Alimony Update: Can a court impute a reasonable rate of return on non-liquid assets for the purpose of determining alimony?
Typically, a court may look at all sources of income when determining whether a party has the ability to pay alimony or the need for alimony. This includes wages and income from investments. However, there is often a question as to whether non-liquid assets, which may increase in value over time, but do not necessarily produce income, should be considered for the purposes of alimony.
Recently, the Fourth District Court of Appeals addressed this issue in the case of Sherlock v. Sherlock, 41 Fla. L. Weekly D1601 (Fla. 4th DCA July 13, 2016). In that case, the trial court denied the Husband’s request for the Wife to pay him permanent periodic alimony and the Appellate Court affirmed holding that the Husband could sell the non-liquid assets that he was awarded as part of the divorce and earn a reasonable rate of return, which would negate his need for alimony. The non-liquid assets awarded to the Husband at trial included vacant lots and other properties. The trial court concluded that a 3 percent rate of return was reasonable and the appellate court did not disturb that finding.
However, this holding appears to be contradicted by the holding of the Second District Court of Appeal, which holds that a party is not required to change the character of an asset to maintain the standard of living established during the marriage. See Suit v. Suit, 48 So. 3d 195 (Fla. 2d DCA 2010).
While the court in Sherlock found it appropriate under the facts of that case to impute a rate of return on non-liquid assets, it agreed with most other courts that no rate of return should be imputed on property where a party resides, meaning his or her homestead. The court reasoned that everyone is entitled to have a place to live. Since nobody should be forced to sell their home, the courts should not impute a rate of return on a primary residence.
This issue is still developing and will continue to unfold as future courts make ruling as to whether a reasonable rate of return should be imputed on non-liquid assets. In high net worth divorces or divorce where the parties own substantial non-liquid assets, this line of case law could have a significant impact on the court’s ability to award alimony. As the Fifth District Court of Appeal has not yet ruled on this topic, there is no definitive answer for divorces in Orlando and Central Florida. However, this line of case law is sure to be argued in local courts and may substantially impact alimony awards.