Posted by Nydia Streets of Streets Law in Florida Divorce

When a family member loans money to a married couple, is that loan repayable by both parties at divorce? This was an issue in the case Burns v. Cole, 1D18-3979 (Fla. 1st DCA November 26, 2019) where the trial court characterized money given to a couple by the former husband’s mother as a loan, but ordered that the former husband would be fully responsible for repaying it.

The evidence established that during the marriage, the former wife found real property that she thought would be a good purchase. The parties asked the former husband’s mother to purchase the home with them, but the former husband’s mother decided to loan the money to the couple for the purchase rather than becoming a part-owner. A promissory note was executed and each month, the parties wrote checks to the mother and in records maintained by the former wife, she stated the payments were for a mortgage. The former wife managed the account from which payments were made to the mother. At divorce, the former husband contended the house should be sold with the remaining loan amount paid back to his mother’s estate prior to the parties dividing the proceeds of the sale.

The trial court found the amount given by the mother to be a loan but ruled it should be repaid by the former husband because the promissory note was “not properly attached to the condominium and may not be enforceable”. The former husband appealed, arguing the court was correct to rule there was a loan, but erred in making only him responsible in repaying it. Among other arguments, the former wife contended the money was an inter-spousal gift and therefore should not be treated as a loan.

The appellate court rejected the former wife’s arguments, holding that even if the money were treated as an inter-spousal gift, it was a gift to both parties and therefore and marital asset subject to division. The appellate court further held “ While ‘conced[ing that] this is not a hallmark or prototypical fraud example,’ the former wife contends that there is sufficient evidence of a ‘deceitful scheme’ or other misconduct to justify the allocation. However, the trial court did not find misconduct and the evidence the former wife points to—including that the funds were provided before the promissory note was executed, the mother had a trust that offset any outstanding loans at the time of her death, and the mother did not move to enforce the note when the former wife stopped making payments during the dissolution proceedings—would not support such a finding. The trial court did not consider the factors listed in section 61.075(1) or articulate a sufficient justification to allocate the loan solely to the former husband. As such, the trial court must treat the debt as a marital liability and order distribution of it accordingly.”

Sometimes parties believe a party is using a relative’s gift as a way to divest a spouse of his or her equal share of the marital estate. To understand what is needed to prove your position on either side of this issue, contact a Miami divorce attorney to go over the specific facts of your case.