TO DIVIDE SEPARATE PROPERTY, LOOK AT ANY INCREASE IN VALUE AND WHETHER IT IS “ACTIVE” OR “PASSIVE"

The general rule in divorce is that property acquired during a marriage is deemed marital property. The presumption is that both parties contributed to it. However, property received before the marriage or by gift or inheritance during the marriage is not considered to be marital property. This does not, however, end the analysis. The next step in the analysis is whether the separate property increased in value during the marriage. If it increased in value, then the Court must look to whether the increase in value was due to “active” or “passive” forces. For example, a passive force is the market, such as the increase in value of a common stock like Coca-Cola. The market increases the value and not the efforts of the spouse. An active increase in value is more likely to come in a small, family-owned business where the efforts of a spouse can be shown to have an impact on the success of the business. If the increase in value can be linked to the active efforts of a spouse during the marriage, then the increase in value may be subject to equitable distribution analysis. For that analysis, the contributions of both spouses are presumed equal. A recent analysis of this is found in the recent decision of Larson v. Larson, No. 2011-CA-00305-COA (3/19/13)(where the court found that the wife had NOT contributed to any increase in family-owned grocery stores).