Posted by Nydia Streets of Streets Law in Florida Divorce

Is a party allowed to cash out his or her retirement plan to pay off debts while a Florida divorce is pending? This situation arose in the case Welton v. Welton, 4D18-1516 (Fla. 4th DCA March 6, 2019) in which the former husband appealed a trial court order that found he committed intentional misconduct when he depleted his retirement account to pay marital and separate debts. The former husband also appealed the trial court’s valuation of his stock and the amount he was to receive from a trust.

The evidence showed the former husband withdrew a portion of his retirement account which incurred a penalty and taxes. He then used these funds to pay off some debts incurred during the marriage and debts in his sole name. He did not pay any debts in the former wife’s sole name. The appellate court reported, “In its final judgment, the trial court found that the husband ‘unilaterally cashed out his entire 401K thereby incurring significant taxes and penalties’ and leaving only $65,000 in the rollover IRA account. It further noted that had the husband not cashed out the 401(k), he would not have incurred these ‘additional and unnecessary penalties.’”

Turning to stock owned by the former husband, about $4,000 of which had been sold during the divorce to pay off debt, the trial court attributed $7,000 to the former husband as the value of this stock in the equitable distribution scheme. Further, although the former husband testified about personal items left in the marital residence which he wanted returned, the final judgment made no mention of these assets.

On appeal, the former husband was successful on all points. Reviewing the trial court’s final judgment for an abuse of discretion on these issues, the appellate court held, “While the trial court did note that the husband ‘intentionally dissipated’ assets in a manner that was ‘detrimental’ to the wife, this was not enough to warrant inclusion of the dissipated assets in the equitable distribution scheme. Instead, the trial court was required to make particularized findings as to the husband's ‘intentional misconduct.’ The trial court did not make such findings and the record evidence failed to show any intentional misconduct in the husband's use of the marital funds. Instead, both parties' testimony reflects that he used the funds to pay off legitimate marital debts rather than for purposes ‘unrelated to the marriage.’ Assets depleted in such a manner cannot be included in an equitable distribution scheme. As such, the trial court erred in finding that the husband's dissipation of the marital funds to pay off marital debts was intentional misconduct.”

As to the stock, the appellate court held, “[B]oth parties testified that the husband sold some of his stocks during the pendency of the petition; in fact, the equitable distribution scheme adopted by the lower court even notes this. Thus, there is no evidentiary support for the stocks still being valued at $7,000. The trial court nonetheless included the pre-liquidation stock value of $7,000 in the equitable distribution. Because this valuation lacked competent, substantial evidentiary support, it was error.” The appellate court further found error in the value of the former husband’s share of his mother’s estate via a trust where it did not take into account debts, costs and expenses that would be incurred by the mother’s estate and/or the former husband.

Last, the appellate court found error in the trial court’s failure to address the former husband’s request to distribute certain personal property he requested to be returned to him. The matter was therefore remanded for the trial court to address these issues. If you are facing a Florida divorce, contact a Miami divorce lawyer to help you move forward. Through a consultation, you can understand your rights in moving forward.