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Calculating the Marital Portion of Passive Appreciation of Non-Marital Property in a Florida Divorce

If you are a married person who owns a significant amount of separate property, the law in Florida when it comes to dividing assets between spouses could become extremely important to you if you should find yourself going through a divorce. Clearly, assets that are marital in nature (such as an asset bought during the marriage using marital funds) are part of the equation when it comes to equitable distribution. However, what happens to non-marital assets? Does each spouse simply receive all of his or her own assets? In Florida, the process is not quite as black-and-white as that, since the equitable distribution process must deal with not just the non-marital asset itself but also the extent of its appreciation during the marriage. If your divorce presents these kinds of issues, make sure you retain an experienced Florida equitable distribution attorney to handle your case.

As noted above, the equitable distribution of some assets can be straightforward. If, for example, your spouse and you bought a rental property during the marriage with marital funds, and both of you expended personal efforts during the marriage to maintain and improve that property, all of it (both the original asset and its appreciation in value) is likely to be marital in nature and subject to the equitable distribution process.

Similarly, a non-marital asset generally isn’t part of the equitable distribution equation. The appreciation of those assets, however, may be. For a non-marital asset that appreciates due to active effort put in by one or both spouses during the marriage, that appreciation is called active appreciation, and it is a marital asset subject to equitable distribution. Using the rental property example, say that the husband updated the property, installing new fixtures, repainting the walls, and knocking out a wall to create a more desirable open concept floor-plan. Then, the increase in value that resulted from those renovations would be active appreciation. That’s a marital asset.

On the other hand, if the couple did nothing to the rental property, and it simply increased in value solely due to overall market forces, that appreciation would be what’s called passive appreciation. Even if a non-marital asset’s appreciation is passive, there are still circumstances in which the appreciation (or part of it) can be a marital asset and subject to equitable distribution. The Florida Supreme Court made an important ruling on this topic in a 2010 case, Kaaa v. Kaaa. Now, under Florida law, there is a multi-step process for calculating which part of passive appreciation of a non-marital asset is subject to equitable distribution.

First, the trial court must decide the non-marital asset’s current fair market value (FMV). Second, the judge must decide whether or not passive appreciation has taken place. Then, the court must decide if that passive appreciation was marital. As an example, if marital funds were used to pay down the mortgage indebtedness on a non-marital property, that would be marital.

If a property has not undergone any improvements, there generally is a mathematical equation that will apply to determining the correct calculation. That calculation says that the marital portion “will be the same as the fraction calculated by dividing the indebtedness with which the asset was encumbered at the time of the marriage by the value of the asset at the time of the marriage.” Thus, if you had a non-marital property for which you paid 50% in cash (from a non-marital source) and then financed the remaining 50% with marital funds, one-half of the asset’s passive appreciation is a marital asset subject to equitable distribution.

Proving which figures the court should use to make this calculation can often involve detailed evidence, including forensic accountants and other economic expert witnesses. Knowledgeable counsel can help you determine which evidence you need to achieve a successful result in your case.

If you find yourself facing a divorce, especially if you own a significant mix of marital and non-marital assets, don’t go it alone. Rely on skilled representation. Experienced Miami divorce attorney Sara Saba has been providing helpful counsel to her clients for more than 13 years. Our team is dedicated to meeting your family law needs. Contact us online or by calling (305) 450-8009 to schedule your consultation. Hablamos Español.

More blog posts:

Multi-Million Dollar Appreciation of Florida Husband’s Stock Portfolio Was 100% a Marital Asset Because He Lacked Evidence Proving Otherwise, Miami Divorce Lawyer Blog, March 6, 2018

Proving that an Appreciation of a Non-Marital Business Asset is a Marital Asset in Florida, Miami Divorce Lawyer Blog, Feb. 27, 2018