Valuation of Separate NonMarital Property – Sort Of – for Purposes of Property Division or Equitable Distribution in Divorce

In some divorces, equitable distribution or asset division is more complicated than in others.

For example, the nature and source of ownership of any particular item of property can create various variables that may muddy the straightforward fair market valuation always desired.

Small businesses are almost always complex to value, particularly closely held service businesses.

Another aspect of property that adds considerable complexity to valuation is where the property is premarital property of one of the spouses.

Despite property being premarital and seemingly separate, there may be factors that, depending upon your point of view, re-cast or taint part or all of that property as marital.

One of those factors is appreciation during the marriage of what came into the marriage as separate property. But not any and all appreciation.

Appreciate can categorized as one of two types: active or passive.

In Florida, among some other states, active appreciation during the marriage, or appreciation as a consequence of the efforts of a spouse, is considered marital property.

But passive appreciation during the marriage of what came into the marriage as separate property, or appreciation deriving from larger or outside market influences during the marriage, is nonmarital property.

If this isn’t enough complexity, a single item of property may potentially undergo both passive and active appreciation. On top of that, some active appreciation may be attributable to the efforts of actors other than the spouse, rendering such appreciation equivalent to passive appreciation.

Depending upon all the particulars for a particular item of property, tracing valuation components and then assessing a valuation of certain assets for purposes of asset division in divorce can be somewhat elusive.

Read more in this forensic CPA’s article: Divorce Valuation: Active vs. Passive Appreciation.