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The Divorce Encyclopedia
Active Appreciation

Term Definition Active Appreciation - an increase in the value of an asset as a result of its owner’s action, such as refurbishing a property.
Application in Divorce Very often the marital home actively and passively appreciates during the life of a marriage. Many spouses do not realize that the appreciation that occurs during the marriage is typically shared between each spouse upon divorce. The marital home is typically classified as a marital asset, so improving the home, increasing the equity, and watching it appreciate in value over time are all adding to the value of the asset. Those who believe..."I owned it before we got married, so it should be all mine" are almost always in for a big surprise.

Appreciation, active or passive, of marital property is jointly shared. Appreciation of separate property, such as gifts and inheritances, can be more problematic.

In dual-classification, equitable distribution jurisdictions, active appreciation that results from marital efforts is marital property; passive appreciation, which is the increase in value due to market or external forces, generally remains separate property. In both equitable and community property states, the burden of proof is one the party who contends that the property is separate.

In order the find active appreciation in separate property, courts must find 1) that the separate property appreciated during the marriage; 2) that the parties made marital contributions that caused the appreciation; 3) that there is relationship between the contributions and at least some of the appreciation.

Moreover, the concept of active appreciation of separate property can even extend to the productive efforts of second-tier managers of a separate property business.

See Separate Property.

See also Passive Appreciation.

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