Skilled Family Law Counsel

Divorce in Florida – Division of a Business

Divorce proceedings in Florida often involve the division of businesses.  Courts typically effectuate the division of property and assets in a Florida divorce in such a manner as to allow the operating spouse to retain his or her ownership in the business.  Florida Courts will not require spouses to remain in business together when one or both spouses do not want to continue to do.  Courts will not award each spouse a one-half interest in a business and require them to continue to be business partners. 

In a Florida divorce, courts will obtain a proper valuation of the business and award the business to one of the spouses.  The court will then devise a plan of equitable distribution that is fair to both parties and that causes the least amount of interference with the business.  The court will award the business to one of the spouses and require that spouse to fairly compensate the other spouse.

In a case captioned Bowen v. Volz, the lower court divided a business owned by a husband and wife. The trial court awarded each party a fifty percent interest in their business. The Florida Court of Appeal reviewed this decision and began by commenting on the lack of evidence that was presented to the trial court concerning the value of the business. The Florida Court of Appeal then reversed the trial court.

Division of Property And Assets Wellington, FL

In effectuating a division of property and assets in a divorce proceeding in Florida, enterprise goodwill represents the tendency of customers to return to a business regardless of the reputation of a person who works at the business. Personal goodwill is attributable to the reputation and continued participation of an individual who works at the business. The Florida Court of Appeals recently addressed this issue in Schmidt v. Schmidt. 

In Schmidt v. Schmidt, the Florida Court of Appeals stated that: “Enterprise goodwill, defined as the value of a business “which exceeds its tangible assets” and represents “the tendency of clients/patients to return to and recommend the practice irrespective of the reputation of the individual practitioner,” is a marital asset subject to equitable distribution. Thompson v. Thompson, 576 So. 2d 267, 269 (Fla. 1991).

Personal or professional goodwill attributable to the skill, reputation, and continued participation of an individual is not a marital asset. id. at 270 (explaining ” ‘[a]ny value which attaches to the entity solely as a result of personal goodwill represents nothing more than probable future earning capacity, which … is not a proper consideration in dividing marital property’ “) . Thus, the value of personal or professional goodwill must be excluded when assigning a value to a business for purposes of equitable distribution. If a business only has value above its assets if a spouse refrains from competing with the business, it is clear that the value is attributable to personal goodwill. “The existence of a covenant not to compete signals the existence of personal goodwill. “When valuing the enterprise goodwill of a business, the necessity of a covenant not to compete is significant as it signals the existence of personal goodwill, which cannot be included in determining the value assigned to the business for purposes of equitable distribution. Walton v. Walton, 657 So. 2d 1214 (Fla. 4th DCA 1995), and Held v. Held, 912 So. 2d 637 (Fla. 4th DCA 2005), illustrate the point. In Walton, the trial court was faced with the task of valuing the husband’s accounting practice. 657 So. 2d at 1214-15. The evidence established that it was the husband’s name on the door, the husband who conducted the majority of client conferences, and the husband who was responsible for bringing clients to the practice…The trial court accepted the wife’s expert’s valuation for purposes of equitable distribution. This court reversed, finding that “[t]he most telling evidence of a lack of any institutional goodwill was the wife’s expert’s testimony that no one would buy the practice without a noncompete clause.”

Division of Property and Assets Involving Companies in Florida

In a Florida divorce, the value of a business is determined by valuing all of its assets and the amount of its liabilities.  In Florida, businesses are valued according to their fair market value.  Fair market value is the amount that a willing buyer would pay and a willing seller would accept.  Enterprise value is the value of a businesses’ tangible assets and the willingness of customers to return (business goodwill).  Personal goodwill is based upon the skill and the continued participation of the current owner in the business.

In a Florida Court of Appeal case captioned Soria v. Soria, the husband and wife were married in April 1988. The husband was the founder of a start-up limited liability company. At the time of trial, the company was carrying approximately $400,000.00 of debt. The company’s liabilities varied from $9,000.00 to $76,000.00 and the company’s assets varied from $147,000.00 to $190,000.00. The husband testified that he was essential to the operation of the business and that the business could not operate without him. The husband owned approximately 64% of the business and investors owned the remaining 36% of the business. After the divorce was filed, the husband transferred 30,000 of his shares in the company to his girlfriend in order to compensate her for her work for the company.

The par value of the company stock was a dollar per share. The trial court used the par value of the company’s stock to value the company. The Florida Court of Appeal reversed the trial court. The Florida Court of Appeal held that in making a division of property and assets determination involving a business, the value of the business is determined by assessing its fair market value. The Florida Court of Appeal stated that the fair market value of the business in question was the amount of money that a willing buyer would pay for the business and a willing seller would accept for the business when both parties have knowledge of the value of the business and neither is under duress to enter into the transaction. The value of a business is the value of the company’s assets plus the value of its goodwill. Enterprise goodwill is the value of a business that exceeds its assets. It constitutes the tendency of patrons to return to a business irrespective of the presence of its owner. Professional goodwill of a doctor, lawyer or business owner is distinct from enterprise goodwill. It is based on the skill and continued participation of the owner in a business. Although, enterprise goodwill is considered to be a marital asset in divorce proceedings, a doctor, lawyer or business owner’s personal or professional goodwill is not considered to be a marital asset.

Division of Property and Assets in Florida

In a recent division of property and assets case, captioned Gotro v. Gotro the Florida Court of Appeal held that a trial court should not include expended assets in an equitable distribution scheme unless these assets were dissipated as a result of one of the parties’ misconduct. In this case, the parties had a 39 year marriage and had 4 adult children. The husband was the primary breadwinner. The husband had a number of bank accounts which were marital assets. The significant bank accounts, for purposes of this appeal, were two accounts at BBVA Compass Bank. By the time that the final hearing took place, the balances in these two bank accounts was significantly lower than they had been at the time of the filing of the divorce. The husband testified that he had used the money in these accounts for his living expenses. The husband requested that the trial court distribute these accounts based upon their value at the time of the final hearing and not as of the date of the filing of the dissolution of marriage. In fashioning its final judgment, the trial court used the values in the accounts as of the date of the filing of the divorce.

In fashioning a division of property and assets the trial court can utilize any date of valuation that the court decides is equitable and just. Different assets can be valued as of different dates. However, it is usually inappropriate to include assets that no longer exist in a division of property scheme. The exception to this rule is when one of the parties’ misconduct results in dissipation of the parties assets during the pendency of the proceedings. A parties’ misconduct may become the basis for assigning an expended asset to that spouse. If the trial court decides to do this, in its ruling, the court must make specific findings that spouse engaged in intentional misconduct. The court must find that the parties’ expended asset was used for a purpose unrelated to the marriage during a time when the parties’ marriage was undergoing a breakdown.

If your spouse has used marital assets to support a girlfriend or a boyfriend, contact Florida divorce attorney Matthew Lane, Esq. at Matthew Lane & Associates, P.A. at (561) 363-3400.

Division of Property and Assets in a Boca Raton, Florida

The division of property and assets in a divorce proceeding cannot include property that was previously conveyed to the parties’ children. In a recently decided case captioned Perez v. Perez, the parties were married for twenty-three years. The husband and wife owned several pieces of real estate. During the course of the marriage, they conveyed four pieces of real estate to their sons. As part of the final judgment in the divorce proceeding, the trial court awarded some of the real estate that was conveyed to the children to the husband and some of this real estate to the wife.

During the course of this divorce proceeding, the wife sued her sons as third party defendants claiming that her husband and sons had engaged in a scheme to defraud her. The husband contended that the wife agreed to the transfer at the time that it was made. In point of fact, the wife signed the deeds conveying the property to her sons. In making its equitable distribution award, the trial court included the properties that the parties had conveyed to the children.

The Florida Court of Appeal reversed the trial court’s ruling on the division of property and assets. The appellate court stated that the lower court improperly awarded property to the husband and wife that they had previously conveyed to their children. The Florida statutes create a clear rule as to when property is deemed to be marital and nonmarital. Absent a separation agreement, the date to determine when an asset is marital or nonmarital is the date of the filing of the divorce. The lower court should have looked at what the parties owned when the divorce was filed. An asset that was previously conveyed to another person cannot be awarded to a spouse as part of an equitable distribution award in a divorce proceeding. The property deeded to the children was a nonmarital asset and should not have been part of the equitable distribution in this matter. Accordingly, the Court of Appeal held that the trial court’s distribution of the son’s property was improper and reversed the ruling.

Are Assets Acquired After a Divorce is Filed Marital Assets?

A division of property and assets case captioned Ritacco v. Ritacco was recently decided by the Florida Court of Appeal.  This case involved a twenty-two year marriage. During the course of the marriage, the parties had two children.  Both are now adults.  The Husband drew a salary, received a pension, and owned a DROP account.  The Wife moved out of the marital home on the day that she filed her Petition for Dissolution of Marriage.

The Wife also borrowed $65,761.00 from the parties’ HELOC on that date.  The Wife deposited these funds into her bank account.  She testified at the final hearing that she used these funds to support her daughter and herself.  She stated that she used these funds to purchase gas, clothing, food, and to pay for medical visits for her daughter.  At the hearing, the Husband asserted that the Wife’s withdrawal from the HELOC was a non-marital debt.

The Florida Court of Appeal stated that under Florida statutes, there are three dates that a Court may utilize to classify marital assets and liabilities.  The first date is the date on which the parties executed a valid separation agreement.  The second date is a date agreed to by the parties in a valid separation agreement.  In the event that neither of these dates apply, the date that Florida Courts utilize to classify marital assets and liabilities is the date that a Petition for Dissolution of Marriage is filed.

ARE WITHDRAWS FROM RETIREMENT ACCOUNTS CONSIDERED TO BE INCOME FOR PURPOSES OF CALCULATING ALIMONY?

A recently decided alimony case captioned Rodolph v. Rodolph involved two appeals by the husband.  Since both appeals involved the same parties and the same facts, the Florida Court of Appeal consolidated the cases into one appeal.  In Rodolph v. Rodolph, the husband appealed the lower court’s order denying his Supplemental Petition for Termination or Modification of Alimony.  Additionally, the Husband appealed the award of $39,000.00 in attorney’s fees to his wife.

In this case, the husband and wife were married for 33 years.  At the time of the divorce, the Husband had been a corrections officer for the Broward County Sheriff’s Office for twenty-four years.  In the final judgment of dissolution, the wife was granted permanent periodic alimony and a portion of husband’s retirement funds.  Husband filed a Supplemental Petition to Either Modify or Terminate Alimony.  Husband’s Supplemental Petition for Modification of Alimony alleged that husband did not have the ability to continue to pay alimony because he was involuntarily unemployed due to his heart condition, his neck and back problems, and carpal tunnel syndrome in his wrist and arm.  Husband also alleged that his wife no longer had a need for alimony because she received the first share of husband’s retirement funds, she was receiving disability payments and her monthly expenses were reduced. While Husband’s Supplemental Petition for Modification was pending, Wife filed a Motion for Contempt of Court against Husband because Husband ceased making alimony payments.

At the hearing on husband’s Supplemental Petition for Modification of Alimony, husband testified that he was receiving social security payments, but was earning no income.  He also testified that he remarried and was living with his new wife and her children. Husband purchased a new home and incurred various expenses.  In order to meet his expenses, husband withdrew $3,500 per month from his retirement account.  Wife testified that her expenses for rent, association fees, water, garbage, insurance, cable, and donations to religious organizations exceeded her income.

Date on Which the Child Support Award Modification Takes Place in Florida

Child Support Award Modification – Date on Which the Modification Takes Place in Florida

When the court makes an allocated award for each child, the modification is retroactive to the date the child reaches majority, and pre-dates the filing of the modification petition. “Furthermore, when the issue is arrearages, the obligor is entitled to a retroactive reduction pre-dating a modification petition, consistent with the statutory child support guidelines. See, e.g., State, Dep’t of Revenue ex rel Ortega v. Ortega, 948 So. 2d 855,857 (Fla. 3d DCA 2007) (explaining that, in the McClung decision, the court was ‘careful to distinguish those authorities that refused to retroactively modify an unallocated support award from the case then before us involving what we determined to be an allocated award…’). Gilbert v. Cole. 

Contests to Prenuptial Agreements in Palm Beach, Florida

In contesting prenuptial agreements, parties should either establish fraud, duress, overreaching or that the agreements are unfair or make unreasonable provision for spouses. In determining whether agreements are unfair or make unreasonable provision for spouses, courts look at the parties relative situations, their ages, health, education, financial status.

In Hahamovitch v. Hahamovitch, the Florida Court of Appeal recently stated: “A party may challenge prenuptial agreements in one of two ways. The first ground for setting aside an antenuptial agreement is satisfied where a spouse establishes that the agreement was the product of “fraud, deceit, duress, coercion, misrepresentation, or overreaching.” Casto v. Casto, 508 So. 2d 330, 333 (Fla. 1987)…The second ground for vacating a prenuptial agreement contains multiple elements. Id. To challenge the antenuptial agreement on the second ground, ‘[i]nitially, the challenging spouse must establish that the agreement makes an unfair or unreasonable provision for that spouse, given the circumstances of the parties.’ Id. When claiming that an agreement is unreasonable, the challenging spouse must present evidence of the parties’ relative situations, including their respective ages, health, education, and financial status. Id. ‘ [A] trial court may determine that the agreement, on its face, does not adequately provide for the challenging spouse and, consequently, is unreasonable. In making this determination, the trial court must find that the agreement is ‘disproportionate to the means’ of the defending spouse.’ Id. ‘This finding requires some evidence in the record to establish a defending spouse’s financial means.’ Id…‘However, ‘[t]he element of fairness should, of course, be measured as of the time of the execution of the agreement.’ Del Vecchio v. Del Vecchio, 143 So. 2d 17, 20 (Fla. 1962); see also Francavilla v. Francavilla, 969 So. 2d 522, 526 (Fla. 4th DCA 2007)’”

To speak with a Palm Beach, Florida, attorney about contesting or enforcing a prenuptial agreement, contact Matthew Lane & Associates, P.A. at (561) 363-3400.

Children’s Preferences in Child Custody and Visitation cases in Florid

A Child Custody and Visitation case involving a child’s custody preference was recently decided by the Florida Court of Appeal. In a case captioned Talarico v. Talarico, the mother and father had two children. The parties divorced and negotiated parenting plans. Several years later, the father sought a modification of child custody and visitation, which the trial court granted. The Florida Court of Appeals reversed the trial court’s decision to grant this modification.

The Florida Court of Appeal stated that in order to grant a modification of child custody, the moving party must prove that a material, substantial and unanticipated change of circumstances occurred which warrants the modification. This change of circumstances must adversely affect the children’s welfare. One of the factors that the trial court is permitted to consider in reaching a custody decision is a child’s reasonable preference. In order to consider a child’s custody preference, the trial court must find that the child has sufficient experience, understanding and intelligence to express a preference. The Court of Appeal stated that trial courts ordinarily do not desire to have children testify in court against one of their parents. In the event that a trial court decides to permit such testimony, the preferred method to obtain such testimony is by an interview conducted by the trial judge outside of the presence of the parents. These interviews are either recorded (unless otherwise agreed to by the parties), or the judge provides a summary of the interviews.

In this case, the Florida Court of Appeal ruled that the absence of a recording or a summary of the children’s interviews with the trial court constituted a violation of the mother’s Due Process rights under the United States Constitution. Therefore the Florida Court of Appeal reversed the trial court’s determination and remanded the case back to the trial court for another hearing.