earlier years of service, when the employee eventually retires.In Arnold v. Arnold, 967 So.2d 392 (Fla. App. 1 Dist. 2007) the court ruled that benefits giving rise to rights in A DROP account could accrue during the marriage and therefore constituted marital assets, if not actually deposited into the subject account until after the marriage.In Pullo v. Pullo, 926 So.2d 948 (Fla. App. 1 Dist. 2006), the court ruled: "payments into DROP are merely deferred retirement benefits from which, but for DROP participation, each former spouse would receive his or her pro-rata share immediately. Accordingly, the concession only established for the court what is well-known."
  
  
• Nonvested Retirement Accounts and Deferred Division on a Fixed Percentage Basis.
  
  Retirement assets are marital property, regardless of whether they are vested at the time of dissolution. § 61.075(5)(a)(4.) Fla. Stat. (2006).For pensions, distribution is accomplished through a "deferred division of benefits on a fixed percentage basis. Deloach v. Deloach, 590 So.2d 956, 965 (Fla. 1st DCA 1991), disapproved other grounds, Boyett v. Boyett, 703 So.2d 451 (Fla. 1997). Distribution includes "all associated interest and cost of living adjustments." Arnold v. Arnold, 967 So.2d 392 (Fla. App. 1 Dist. 2007)In Deloach, the methodology is described as follows:(1) the trial court must retain jurisdiction over the case until the employee spouse retires or begins to draw on pension benefits; (2) then, at such a time, the trial court must allocate the amount paid based on a fraction that takes into account the total period of the employee spouse’s participation in the pension plan; and (3) in making the award, the trial court must account for increases in the employee spouse’s retirement benefits that accrue between the date of dissolution and the date of retirement. DeLoach, 590 So.2d at 963.

By: Marc A. Rapaport, Esq.; 2010, All Rights Are Reserved.

Section 732.702 of the Florida Statutes specifically provides that a marital separation agreement may include a waiver of the right of one or both parties to share in the other's estate. The law requires that the separation agreement be signed by the waiving party in "the presence of two subscribing witnesses." The law further requires that each spouse fully disclosure his or her estate (assets, liabilities, etc.) upon entering into a legal separation agreement.