As we have discussed in previous articles, during a divorce the court will distribute marital property through an equitable division of the assets. Marital property includes assets acquired during the marriage, enhancement in value and appreciation of non-marital assets, interspousal gifts during the marriage, real and personal property held as tenants by the entireties, and certain retirement benefits.
The enhancement in value and appreciation of non-marital assets can sometimes be the trickiest to understand at first. Georgia law recognizes that a spouse may make a non-economic contribution to the marriage that might be reflected in an equitable division of property, regardless of the actual legal ownership. In fact, separate property may be deemed in whole or in part marital property by the court upon divorce if the value of the property appreciated during the marriage and that appreciation was caused by the efforts of the other spouse.
The test used to determine this is whether there was active or passive appreciation. If the value of a certain asset has appreciated, even in part, by the contributions of either spouse, there may be a claim for active appreciation. One of the biggest questions in this regard comes into play with the active appreciation for a business owner. If that company grows and succeeds because of the ideas, leadership, and business acumen of the owner, that increase in value is due to active appreciation. It is important to note here that this can be cause by either spouse regardless of who is the owner of the business. For instance, if spouse A told spouse B, who is the owner, a business idea which then directly caused the appreciation, then spouse A assisted in the growth of the business and has therefore contributed to and warrant and equitable division of the property. Other types of contribution from a spouse can include the following:
- Choosing to forgo a career and stay at home raising the children to allow the other spouse to further his or her career
- Contributing to the cost of a spouse’s education used then for a future career
- Helping design a spouse’s company’s office
On the other hand, passive appreciation is the increase in the value of certain assets due to outside market forces, such as supply and demand and inflation. For instance, say spouse A bought a tract of land for $20,000 and made no improvements to the land but because of improvements to the surrounding area, the tract is now worth $100,000. The land is now worth much more than when it was originally bought, but it was not due to any efforts of spouse A, so the increase was a cause of passive appreciation.
If you are about to begin a divorce proceeding, please contact the experienced attorneys at Vayman & Teitelbaum. Our dedicated team can help explain the area of marital asset equitable division and how it applies to your specific situation. We will conduct a thorough investigation into you and your spouse’s assets to ensure that your rights are protected.