Fourth DCA Holds That Inheritance Commingled with Marital Funds Became Marital Property Subject to Equitable Distribution
A divorce proceeding forces the parties, their attorneys, and possibly the court, to examine the parties’ assets to determine which assets are marital and which are non-marital. Absent an agreement between the parties, the marital assets are then subject to equitable distribution by the court. A common area of dispute in divorce cases involves whether the character of an otherwise non-marital asset has been changed to marital because it was commingled with marital assets.
The Fourth District Court of Appeal (“Fourth DCA”) recently reaffirmed that a non-marital asset can become marital when it is commingled with marital assets. In Sorgen v. Sorgen, 4D12-718 (Fla. 4th DCA July 2, 2014) the trial court had found that the one-third interest in a home that the wife had inherited prior to the parties’ marriage was not a marital asset. The wife had purchased the remaining two-thirds interest in the home during the marriage. The parties disputed whether the wife used joint funds to make the purchase. Regardless, it was undisputed that the parties renovated the home with joint funds, deposited the rental proceeds from the home into a joint account, paid property taxes and income taxes (on the rental proceeds) from a joint account, and later deposited the proceeds from the sale of the home into a joint account.
On appeal, the Fourth DCA noted that an inheritance is considered non-marital property under section 61.075(6)(b)(2), Fla. Stat. However, the court also pointed out that the character of the inheritance at the time of a divorce depends on the party’s treatment of the inheritance after receiving it. If the party kept the inheritance funds separate, the inheritance will remain non-marital. But if the party commingled the inheritance funds with marital funds so that they are untraceable, the party creates the presumption of a gift of an undivided one-half interest to the other spouse. Lakin v. Lakin, 901 So. 2d 186, 190 (Fla. 4th DCA 2005); Williams v. Williams, 686 So. 2d 805, 808 (Fla. 4th DCA 1997).
The Fourth DCA held that the wife’s commingling of the proceeds from the sale of the home, by depositing them into the parties’ joint account, resulted in the presumption that she gifted one half of her interest in the proceeds to the husband. The wife had presented no evidence overcoming the presumption, so the court decided in favor of the husband and remanded for the trial court to include the asset in the equitable distribution.
The Fourth DCA’s holding in Sorgen reaffirms the settled law that a party’s treatment of a non-marital asset may change the character of that asset for equitable distribution purposes. A serious potential pitfall awaits any unknowing spouse who may receive the incomplete advice that “an inheritance is non-marital.” As a result, an individual interested in maintaining the non-marital character of property such as an inheritance should always seek the advice of qualified counsel.
(The Fourth DCA’s decision is not final until disposition of a timely-filed motion for rehearing).