Measuring Active and Passive Depreciation in Separate Property
Active appreciation is appreciation in separate property that is caused by contributions of marital funds or marital efforts. In almost all dual classification states, active appreciation is marital property. It is generally distinguished from passive appreciation, which is appreciation caused by market forces or by the efforts of third parties. Passive appreciation generally remains separate property. When a highly valuable separate asset such as a business increases in value during the marriage, thousands of dollars can turn upon whether the increase in value was active or passive. This 29-page White Paper reviews cases from all over the nation distinguishing between active and passive appreciation. It suggests an analytical approach for making the distinction, focusing first upon market forces, and then upon the relationship between marital contributions and third-party contributions. The article cites over 150 cases. The cost of this White Paper is $75.